Tesla Motors, Inc. (Nasdaq: TSLA) shares have been beat down as of late: down nearly 13% over the past two weeks amidst fears that the company will have a high rate of cash burn that it can’t afford, some analysts are saying that now is the best time to buy.
In a memo sent to investors last Friday, Baird analyst Ben Kallo and Tyler Frank note that Tesla’s liquidity challenges and its need to raise capital is commonplace for a small and fast-growing company. The wealth management group points out Tesla CEO Elon Musk’s remarks from previous quarterly reports that the Silicon Valley electric vehicle maker and energy company disclosed to investors its need to raise cash in late 2016 and early 2017.
As we previously reported, Tesla’s capital spend will soar by 340% in the second half of this year while it stays the course with investments into new development and growth. Though Tesla has built a $3.25 billion cash position helped by the company’s raise of $1.7 billion earlier in the year, additional cash will be needed to help fund tooling and equipment costs for its highly anticipated mass market Model 3. The additional capital from its upcoming cash raise will also go towards development of the company’s massive Gigafactory battery facility.
Tesla also expects to issue 15 million shares to pay out SolarCity shareholders, if approved, as part of the merger. The company filing will value SolarCity shares at $24.16 resulting in a deal worth approximately $2.4 billion.
Investopedia reminds us of Warren Buffet’s famous words when it comes to investing, “Be greedy when others are fearful,” and this couldn’t be more the case right now with Tesla shares.
At the time of this writing, Tesla shares are trading up $4.90 (+2.48%) at $202.68.