Tesla shares dropped 14.3% following analyst note

Article by Anita Panait, on July 18, 2013

The shares of Tesla Motors Inc. dropped 14.3 percent on July 16, 2013 following a move by Goldman Sachs Group Inc. setting a new price target below the current trading price. In a broader research note on the automotive sector, Goldman Sachs analyst Patrick Archambault offered three different growth scenarios for Tesla and set a six-month price target of $84 per share.

He left unchanged his "neutral" rating on the stock. Tesla’s shares dropped by $18.21 to close at $109.05 on Nasdaq. Tesla’s shares had nearly quadrupled so far in 2013 until Monday. In one scenario, Archambault sees Tesla selling 105,000 cars -- including the Model S and a future smaller sedan -- with 14.6 percent operating margins and earnings per share of $5.99.

In the second scenario, he sees the carmaker selling 150,000 cars with 14.8 percent margins and earnings per share of $8.59. In the third scenario, Archambault sees Tesla selling 200,000 units with 15.2 percent margins and earnings per share of $11.69.

Archambault came up with the new price target of $84 by averaging out the three scenarios. Archambault said automotive stocks have underperformed the S&P 500 index by an average of 26 percent in three of the last four economic periods.

According to him, the auto sector has historically reached a peak of 65 percent of the way through an expansion. Archambault remarked he was now focused on General Motors Co. and Ford Motor Co, which he said has “strong product-driven growth stories in multiple regions."

Tesla Model S is the first completely electric sedan, representing a great leap in automotive engineering. It combines safety, performance, and efficiency, and boasts the highest safety ratings possible. It also has the longest range for any EV and delivers over-the-air software updates.

Moreover, the Model S is powered by a battery that is located on the floor. This location gives the car an impressively low center of gravity, thus reducing the risk of a rollover very significantly while also enhancing the vehicle’s handling and performance. Tesla Model S also features a crumple zone that is much larger compared to that of other performance sedans. Because of this huge crumple zone, the car is able to absorb the energy in case of a front-end impact.

It goes without saying that Tesla Model S is outstandingly safe to drive. The car largely owes its safety to the unique electric drivetrain sitting beneath it. The vehicle’s NHTSA and Euro NCAP five-star safety rating is more proof of the Model S's safety record.

Furthermore, standard active safety features can be found in the car. These features include automatic emergency braking, lane departure warning, blind spot detection, collision warning, and optional convenience features such as traffic-aware cruise control, summon, autosteer, and autopark.

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