Tesla's (NASDAQ: TSLA) Fresh Round of Funding Sends Shares Rallying
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Is there anything that can hold Tesla (NASDAQ: TSLA) stock down right now? Typically when a company raises more money from an additional stock offering, shares see some weakness creep in as their value is diluted, on paper at least. Not so for the company of Mr. Musk, which finished the day up more than 1% and at all-time highs.
The $600 billion electric vehicle titan plans to pull in a cool $5 billion from an at-the-money offering, even with shares as high as they are. Several double-digit percentage pullbacks in recent months haven't been enough to dilute the resolve of their bulls, who've pushed the stock up almost 9x in as many months. Investors would do well to take note. It seems the smart money and the big money is focusing on the ever-growing potential that lies ahead in the electric vehicle and clean energy space, and are betting big on Tesla's ability to continue capturing market share.
$1,000 Price Target
Wedbush Securities called yesterday's decision a smart move and one that will give them a hefty balance sheet to enter 2021 with. Analyst Dan Ives noted how "this is in addition to the $5 billion raised from September and additional equity raises in a continued effort to build up its treasure chest and capital expenditure capabilities down the road." By raising so much fresh capital, Tesla seems to have put to bed any near-term concerns about the bears' thesis becoming reality. Not only were they able to side step the shutdown of key factories due to COVID-19, but they've also been able to hit their key production and sales metrics this year too.
Wedbush's $1,000 price target for Tesla shares should have those of us still on the sidelines licking our chops at the prospect of getting involved, even with the stock as high as it is. Wedbush are not alone on Wall Street either in terms of being fans of Tesla, with Goldman Sachs upgrading the company's shares from Neutral to a Buy rating late last week. A vastly improved long term sales outlook and attractive margins underpinned their decision, which was also possibly influenced by them being the underwriters of the $5 billion offering announced yesterday.
Close To Zero Competition
On Monday, Loup Ventures' Gene Munster looked beyond 2021 and called for a $2,500 price target, or a 300% increase from the current share price, within the next three years. This would put their market cap above the $2 trillion level but Munster is bullish on this happening as Tesla continues to bring its characteristic disruption to industries outside of the auto space.
In an interview on CNBC, Munster said Tesla "are really going to take their tech that they're defining and pioneering with auto and apply it to new markets", with high margin industries like insurance ripe for a 21st century player. Is there a chance that their automotive peers could catch up with them? Not a hope says Munster, "that ship has sailed". Indeed, it's already a fading headline that Tesla now outweighs almost any combination of other automakers by market cap.
The consistent profitability that has now become the mainstay of their quarterly earnings reports has also come to bear fruit, with their upcoming inclusion in the S&P 500 index seen as a major step in their maturity as a public company. Tesla's inclusion will come into effect on Monday, December 21st, in what will be the largest rebalancing of the benchmark index in its history.
By the time that Monday's session closes, Tesla will be around the 7th biggest component of the index, lagging behind fellow tech titans such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Amazon (NASDAQ: AMZN). But based on the seemingly unstoppable momentum that's in its shares at the moment, it's hard not to see them soon moving towards the top of that bunch.