Shares of Tesla Inc (NASDAQ:TSLA) could stumble by 30% in the next six months because of increased competition from other luxury carmakers, a report by Goldman Sachs (NYSE:GS) quoted by CNBC said.
The network reported that Goldman analyst David Tamberrino has recommended a sell rating for Tesla stock because competition will cut into the company's share of the electric car market. Goldman had resumed coverage of Tesla after it dropped commenting on the stock when it was hired by Tesla chief executive Elon Musk on his go-private plans.
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"We see the medium-to-longer term industry backdrop as challenging for Tesla's products," Tamberrino was quoted in a note to clients by CNBC. "We believe the company will see pressure to its lead in EVs (electric vehicles) as competition catches up."
Tamberrino gave a US$210 six-month price target for Tesla's shares. The shares were trading down 2.1% at US$295.35 in the premarket on Tuesday. It was trading 1.8% lower at US$296.12 in early dealings. The stock closed on Friday at US$301.66, off 0.5% for the session. US financial markets were closed on Monday for a holiday.
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The Goldman analyst said several large automakers such as Audi, BMW, Jaguar and Porshce are expected to launch their own electric vehicles in the coming years.
"With regional mandates and tightening CO2 standards, both traditional and new entrants are expected to launch several EVs in the coming years — with a large crescendo in the early-to-mid 2020s," Tamberrino said. "Altogether, we remain bearish on the company's ability to execute, achieve its targeted production ramp/margins, and sustain FCF [free cash flow] generation."
Musk sparked frenzied speculation in the markets when he announced his plan to take Tesla private early last month. He has abandoned that plan.