Analyst Says Tesla's $5B Stock Sale Is Smart Strategic Move

Tesla Inc TSLA announced a $5 billion equity distribution agreement, sending the high-flying stock a tad lower Tuesday morning.

Wedbush analyst Daniel Ives maintains a Neutral rating and $560 price target but likes the move.

The Tesla Thesis: The equity distribution agreement for raising up to $5 billion is in addition to the $5 billion raise from September, as the EV maker continues to build up its treasure chest and Capex capabilities down the road.

"We believe this is the smart move at the right time for Musk & Co. after the parabolic rally in shares with the appetite strong among investors to play the transformational EV trend through pure play Tesla over the coming years," Ives wrote in a note.

Tesla raised significant capital over the past year, which has taken the "doomsday scenario" off the table and also helping to build out the "lynchpin" Giga 3 factory in China, Ives said. It also provided enough time for the model to hit sustained profitability which also earned the company S&P 500 inclusion.

Related Link: Why Tesla Is Unlikely To Buy A Traditional Automaker Outright

Ives said Tesla is now in a clear position of strength, having come out of losses and with two factory buildouts – Austin and Berlin – on the horizon.

The company is raising enough capital to solidify its growing cash position and slowly get out of its debt situation. This, the analyst said, throws the lingering bear thesis for Tesla out the window for now.

"We believe this capital raise is a clear positive and further solidifies our bull case price target scenario of $1,000 with our base target $560," he wrote.

TSLA Price Action: Tesla shares were slipping 2.38% to $626.50.

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