Summary List Placement

  • Bank of America on Wednesday boosted its Tesla price goal to $550 from $350, implying a roughly 16% upside from Monday’s shut.
  • Tesla on Tuesday introduced plans to sell up to $5 billion in new shares, capitalizing on its current rally.
  • The announcement “was evidence of our thesis that TSLA will utilize its stock to raise capital through low-cost equity offerings in order to accelerate aggressive capacity buildout plans globally and drive units/revenue substantially higher, further cementing its status as the dominant EV automaker,” analysts led by John Murphy wrote in a be aware.
  • Watch Tesla trade live on Markets Insider.
  • Read more on Business Insider.

Tesla shares are poised to surge even larger within the subsequent 12 months following its proposed $5 billion fairness providing, in accordance to Bank of America.

The agency on Wednesday boosted its Tesla price goal to $550 from $350, implying a roughly 16% upside from Monday’s shut. Tesla on Tuesday introduced plans to sell up to $5 billion in new shares, capitalizing on its current rally.

“In our view, yesterday’s announcement was evidence of our thesis that TSLA will utilize its stock to raise capital through low-cost equity offerings in order to accelerate aggressive capacity buildout plans globally and drive units/revenue substantially higher, further cementing its status as the dominant EV automaker,” analysts led by John Murphy wrote in a be aware.

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Shares of Tesla dipped as a lot as 8% in intraday buying and selling on Wednesday.

The new price goal got here as Bank of America moved ahead its “sliding scale of valuation based on the theoretical growth opportunity afforded to TSLA,” Murphy mentioned. Bank of America reaffirmed its “neutral” score on shares of the automaker.

Bank of America mentioned it sees Tesla utilizing its excessive stock price to raise more cash via share gross sales, which increase money holdings that can be utilized to improve future earnings progress.

“It is important to recognize that the higher the upward spiral of TSLA’s stock goes, the cheaper capital becomes to fund growth, which is then rewarded by investors with a higher stock price,” Murphy mentioned. “The inverse of this dynamic is also true, and it is this self-fulfilling framework that appears to explain the extreme moves in TSLA stock to the upside and downside.”

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While Tesla’s “hyper-growth is not necessarily self-funding,” it would not want to be so long as the corporate has entry to plentiful low-cost capital, Murphy mentioned.

“Simply put, TSLA is a new disruptive (auto) company that may or may not be dominant in the long-term, but that does not matter as long as it can keep funding outsized growth with almost no cost capital driving capacity expansion,” he mentioned.

Tesla has gained roughly 435% year to date.

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