Tesla analyst is bullish on what the company is doing with its high-priced stocks, raises the price target to $ 550
You’re here (TSLA) The high-priced stocks give the electric vehicle maker access to more equity, which ultimately means more growth for the company, BofA analyst John Murphy said.
Analyst raised his stock price target to $ 550 from $ 350 the day after Tesla announced its intention to sell up to $ 5 billion in common stock.
“This supports our view that TSLA will use its shares to raise low-cost equity capital to fund accelerated growth,” Murphy wrote in a note to investors. The analyst maintains a neutral rating on the title.
“Building capacity in the automotive industry is expensive and often generates low returns,” Murphy said. “Even though there is a future software / service / car-calling game for TSLA (and we have our doubts), the vehicles / platform have yet to be manufactured,” he said.
“It is important to recognize that the higher the upward spiral of TSLA shares, the less expensive capital becomes to finance growth, which is then rewarded by investors with a higher share price,” he said. he writes.
Year-to-date, the stock is currently up around 425%. Actions rose 12% on Monday following a 5-to-1 stock split.
‘No need for internal funding when external is abundant ‘
Murphy says Tesla doesn’t need internal funding “when external is plentiful.”
He points to government subsidies to consumers and low-cost loans that helped Tesla in its initial phase of development. He also emphasizes regulatory credits which amounted to over $ 1 billion in the past 12 months. Finally, according to Murphy, “The results and momentum further drive low-cost equity financing as the stock grows. “
“Put simply, TSLA is a disruptive new (automotive) company that may or may not be dominant in the long run, but that doesn’t matter as long as it can continue to fund disproportionate growth with almost no cost of capital.” to increase its capacity, ”he wrote.
Tesla’s last Second quarter results announced in July beat expectations. The company posted a fourth consecutive quarter of profitability under GAAP, making the stock eligible for inclusion in the S&P 500 (^ GSPC). It also helped the stock rally over the past month.
Dan Ives of Wedbush has a Tesla price target of $ 380 (reflecting the stock split), and a bull case target of $ 700. Ives a told Yahoo Finance that Tesla “is a technology company, not an auto company. “
On Wednesday, the stock was down more than 7% at mid-session after a major shareholder revealed a reduction in its Tesla position.
Ines covers the US stock market. Follow her on Twitter at @ines_ferre