NEW YORK (TheStreet) -- Tesla (TSLA) - Get Report stock is gaining by 2.26% to $243.56 in mid-morning trading on Thursday, after the company filed to sell additional shares to raise $500 million for product development and growth.
Tesla's CEO Elon Musk plans to buy $20 million in shares in this offering.
TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust portfolio, said "He may make better cars, but what Elon Musk really runs is Tesla the stock. This was a brilliant move to raise $500 million—enough for now—and buy his own stock on the deal. And not a token amount, $20 million. The deal will get done, the liquidity overhang erased—again for now—and the longs will live to play another day."
Palo Alto, Calif.-based Tesla plans to use the funds to develop and manufacture Model 3, its more affordable vehicle, and increase the growth rate of stores, service centers and Supercharger networks.
The company will also invest in the energy-storing business, Tesla Energy, and develop the Tesla Gigafactory, which would manufacture lithium ion batteries.
Tesla will also grant underwriters the option to purchase up to $75 million in additional shares within a 30-day period.
Separately, TheStreet Ratings team rates TESLA MOTORS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TESLA MOTORS INC (TSLA) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its robust revenue growth -- not just in the most recent periods but in previous quarters as well. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 8.6%. Since the same quarter one year prior, revenues rose by 24.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- TESLA MOTORS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TESLA MOTORS INC reported poor results of -$2.36 versus -$0.71 in the prior year. This year, the market expects an improvement in earnings ($0.20 versus -$2.36).
- In its most recent trading session, TSLA has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for TESLA MOTORS INC is currently lower than what is desirable, coming in at 31.91%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -19.29% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$159.52 million or 4356.99% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: TSLA Ratings Report