Connect with us

Investor's Corner

Tesla (TSLA) uses Model S, 3, X leases to back $780 million bond deal

The Tesla Model S, X, and Model 3. (Photo: MotorTrend)

Published

on

Tesla (NASDAQ: TSLA) is planning to raise $779.53 million this week in the asset-backed bond market. The company’s bonds will be backed by Tesla vehicle leases, made up of mostly the Tesla Model S and Model X.

The electric automaker is offering eight classes of bonds, a majority of which carry mostly top AAA ratings from Moody’s Investors Service. The bonds will mature for investors in 2.7 years or less.

The asset-backed bond move from Tesla is the first time the Silicon Valley-based electric car manufacturer has made a debt deal in 2020. Moody’s data suggests the company raised funds three times prior: once in 2019 and twice in 2018. MarketWatch initially reported the agreement.

Impressively, it is the first time Tesla has used the strategy during the global COVID-19 pandemic, which has crippled many industries since the virus arrived in the U.S. in January.

The coronavirus’s presence in the United States has slowed the economic surge that the U.S. stock market was experiencing toward the tail end of 2019. Many of the country’s sectors have felt profound economic consequences that were brought on by mandatory Stay-at-Home orders and social distancing measures that were recommended by state and local governments.

Advertisement

Tesla is one of the few businesses that has managed to gain momentum amidst the pandemic. The company has experienced some of its most substantial gains throughout the past several months.

Leases on the Model S sedan and Model X SUV make up half of the collateral for the bond deal. The remainder comes from the Model 3, the company’s most popular vehicle, Moody’s says.

During the last U.S. economic crisis, consumers prioritized auto payments above their home mortgages. This option ultimately benefitted automakers because there were few credit issues on bonds backed by vehicle leases. Instead, the housing market felt the brute of the consequences as homes were foreclosed on.

If the trend remains consistent throughout the current economic recession, it may solidify the demand for Tesla’s debt.

The company’s Q2 Earnings Call on July 22 showed the company managed to turn a profit for the fourth consecutive quarter. After reporting a net GAAP income of $104 million and non-GAAP earnings of $2.18 per share, the company surprised many people because of extended closures at its Fremont production facility in Northern California.

Advertisement

At the time of writing, TSLA stock was trading at $1,507.45. It remains the most valuable automotive company in the world, with a market cap of $279.81 billion.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Joey has been a journalist covering electric mobility at TESLARATI since August 2019. In his spare time, Joey is playing golf, watching MMA, or cheering on any of his favorite sports teams, including the Baltimore Ravens and Orioles, Miami Heat, Washington Capitals, and Penn State Nittany Lions. You can get in touch with joey at joey@teslarati.com. He is also on X @KlenderJoey. If you're looking for great Tesla accessories, check out shop.teslarati.com

Advertisement
Comments

Investor's Corner

Tesla gets its best analysis from Morgan Stanley as ‘it’s all about to change’

He maintained its ‘Overweight’ rating and the $410 price target Morgan Stanley had on the stock.

Published

on

(Credit: Tesla)

Tesla has gotten perhaps its best analysis from Morgan Stanley in quite some time, as the Wall Street firm claims that “it’s all about to change.”

That phrase could be used for both the company’s status and the world in general.

Analyst Adam Jonas said in a new note on Thursday to investors that Tesla could be one of the major winners in terms of the global transition from what it is now to what it will be.

He describes the global shift that will occur over the next few years:

“Have you interacted with a robot today? Have you even seen a robot today? No? Well, take a mental picture because it’s all about to change. When we meet someone who has never been in a Waymo or a Tesla Cybercab (which is most people), we frequently see a wince and a response such as ‘I’m not sure I’d feel comfortable getting in a car without a driver.’ We imagine going back in time to 1903 and asking people if they’d feel comfortable in an airplane.’”

Advertisement

The same technological revolutions that have occurred over the past 150 years will continue to occur again and again. We are on the verge of another, Jonas believes, as companies like Tesla are working on artificial intelligence tech, which includes changing the way we look at things like transportation and labor.

Jonas includes an interesting tidbit in his note about how humanoid robots could change wages, and how it could work into the advantage of Tesla, especially as it is developing its own Optimus robot:

“We estimate 1 humanoid robot at $5/hour can do the work of 2 humans at $25/hour, generating an NPV of approximately $200k/humanoid. 1 robot shaped car can potentially drive down cost/mile of a ride share vehicle to <$0.20 mile (1/10th human-driven ride-share).”

Jonas sees Tesla as a key player in how AI will impact things like manufacturing and various automotive industries, and he believes there is long-term potential for AI, robomobility, and even autonomous eVTOL platforms.

Tesla stock: Morgan Stanley says eVTOL is calling Elon Musk for new chapter

Advertisement

He maintained its ‘Overweight’ rating and the $410 price target Morgan Stanley had on the stock.

Continue Reading

Elon Musk

Tesla stock gets crazy prediction from CEO Elon Musk

Musk says this is what it would take to be a millionaire from a Tesla investment right now.

Published

on

A red Tesla Roadster driving around a turn
(Credit: Tesla)

Tesla stock (NASDAQ: TSLA) got a crazy prediction from CEO Elon Musk recently, as the future of the company seems to be moving more toward AI, autonomy, and robotics, and away from automotive, which is what it has traditionally been recognized as.

Over the past few years, as Tesla has prioritized its Full Self-Driving suite, its rollout of a dedicated Robotaxi program, and the development of the Optimus bot, the company has gained a new reputation from analysts.

It was always looked at as a stock with tremendous potential by many Wall Street firms, some more than others.

The most bullish analysts, like Cathie Wood of ARK Invest, believe the company will eventually reach a multi-trillion-dollar valuation and a share price of over $2,000. Her $2,600 price target does not include any contributions of Optimus. Instead, it leans on Full Self-Driving and Robotaxi.

Tesla tops Cathie Wood’s stock picks, predicts $2,600 surge

Advertisement

Based on where the company is now, there are a lot of potential catalysts. The Robotaxi expansion, as well as affordable vehicles, its prowess in AI and Robotics, and its powerful energy division are all arguments for investment.

One X user said that a $150,000 investment in Tesla right now would likely make you a millionaire. Musk said he thinks that sentiment is “probably correct.”

He’s echoed this belief in recent earnings calls, including the one for Q2, which happened in July:

Advertisement

“I do think if Tesla continues to execute well with vehicle autonomy and humanoid robot autonomy, it will be the most valuable company in the world. A lot of execution between here and there. It doesn’t just happen. Provided we execute very well, I think Tesla has a shot at being the most valuable company in the world. Obviously, I am extremely optimistic about the future of the company.”

Tesla is trading at $316.50 at the time of writing, and has a market cap of just under $1 trillion.

Continue Reading

Elon Musk

Tesla stock gets another analysis from Jim Cramer, and investors will like it

“Tesla is morphing right now. It’s in transition from being a car company to being a technology company.”

Published

on

Credit: CNBC Television/YouTube

Tesla stock (NASDAQ: TSLA) got its latest analysis from Jim Cramer, and investors will like what he has to say.

Cramer has flip-flopped his thoughts on Tesla shares many times over the years. One time, he said CEO Elon Musk was a genius; the next, he said Ford stock was a better play. He’s always changing his tune.

However, Cramer’s most recent analysis is of a bullish tone, as he talks about the company’s evolution from an automaker to a tech powerhouse. He made the comments on CNBC’s Mad Money:

“Tesla is morphing right now. It’s in transition from being a car company to being a technology company. You wanna be in there because the tech is worth a lot more than what it’s selling for right now. Don’t care where you bought it, care where it’s going to.”

Tesla has always been looked at by the mainstream media as an automaker. While that is its main business currently, Tesla has always had other divisions: Energy, Solar, Charging, AI, and Robotics. Some came after others, but the important point is that Tesla has not been an automaker exclusively for a decade.

It launched Powerwall and Powerpack in April 2015, marking the start of Tesla Energy.

But Cramer has a point here: Tesla is truly becoming much more than a car company, and it is turning into an AI and overall tech company more than ever before. Eventually, it will be recognized as such, more so than it will be as an automotive company.

Cramer’s comments also follow a recent prediction by Musk, who stated on X that he believes a $150,000 investment in Tesla shares right now would eventually turn someone into a millionaire:

Advertisement

Musk has said he believes Tesla could be headed to a serious increase in valuation. Eventually, it could become the most valuable company in the world. He said this during the Q2 Earnings Call:

“I do think if Tesla continues to execute well with vehicle autonomy and humanoid robot autonomy, it will be the most valuable company in the world. A lot of execution between here and there. It doesn’t just happen. Provided we execute very well, I think Tesla has a shot at being the most valuable company in the world. Obviously, I am extremely optimistic about the future of the company.”

Advertisement
Continue Reading

Trending