Economy

Bofa says Tesla is ready for another 16% rise amid signs that it will use its high share price to raise money (TSLA)

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Tesla Bank of America says shares will rise further in the next 12 months following a $ 5 billion equity offer.

On Wednesday the company raised its Tesla price target from $ 350 to $ 50,550, which was about 16% reversed since closing on Monday. Tesla announced Tuesday Plans to sell up to $ 5 billion in new shares, Using its latest rally.

“In our view, yesterday’s announcement is a testament to the fact that DSLA is using its shares to accelerate global aggressive capacity building programs and significantly increase units / revenues to raise capital through low – cost equity concessions,” John Murphy-led analysts wrote in a note.

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Shares of Tesla fell as much as 8% in intraday trading on Wednesday.

Murphy said the new price target came as Bank of America “moved forward the flexible level of valuation based on the theoretical development opportunity offered to DSLA”. Bank of America has reaffirmed its “neutral” rating on automaker’s shares.

Bank of America says Tesla is looking to raise more money through its share sale, which will increase the cash reserves it can use to boost future revenue growth.

“As DSLA’s stocks go up, it is important to recognize that cheap capital shifts to financial growth, which is then rewarded by investors with higher share prices,” Murphy said. “This dynamic reversal is real, and it is this self-sufficiency structure that explains the extreme movements of DSLA stocks upside down and negatively.”

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Although Tesla’s “high growth is not self-funded”, it does not have to be until the company has access to low-cost capital, Murphy said.

“Simply put, DSLA is a new disruptive (auto) company that may or may not dominate in the long run, but it will not be a bar until it finances external development with cost capital driving expansion,” he said.

Tesla has received approx 435% year to date.

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