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Timed Is Running Short for Tesla: Canaccord By Donna Fuscaldo | August 29, 2018 — 9:42 AM EDT
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Tesla Inc.’s (TSLA) short-lived go-private saga may have unnerved some investors, but for the electric car company, it was a distraction that could hurt its chances for profitability.
That’s the call out of Canaccord Genuity, which lowered its price target on Tesla to $316 a share from $336 a share after the company’s CEO, Elon Musk, said going private wasn’t the best path forward for the company. That quelled speculation as to whether or not Musk had secured the financing for a $420 a share offer but thrust the company’s performance and production goals back into the spotlight. At $316 a share, Canaccord Genuity expects the stock to gain just under 2%. (See also: Where Are Tesla Shares Headed After Privatization Talk?)
"What was at best a premature announcement has generated three weeks of distraction from one of Tesla's most important quarters to date," said Canaccord analyst Jed Dorsheimer in a research report covered by CNBC. "We feel less confident in the company's ability to meet it's 50,000 to 55,000 production guidance indicated at the end of [the second quarter]." Canaccord cut its forecast for Model 3 production for the third quarter to between 48,000 to 52,000 units, which is lower than the target offered up by Tesla.
Tesla Running Out of Cash
The analyst noted that while Tesla was able to stem its burn rate in its second quarter, he thinks it is going through its cash at a rate that means the Model 3 has to be successful in order for the company to be profitable. "Tesla will need to secure profitability by the end of the year to maintain solvency," Dorsheimer said, warnings the company has six to nine months of cash to sustain itself. Tesla ended the second quarter with $2.2 billion in cash. (See also: Tesla Model 3 Teardown Reveals Flaws: UBS.)
New Leadership In Order?
On top of worries about the burn rate at the carmaker, the Canaccord analyst warned that the “series of self-inflicted problems” could pave the way for competitors to enter the market with more financial backing. That could chip away at its leadership position in the electric vehicle market. The analyst also said it’s time for more experience at the top. "The drama associated with ‘the take private fiasco’ is a great example of why even a great company may need different leaders during its life cycle," wrote Dorsheimer. "Musk's recent behavior, including the handling of the potential go-private deal, also underscores a need for strong and experienced leadership to minimize distractions during an extremely important time for the company.”
It’s not just Dorsheimer who thinks Tesla’s credibility is now in question. After weeks of making the case for taking Tesla private Musk’s about-face, blaming the decision on resistance from existing shareholders, isn’t sitting well with Wall Street and investors. The stock closed Tuesday’s trading session down 2.3% or $7.41 to $311.86 a share.
Read more: Timed Is Running Short for Tesla: Canaccord | Investopedia https://www.investopedia.com/news/timed-running-short-tesla-canaccord/#ixzz5PZstmEP9
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