Shares of Tesla Inc. is ready to plunge 35% to multi-year lows?

On Thursday, shares of Tesla Inc (Nasdaq:TSLA,) dipped by 2.3% to approximately $294, before recovering to $300 on Friday. Shares fall, Tesla would not be so significant if it did not come up on the message about the planned model of the company g production of SUVs.

According to the report from Reuters, Tesla will begin producing the model Y in November 2019. Same as model 3 is more affordable compared to the sedan model s, the model Y is a more affordable option in comparison with the model x SUV. In February, CEO Elon Musk told us that the company will aim to produce 1 million units of the model per year, although it does not provide time for this purpose.

Production Hell

You see, there is already a mountain of problems related to the production of the model 3. Musk said it best when he called it “production hell”. Coming in 2018, the goal was for Tesla to make 2500 units per week by the end of the first quarter and 5,000 per week by the end of the 2nd quarter.

After a total push occurs at the end of the quarter, Tesla produced 2,020 in the last week of the 1st quarter. The company said it still plans to produce 5,000 model 3 Grand a week for three months. At this point, it was about a year after the official publication (although a limited production at first) began in July 2017.

On the other hand, the model M will be built on the same platform as the model 3. This should lead to a decrease in the production of headaches down the road. But, it is worth noting that the model x will be built on the same platform as the model S, and it’s not an easy buildup. So we’ll see if Tesla has learned from its previous operations.

All about the money

Sometimes Tesla reminds me of the overly optimistic home remodeling contractors. While they talk about the great, amazing features they can add to your home, whatever you are trying to do is to try to keep up with the mental calculations on how much it will cost.

In the case of Tesla, here’s what we’re working with: the introduction of the model 3 was slower-than-expected pressure on margins and hurt free cash flow. Also, the company has already presented its a new truck and an ultra-fast convertible with the Roadster. It is building out its Gigafactory (in Nevada) and also want to build a factory in China. Musk also said that the capital investment for the model Y is likely to begin in late 2018. And finally, if in the end Tesla to achieve its goals of production, the automaker we are looking for need too the new production.

Don’t forget that Tesla now has $ 11 billion of debt against about $3.5 billion in cash and still carries its acquisition of SolarCity.

This may sound like a hit piece on Tesla stock, but it’s not. I really like the products of Tesla and the vision of love musk for a cleaner, better tomorrow. Plus, the car is gorgeous. Though, it just seems that Tesla puts too much on his plate and what he’s capable of in food at the moment.

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At some point the financial situation must be taken into account. Countless analysts and Moody’s, the credit rating agencies have all said that the company would need to raise capital to survive. Musk argued that point on Friday morning. Taking on more debt seems ill-advised, while the secondary offer is always on the table.

If the model 3 significantly improves the capital raising is likely to be a “when” and not “if” scenario.

Goldman Sachs Says Sell Tesla Stock

Earlier this week, analyst Goldman Sachs David Tamberrino banged his fist on the table, Tesla stock. He reiterated his sell rating and slashed its target price to $195 to $205. From current levels, target price Tamberrino involves about 35% reduction, TSLA stock prices.

It is also one of the analysts expects the capital raising at some point in 2018. He also says that sales for the model S and model x could suffer as the Federal EV tax credit to disappear for vehicles in the second half of 2018. Finally, he expects the model 3 production behind the management forecast for the second quarter.

So you need to sell?

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We have already discussed how to move on Tesla stock from 250 $to 300$. Now back to our goal of$ 300, let’s keep it simple. Above $300 and we can be long TSLA stock and we want to avoid it. Just be careful of the stock was chopping around this level, if you use a stop loss.

For those looking for other plays in the auto industry, we should not forget about General motors company (NYSE Ticker:GM), as it can hit $70.

Bret Kenwell Manager and author of the forthcoming “blue chips” and on Twitter @BretKenwell. At the time of this writing, he has not held positions in any of the above securities.

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