Tesla shares slammed on Goldman's low price target
Tesla shares, which soared to a new all-time high earlier this week, were thrown into reverse Tuesday in the biggest one-day drop the stock has seen since January 2012. The selloff is being driven by the highest trading volume in TSLA stock since May.
TSLA shares closed down more than 14 percent at $109.05. (For the latest stock price click here.)
One factor is a research note from Goldman Sachs setting a price target for Tesla of $84 (that is $42.32, or 34 percent, below Tuesday's opening price of $126.32).
Potentially more troublesome for investors worried about a selloff in Tesla shares is the worst case scenario outlined by Goldman analyst Patrick Archambault. He forecasts a worst case scenario of Tesla shares dropping to $58, which would be 54 percent below the stock's opening price on Tuesday.
Goldman's TSLA Price Target Methodology
So how did Goldman Sachs come up with a price target of $84 for TSLA shares?
Archambault outlined three scenarios for Tesla revenue, operating margin, earnings per share (EPS), and implied stock price and future sales. The worst case scenario has sales totaling 104,561. The middle forecast is 150,000 Tesla models being sold. The bull case scenario targets sales at 200,000.
Based on that and other factors, Goldman came up with a stock price at a 20 percent discount. Archambault then took an average of the discounted stock price forecasts to arrive at a price target of $84.
Goldman Sachs Tesla Scenarios
Worst case | Middle | Bull case | |
Discount Stock Price: | 58 | 83 | 113 |
Goldman Sachs Price Target: | 84 |
Tesla Earnings Coming
The selloff comes less than a month before Tesla is scheduled to report second-quarter earnings. Some analysts have predicted a slight loss due to the accounting of lease reserves.
(Read More: Tesla Stock: Hot or Not?)
Would that accelerate a TSLA selloff? Probably not. A great concern for investors will be the comments from CEO Elon Musk about the automakers plan to ramp up production of the Model S through the end of this year and next year. If Musk says Tesla is still on target, it's possible investors could reverse course yet again and push Tesla shares higher.
—By CNBC's Phil LeBeau. Follow him on Twitter @LeBeauCarNews.
Questions? Comments? BehindTheWheel@cnbc.com.