Tesla Inc (NASDAQ:TSLA) shares are up another 7.7% this week after the company completed its stock split on Monday and announced a $5 billion offering on Tuesday.
On Wednesday, one Wall Street analyst raised his price target for Tesla and said the company no longer has pressure to self-fund its expansion.
The Tesla Analyst: Bank of America analyst John Murphy reiterated his Neutral rating for Tesla and raised his price target from $350 to $550.
The Tesla Thesis: Murphy said Tesla’s biggest long-term challenge will be funding its massive global expansion efforts, but the higher the stock goes the less pressure Tesla will face in raising that capital.
This week’s $5 billion offering is the second time Tesla has raised outside capital since CEO Elon Musk said it “doesn’t make sense to raise money” back in January.
Murphy said Tesla’s “upward stock spiral” suggests the company has “no need for internal funding.”
Murphy said Tesla’s auto business “may or may not be dominant in the long-term,” but that outcome is irrelevant if the company continues to have nearly unlimited access to virtually no-cost outside capital.
“After 17 years in existence, TSLA’s hyper-growth is not necessarily self-funding, and really does not need to be when low cost capital is plentiful,” Murphy wrote in the note.
Murphy said the higher Tesla’s stock price goes, the cheaper capital becomes for the company, which creates a positive feedback loop that drives the stock price even higher and creates a “self-fulfilling framework” that helps explain the extreme 961.5% gain in Tesla stock over the past year.
Benzinga’s Take: Tesla is clearly dominating an EV market that is virtually free from competitors at this point. For Tesla to maintain anything close to its current valuation in the long term, it will need to maintain the same level of domination once roughly 20 new EV models produced by other auto companies hit the market for the first time before the end of 2021.
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