Citi starts Tesla shares at neutral
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Citi initiated coverage on shares of American electric vehicle manufacturer Tesla with a neutral rating and a $357 price target, which was roughly 10% above the company's then current share price.
In a research note released to clients on Thursday morning, Citi analyst Itay Michaeli stated “fundamentally, we find ourselves in the Tesla bull camp” and feel it best to wait for a stronger balance sheet and hence for a more advantageous entry point into the shares.
Shipping a record 25,021 units in Q1 2017 and leaning on the appeal of the brand, Tesla had initial success and while Michaeli does feel positive on Tesla’s position as a “car of the future”, he does note the potential of the Model 3 to cannibalize sales of the Model S.
Michaeli predicts the electric car maker's cash balance will fall to $1.1bn at the end of 2017 from $4bn due to Model 3 production costs and operating losses. He further estimated Tesla would not generate positive free cash flow until 2019.
His view on the company's prospects hinged on two variables, the successful conversion of orders for the Model 3 and Tesla’s position in autonomous mobility. The latter being something CEO, Elon Musk has long been a vocal proponent of.
As 1535 BST Tesla Motors Inc shares were up 0.13% to $325.68