The Bank of America Corporation (BofA) raises Tesla (NASDAQ: TSLA) price target to $550 from $350.
Yesterday, Tesla announced that it has entered into an equity distribution agreement to sell up to $5bn of common stock in the future through an “at the market” offering program, which could occur as block trades, open market transactions, or other market offerings. This follows a near 500% run up in the stock this year, as well as a 5:1 stock split, effective August 31.
Tesla Enters Agreement To Raise $5 Billion through Common Shares offeringhttps://t.co/Mjcs8EGZIF— Tesmanian.com (@Tesmanian_com) September 1, 2020
BofA writes in its note to investors: "As a reminder, we had ungraded TSLA stack ta Neutral predicated on the notion that the company has unfettered access to low-cost capital Which remains a key advantage that may (and should) be leveraged to accelerate growth over our forecast period. In our view, yesterday's announcement was evidence of our thesis that TSLA will utilize its stock to raise capital through low-cost equity offerings in order to accelerate aggressive capacity buildout plans globally and drive units/revenue substantially higher, further cementing its status as the dominant EV automaker."
With the proposed equity offering, BofA raising its PO for TSLA from $350 to $550, since the company moved forward its siding scale of valuation based on the theoretical growth opportunity afforded to TSLA, which is now consistent with 13.6x EV/Sales (prior 8.5x ) and 87x EV / EBITDA (prior 55x) on their 2021-2022 estimates.
BofA's framework follows five key steps:
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