Written by Cláudio Afonso | Info@claudio-afonso.com | LinkedIn | X
S&P Global Ratings reiterated on Wednesday its “BBB” credit rating for Tesla as it expects the company to maintain low debt while defending its “strong market share, profitability, and liquidity”.
The rating is the second-lowest investment grade and is described by S&P as “Adequate capacity to meet financial commitments, but more subject to adverse economic conditions”.
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“Despite price cuts to combat weakening affordability in a high interest rate environment, we expect Tesla’s EBITDA margin to remain strong over the next two years,” it can be read in the statement.
When it comes to competition from other EV players, S&P says it is expectable to continue as “further pricing pressure will lead to more volatility in Tesla’s results in 2024 and 2025”.
To conclude, S&P revealed in which cases it would lower or raise Tesla’s rating. It would lower in case Tesla adopts “a more aggressive financial policy” that could reduce its “financial cushion due to shareholder distributions, the expansion of its captive finance operations or other business segments, and acquisitions”.
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As a second option, S&P said the lowering would happen in case Tesla “cannot sustain solid FOCF due to slowing growth or higher-than-expected spending”.
If Tesla “sustains its first-mover advantage” with market share exceeding 5 percent or “remains committed to a prudent financial policy”, S&P says it will increase the rating.
Earlier this week, chief executive Elon Musk emailed Executives warning that the company needs “need to be absolutely hard core about headcount and cost reduction” as layoff continues.
“Starting at 10 AM EST Tuesday, I will ask for the resignation of any executive who retains more than three people who don’t obviously pass the excellent, necessary, and trustworthy test,” Musk wrote according to The Information.
Written by Cláudio Afonso | info@claudio-afonso.com | LinkedIn | X
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