Electric vehicle maker Tesla has been on an explosive tear since the year started and has now seen several weeks of straight gains. With delivery expectations beating estimates, a slew of bullish price targets from analysts, and excitement around the company’s Shanghai factory, Tesla’s share price has been surging.
The stock flew past $900 after Piper Sandler hiked Tesla’s price target to $928 per share, the highest on Wall Street, according to FactSet.
The company surprisingly announced recently that it has offered to sell $2 billion in common stock and priced the offering at $767 a share. The deal raised a total of $2.03 billion and was revealed only days after Chief Executive Elon Musk said that it would not “make sense” to raise more cash.
Tesla said it would use the proceeds from the offering “to further strengthen its balance sheet, as well as for general corporate purposes.”
“Our applause for issuing equity,” analysts at Evercore ISI said. The firm raised their price target on Tesla shares to $550 from $250. “Valuation is, as ever, in the eye of the beholder,” the Evercore ISI analysts, led by Chris McNally, wrote. “But at this point Tesla’s valuation is implying significant volume increases which would require flawless execution.”
Since 2020 began, Tesla shares have gained over 100% and there doesn’t seem to be an end for this rally in sight yet, especially when one of the most optimistic outlooks for Tesla shares is now at $7,000 in five years.
ARK Invest recently published an update to its Tesla valuation model and said that it now expects the stock to be worth $7,000 by 2024. Considering that this is just a base case, and that in a bull case the stock could trade as much as $15,000 or above according to the firm, it is no surprise that Wall Street is going crazy for Tesla.
“In our experience, we’ve never seen a stock rise that much that fast with such little regard to past fundamentals or track record,” remarked Needham analyst Rajvindra Gill in a note to investors titled “Irrational Exuberance Hits All Time High.”
Positive notes from analysts including Argus Research, who recently raised its bar for the stock to the highest level yet, has helped Tesla shares perform better than they have since 2013.
Shorts have been eating their shorts with how fast Tesla has been moving, including Steve Eisman. Eisman, an American businessman known for his short positions, said he ate his losses amid Tesla’s “cult-like” rally. He told Bloomberg Television, “Look, everybody has a pain threshold. When a stock becomes unmoored from valuation because it has certain dynamic growth aspects to it, and has cult-like aspects to it, you have to just walk away.”
Positive news from China may have also been contributing to Tesla share prices moving higher, as the Shanghai municipal government recently said it would help companies like Tesla “resume production as soon as possible” in the midst of its deadly coronavirus outbreak.
Sources:
https://www.theverge.com/2020/2/13/21136164/tesla-2-billion-stock-offering-elon-musk-cash-raise
