At the electric automaker's current cash burn rate, it could run its reserves dry in as little as four quarters, UBS analysts wrote in a note Monday, Oct. 30. The analysts reiterated a "sell" rating on Tesla stock.
Assuming Tesla has about $1 billion in cash, it might only be able to keep up for another year, UBS said. To compound its free cash flow troubles, Tesla also has about $1.4 billion in debt that will come due by the end of 2018.
Tesla shares have gained 50% year-to-date, UBS wrote, despite the fact that consensus earnings estimates have toppled during the same period to a loss of $2.28 from previous estimates of a loss of 65 cents.
Tesla is scheduled to report third quarter earnings Wednesday, Nov. 1, after the closing bell. UBS said the report will likely serve as a negative catalyst for shares. In their Monday note, UBS analysts assigned Tesla a price target of $185, which represents about a 42% downside for the stock.
Analysts polled by FactSet expect Tesla will report negative free cash flow of $1.2 billion in the third quarter.
Tesla's impressive gains so far this year were mostly based on initial Model 3 production timelines, UBS noted. But as Model 3 deliveries continue to whiff on promises, Tesla has undermined its own credibility and increased near-term risks.
Happy Monday, Elon Musk.
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