Tesla May Not 'Need' A Capital Raise, But Morgan Stanley Predicts A $2.5-Billion Issue

Tesla Inc TSLA said Tuesday it could meet its 2018 objectives without a debt or equity raise, but some on the Street aren’t ruling out the option.

The Rating

Morgan Stanley analyst Adam Jonas reiterated an Equal-weight rating on Tesla with a $379 price target.

The Thesis

Tesla aims to achieve a Model 3 production rate of 5,000 per week within the next three months, a feat Morgan Stanley expects no sooner than the fourth quarter. At the same time, it guided for full-year Model S and X deliveries surpassing analyst estimates — despite having missed the mark in the last quarter.

Morgan Stanley anticipates a $2.5-billion equity raise in the third quarter to support these bullish production and delivery goals.

“Investors with whom we spoke positively interpreted the company's commentary around ‘high volume, good gross margin and strong positive operating cash flow’ in Q3, although [they] were somewhat skeptical that the company would actually realize these goals or avoid an equity or debt raise,” Jonas said in a Wednesday note.

Price Action

At the time of publication, Tesla shares were trading up 0.46 percent at $268.75. 

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Photo courtesy of Tesla.