Tesla Inc. (TSLA) can't grow like this forever.

CEO Elon Musk said in a recent quarterly update that the company will not require a debt or equity raise outside of standard credit lines through the rest of the year. But according to Goldman Sachs analysts, that kind of growth won't last long.

"Between its current operations, anticipated new product spend and incremental capacity additions, we see Tesla potentially requiring over $10 billion in external capital raises and debt refinancing by 2020," Goldman wrote in a note Thursday, May 17.

Tesla and its leader, Musk, have been feverishly attempting to cut costs in recent months in a bid to keep that no-fundraising promise to investors. Musk has come under fire again and again for whiffing on production goals for the mass market Model 3, drawing attention to his recent failure to hold up his end of manufacturing bargains. Tesla also burned through more than $1 billion in the first quarter.

Tesla CEO Elon Musk.
Tesla CEO Elon Musk.

Goldman said it thinks Tesla could raise this needed capital through "multiple avenues," including new bond issuance, convertible notes and equity.

"We see several options available to the company to refinance maturing debt and raise incremental funds, which should allow Tesla to fund its growth targets," Goldman said. "However, issuing incremental debt (including priming current creditors with secured debt) may weigh on the credit profile of the company while issuing additional equity or convertibles at lower premiums would dilute current shareholders."

If previously disclosed Model 3 production guidance is actually achieved, Tesla would still need $5 billion of debt, Goldman said. While analysts don't think the targets will be hit anytime soon, they modeled cash needs in a situation in which the company "sustainably produces" 10,000 Model 3 units per week in 2020 and continues recently disclosed development of the Model Y unit and production in China. "Under this scenario, Tesla capital needs would be half of our estimate - and the company would likely be able to fund growth entirely with debt," analysts said.

With that, Goldman said its preference is "to express long views via the front-end convertible credit - and we continue to express a bearish view on the equity." Goldman analysts rate Tesla stock a sell and maintain a $195 price target, implying about a 32% downside for the stock from current levels.

"We believe Tesla will continue to be challenged wit its manufacturing process and see downside to overall margin trajectory for its products (Model S/X from incremental competition, and Model 3 from rising commodity costs and a more labor-intensive manufacturing process)," Goldman noted. "Altogether, we see the company remaining [free cash flow] negative through our forecast period."

While the stock looks anything but compelling to Goldman at the moment, analysts said there is an opportunity to "express a view on the company's liquidity levels" in buying Tesla 0.25% 2019 convertibles and selling a March 2019 call option in a move that would "isolate the credit value."

Tesla stock dipped 0.28% to $285.68 on Thursday.

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