Tesla (TSLA) must keep their phone line open with banker pals as it may need to raise another fresh capital to boost its money-losing auto outfit. This advice came from Wedbush analyst Dan Ives who just cut TSLA’s stock to Neutral from Outperform last month.
On Monday (May 20), the analyst cut the price target on TSLA again to $230 from $275 on Monday (May 20). The stock’s shares dipped by 5%.
We believe Tesla will have to raise another $1 billion in capital,
He told Yahoo Finance.
The troubled Tesla
The cash outlook came as a surprise considering that the firm headed by Elon Musk just had a capital raise earlier this month.
The Musk-led company raised around $1.84b by issuing convertible debt and $860m by selling new stock.
The efforts were done despite Musk denying the need to boost capital during most of last year. Yet, dismal first-quarter earnings results and a stock price on a continuous downtrend has forced TSLA to take some measures to beef up its finances.
The media also reported that the chief executive officer has recently imposed a new round of cost cuts at Tesla to save money.
Weak demand for the company’s expensive cars did not help its fundamentals. The company’s cash pile plunged $1.5b in the 1Q2019 from 4Q2018.
Will TSLA have a strong cash position ahead of a head of a Model 3 production ramp and pursue its ambitious forays into car insurance, robotaxis, and more?
Tesla may avert bankruptcy
On a positive note, Ives expect TSLA to return to profitability and may not need to file bankruptcy.
The analyst said:
If demand comes back and they cut costs in other non-strategic initiatives I think they can be profitable.
Ives, however, cautioned that recovery may take longer than expected and it requires more capital boost.
“It will take some pretty significant navigating throughout this perfect storm they are hitting,” says Ives, regarding concern over degrading product demand as well as Tesla’s heavy cost structure.
Tesla declined to comment on the analyst’s outlook. Check out blocktoro.com for more updates.