Tesla (TSLA) investors have been worried about too much cash burn and too much debt at times this year. Now Tesla's bonds, a key indicator of the electric car maker's long-term health, are on the rise.
Investors applauded Tesla's earnings report Wednesday. Sales came in at roughly $4 billion, beating estimates. The loss per share was $3.06, less than analyst expectations for a $3.30 a share loss.
And there was more good news for bond investors. Tesla burned less cash than expected, with cash outflows of $739 million, compared with the expected $889 million. The stock rose more than 15% Thursday as the company reiterated its second-half guidance.
Tesla's 5.3% bonds, issued in August of 2017 and due in 2025, are gaining ground Thursday. They rose to $91.25 apiece, up from $89.50 Wednesday, according to data from LCD, a division of S&P Global Market Intelligence. Bond investors in Tesla watch Tesla's liquidity more than anything else, LCD told TheStreet.
"Tesla bondholders also breathed a sigh of relief on Thursday, after obtaining a much-anticipated look at the company's balance sheet," LCD wrote in an email to TheStreet.
Just one week ago, Tesla asked its suppliers for cash returns, raising fears about Tesla's liquidity. That caused the price of the bonds to come down according to LCD, but the solid results out Wednesday prompted the rebound.
Adding to the bond rally was CEO Elon Musk's comments that it won't need a capital raise any time soon, a change of pace from the company's frequent reliance on capital markets to fund its operations.
"I think we can be sort of essentially self-funding on a go-forward basis," Musk said on the company's earnings call.
Those comments were a turning point in the bonds' recent move upwards. "Bondholders were especially attuned to remarks from CEO Elon Musk on yesterday's post-market," LCD wrote in the email.