Tesla shares drop on Goldman Sachs downgrade

Tesla Motors slid 3.7% in morning trade in New York after Goldman Sachs downgraded the stock.

The bank cut Tesla from 'buy' to 'neutral' on the back of potential delays to the new Model 3 launch, as well as the merger with another of Elon Musk's companies, SolarCity.

Goldman published a report on Thursday entitled "Americas: Automobiles" in which it also lowered its 6-month price target from $240 to $185.

"With solid third-quarter 2016 deliveries and the potential downward catalyst of a missed Model 3 launch timeline out in the second half of 2017, we prefer to be neutral on shares," it said.

Tesla has been forced to fend off accusations that it is not a profitable company, especially after the SolarCity acquisition. Goldman referred to the companies as "two high growth, high cash burn businesses".

The bank's analysts did say that in the near-term Tesla was likely to perform well, citing its third quarter results.

This was based "mainly on strength of vehicle deliveries achieving half of the company's second half of 2016 guidance," according to the note.