Tesla shares plunge 14% after Goldman sets new price target




The shares of electric carmaker Tesla Motors Inc. fell 14 percent today after Goldman Sachs Group Inc. set a new price target far below the current trading price.

Shares in electric sports car maker Tesla Motors Inc jumped 18 percent to a record high on Thursday, after surprisingly strong second-quarter results convinced investors the company has found a route to sustainable profits.

Goldman Sachs analyst Patrick Archambault, in a broader research note on the automotive sector published earlier today, offered three different growth scenarios for Tesla and set a six-month price target of $84 a share, up from $61, previously. He left unchanged his "neutral" rating on the stock.

Tesla's shares have more than doubled since it reported its maiden profit in the first quarter of the year -- hitting new highs most weeks.

Tesla's shares plunged 14.3 percent, or $18.21, to close at $109.05 on Nasdaq. Through Monday, the stock had nearly quadrupled so far this year. Earlier this month, Nasdaq said that Tesla's shares would be listed on the Nasdaq 100 index to reflect the company's rising profile.

At least seven brokerages raised their price targets after Tesla reported its second profit in a row late Wednesday, by as much as $69 a share.

If the stock closes at this level, it would be the largest one-day drop since Jan 13, 2012, when it fell nearly 20 percent.

Their targets now range up to $187, compared with the new record share price of $158.88, struck on Thursday on heavy volumes after Tesla said it had sold more of its popular Model S sedans than expected.

In one case, Archambault sees CEO Elon Musk's company selling 105,000 cars, including the Model S and a future smaller sedan, with 14.6 percent operating margins and earnings of $5.99 a share. In the second scenario, he sees 150,000 sales, 14.8 percent margins and earnings per share of $8.59. The most bullish scenario was for 200,000 sales, 15.2 percent margins and $11.69 in earnings per share.

"The bull argument for the stock could be that the CEO, Elon Musk, is the next Henry Ford - i.e. mass market success would be assured," said Barclays Capital analyst Brian Johnson, who raised his target on Tesla to $141 a share from $90.

In averaging out the three scenarios, Archambault came up with the new price target of $84, which is far below the current price.

The Model S is the best-selling U.S. electric car despite a starting price of more than $70,000. The company sold 5,150 cars in the second quarter and said on Wednesday it expects to reach an annual production rate of 40,000 by late next year as it starts selling in Europe and Asia.

Speaking more broadly about the auto sector, Archambault said auto stocks have underperformed the S&P 500 index by an average of 26 percent in three of the last four tightening economic periods. He said the sector has historically peaked 65 percent of the way through an expansion.

With so many alternative-energy firms struggling -- such as solar power companies and other electric car companies -- analysts say Tesla appears to have broken away from the pack.

Archambault said he was now focused on General Motors Co. and Ford Motor Co. "Both ... have strong product driven growth stories in multiple regions," he said in the note.

"We look at Tesla as not only an auto manufacturer, a trend-setting consumer brand, and a leader in technology that dozens of companies both larger and smaller have failed at perfecting," Robert W. Baird & Co analyst Ben Kallo wrote in a client note on Thursday.

Archambault rates both stock as "buy," but sees stronger near-term catalysts for GM's share, including the rollout of profitable full-size pickup trucks boosting margins in the second half of 2013, and the possibility of a common dividend by year end.

Kallo raised his price target on Tesla's stock by $69 to $187, saying the Model S is an attractively priced luxury vehicle with triple the range of many competitors.

As well as boosting sales, Tesla lowered component costs in the Model S, contributing to its second-ever quarterly profit.

"Tesla's stronger-than-expected set of (second-quarter) results should do much to help assuage concerns regarding the steep uphill climb to meet management's aggressive medium-term margin targets," J.P. Morgan Securities analyst Ryan Brinkman said in a note.

Gross margins expanded by 5 percentage points to 22 percent and the company said it was on track to achieve margins of 25 percent in the next quarter.

Goldman Sachs analyst Patrick Archambault raised his price target to $95 from $84 on Tesla's stock.

Archambault last month sparked the biggest one-day drop in Tesla's shares since January 2012 by casting doubts on the company's ability to raise operating margins beyond 15.2 percent in the long term.

The analyst said he was now factoring in a slightly stronger margin trajectory following better second-quarter profitability, but left his rating on Tesla unchanged at "neutral".

Five of seven brokerages who raised their price targets on Tesla's stock on Thursday now value the shares at $141 or more.

Tesla shares were up 17 percent at $157.81 in afternoon trading on the Nasdaq. Nearly 20 million shares had changed hands, more than double the stock's 10-day moving average. qichepeijianwang

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