Gene Munster Defends Tesla Bulls, Roth Capital's Irwin Makes Bear Case

Electric automaker Tesla Inc TSLA is among the most contested stocks, and the debate likely picked up momentum after the company announced a 2.65-million share offering at $767 each this week. 

The Bear Argument: Why Does Tesla Need The Cash?

Tesla showed in its most recent earnings report $6.7 billion in cash and equivalents on the balance sheet, which begs the question of why the company needs another $2.23 billion, Roth Capital analyst Craig Irwin said on CNBC's "Squawk Box."

There is only one reason why the company would need that extra $2.23 billion, he said: prior financial benefits won't occur again, while SG&A expenses will increase.

On the other hand, Tesla deserves credit for making the right move in raising cash, as it did so out of a position of strength rather than necessity, the analyst said.

The Tesla Bull Argument: Focus On The Future

Taking the bull side of the debate, Loup Ventures managing partner Gene Munster said Tesla is focused on two trends that will dominate the future of automotive: electrification and autonomy.

Bears may be missing the "undeniable truths" that Tesla is addressing a large market in which Americans drive more than 2.5 trillion miles a year on highways, he said.

It would be wrong for investors to be negative on these "themes" and Tesla is the leader in the area, Munster said.

Irwin responded that he shares a similarly positive view on the future of the auto industry.

At the same time, one could look beyond Tesla's role and evaluate its financials, the analyst said.

Stripping out Tesla's consumer finance unit, shares are trading at three times the valuation of Daimler and five times the valuation of BMW, he said.

These automakers and others are likely to catch up to Tesla's lead, and the stock's valuation may imply it has a 10-year head start, if not longer, Irwin said. A two-year advantage is a "pretty fair timeline," as Tesla has no "strategic structural strategic long-term advantage," he said.

Munster: 'Dire Situation' For Auto Companies

Munster recalled a meeting he had with an unnamed "top-10 automaker" that has been around for more than eight decades.

The auto executives expressed a viewpoint that just because they have been around for close to a century doesn't mean their company has a future, he said. 

Munster said that within a decade, one of the automakers that now ranks as a top-10 global leader will "be on a track to go out of business."

Tesla shares were down 0.26% at $801.93 at the time of publication Friday. 

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Photo courtesy of Tesla.