Longtime Tesla bear throws in the towel and upgrades shares after 1,200% rally, reflects on what it got wrong
- RBC upgraded shares of
Teslato "sector perform" after maintaining a bearish view on the stock since January 2019, it said in a note on Thursday.
- The firm upped its price target to $700 from $339 and reflected on what it got wrong in its bearish call.
- "There is no graceful way to put this other than to say we got TSLA's stock completely wrong," RBC said.
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A longtime Tesla bear is throwing in the towel after the stock rallied 1,200% since its January 2019 "underperform" initiation.
RBC upgraded Tesla to "sector perform" from "underperform" and increased its price target to $700 from $339, it said in a note on Thursday. A move to $700 represents downside potential of 7% from Wednesday's close.
"There is no graceful way to put this other than to say we got TSLA's stock completely wrong," RBC said.
The biggest miss in RBC's original analysis was Tesla's ability to take advantage of its stock price to raise capital inexpensively, helping fund capacity outlays and growth, the note said.
In the past few months, Tesla has raised $10 billion in at-the-market share offerings, with its last raise of $5 billion less than 1% dilutive to shareholders.
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"This shows how easily Tesla can fund future growth whereas traditional OEMs need to generate significant cash from existing operations to fund their transition to electrification," RBC said, adding that the higher stock price is "somewhat self-fulfilling to Tesla's growth potential."
RBC now expects Tesla to sell 1.7 million cars in 2025 at a five-year compounded annual unit growth rate of 28%, driven by additional manufacturing capacity coming online and maintaining a global electric-vehicle market share of about 20%.
Going forward, RBC argued, Tesla can use its high stock price to fund acquisitions, whether of a traditional automaker for additional manufacturing capacity, of suppliers or raw materials to further vertically integrate, or of software or artificial-intelligence companies.
"Tesla's current valuation is just too large to ignore," RBC said.
As of Wednesday's close, Tesla was valued at $734 billion, making it the sixth-largest company in the S&P 500.
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