Tesla Motors Inc (TSLA) PT Raised, Now Look To Mass Market: Barclays

Updated on

Tesla Motors Inc (NASDAQ:TSLA) shares are on the rise yet again, this time after the company’s CEO said he would be investing $100 million in the company. The stock jumped as much as 7 percent after the announcement, and analysts at Barclays PLC (NYSE:BCS) (LON:BARC) released a report weighing in on the equity injection. They see it as an important step for the company as it moves to enter the mass market and have raised their price target on Tesla shares.

Tesla Motors Inc (TSLA) PT Raised, Now Look To Mass Market: Barclays

CEO Elon Musk’s $100 million investment will be split, with $45 million of it coming in the common stock offering and about $55 million of it being purchased directly from Tesla Motors Inc (NASDAQ:TSLA). The automaker also announced this week that it would offer 2.7 million shares of common stock, adding up to about $244 million, plus an additional $450 million in a convertible senior note that’s due in 2018.

The Benefits Of Tesla’s Extra Cash

In the view of analysts at Barclays, Tesla Motors now has a greater chance to move from just a luxury automaker into a mass affluent automaker. The company poses less of a financial risk because of the raise in equity. In addition, demand is expected to rise thanks to consumer confidence in the company’s warranties and also more international visibility.

As a result, analysts at Barclays have raised their price target for shares of Tesla Motors Inc (NASDAQ:TSLA) from $72 per share to $90 per share. They also reiterated their overweight rating on the stock.

Tesla’s Continued Development Will Be Funded

The main reason Barclays analysts see Tesla Motors Inc (NASDAQ:TSLA) as being able to move from a niche automaker into the mainstream is because of the way the company’s equity injection plan is laid out. They said the plan will make it possible for the company to continue developing the already-promised Model X and the future mass market vehicle that Tesla has said it would build.

The entire plan will bring in around $830 million for Tesla, and after subtracting the repayment of the company’s loan from the Department of Energy, it will likely have about a $390 million boost in cash.

Tesla’s Chance To Enter The Mass Market

Analysts at Barclays PLC (NYSE:BCS) (LON:BARC) still remain concerned about the costs of batteries, so they say that will be one challenge Tesla Motors Inc (NASDAQ:TSLA) will have to overcome as it moves to enter the mass auto market. They said they’re looking for more evidence in terms of battery cost reductions before they assign a higher probability of mass market adoption in their valuation. At this point they’re only factoring in a 5 percent chance.

The analysts point out that Tesla Motors Inc (NASDAQ:TSLA) bulls see no chance that the company will fail, a 70 percent chance that the company will successfully get into the mass market and a 25 percent chance that the company will only get as far as generation three in terms of its automobiles. They said if the bulls are right, they see an upside to $137 per share.

Leave a Comment