Bank Of America: Tesla's Stock Headed To $155

Tesla Motors Inc TSLA could be one of the best short-selling opportunities in the market today. According to Bank of America analyst John Murphy, Tesla’s stock has nearly 30 percent downside ahead.

Tesla’s recent $2 billion equity offering was not surprising given the companies ambitious growth goals and high cash burn, but Murphy believes shareholders should prepare for even more dilution in the future. He points out that Tesla’s $750 million equity raise in Q3 of 2015 quickly evaporated when the company burned $1 billion in the second half of 2015.

“With roughly $1.4 billion of cash on its balance sheet at the end of 1Q16, and an estimated quarterly cash burn rate of ~$(400)mm+, we believe the incremental capital, as well as a full-draw down on its existing ABL, will likely only sustain TSLA through 2017,” Murphy explains.

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Murphy goes on to call Tesla’s goal of producing 500,000 units by 2018 “optimistic at best,” and questions whether or not Elon Musk’s vision for Tesla will come “at the expense of shareholders.”

Murphy concludes by pointing out that Tesla has raised capital every year since 2010, but if the company doesn’t do something to rein in its cash burn, support for the stock could soon begin to dissipate.

Bank of America has resumed coverage of Tesla with an Underperform rating and maintains a $155 price objective for the stock.

Disclosure: the author holds no position in the stocks mentioned.