Tesla’s (NASDAQ:TSLA) $2.4-B Offering May Put a Floor Under the Company’s Stock Price

Tesla’s (NASDAQ:TSLA) $2.4-B Offering May Put a Floor Under the Company’s Stock Price

$TSLA

  • JPMorgan, a Tesla bear, told clients Monday the offering should help put a floor on the stock’s price.

Tesla (NASDAQ:TSLA) is raising $2.4-B in new funding, the company, and even the most bearish of Wall Street analysts are sympathetic about the long expected move.

“We applaud Tesla’s decision to raise capital but believe at the same time it should serve to highlight the potential ongoing dilution risk should the firm not prove more successful in stanching free cash outflow (it burned -$0.8 bn in 1Q19),” JPMorgan’s autos analyst, said in an note to clients Monday.

Tesla’s stock price gained about 4.5% on Friday, following the expansion of the capital raise, on top of another 6.9% gain when the company originally announced the offering on May 2. The gains have helped shares claw their way back from Tesla’s lowest trading prices in years, after a disappointing Q-1 earnings report sent the stock due South.

As shares crossed back into their usual territory Monday morning, near 250, JPMorgan says a hedging move used by Tesla in the capital raise could help the stock from deep diving again as it did last week.

Tesla’s shares finished at 255.34 each at the close in NY Monday, shares are down in extended trading.

Tesla will be “using some of the proceeds to enter into anti-dilutive hedging transactions and the majority for general corporate purposes, which we estimate has the potential to help put a floor under the stock over the near- to medium-term as liquidity concerns are likely to fade for now,” the bank said.

“At the same time, however, the transaction limits prior potential upside on a per-share basis, given dilution.”

The average price target for Tesla’s stock has fallen drastically in recent months; 14 of the analysts rate the stock a Sell, with 10 saying hold and 11 saying Buy.

From JPMorgan’s note to clients Monday: “Although both technology and execution risk seem substantially less than was once feared, expansion into higher volume segments with lower price points seems fraught with greater risk relative to demand, execution, and competition. “Meanwhile, valuation appears to be pricing in upside related to expansion into mass-market segments well beyond our volume forecasts for the Model 3.”

Tesla is a very risky play that Shayne and I believe is for professional only now. Our price target is 140 and then…

TSLA: Support & Resistance
TypeValueConfluence
resist.376.792
resist.356.342
resist.346.263
resist.325.713
resist.318.727
resist.305.782
resist.289.7716
resist.271.8910
resist.260.568
supp249.433
supp237.872

Read more at http://www.stockta.com/cgi-bin/analysis.pl?symb=TSLA&cobrand=&mode=stock#Lmm1BqL7gPyi1dGB.99

HeffX-LTN’s overall technical outlook for Tesla is Very Bearish across the board, there is no support for the fledgling EV maker in here an a mountain of overhead resistance.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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