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Why Did Tesla (TSLA) Stock Climb Today?

Tesla TSLA stock surged 2.08% on Monday morning after the electric car company received two separate analyst upgrades.

Morgan Stanley's MS Adam Jonas raised his Tesla price target to $317 a share from $305 a share. That number might surprise some investors as shares of Tesla currently sit at over $365. However, the analyst also upped his “bull case” target for the car company to $526 a share from $511 a share.

Jonas noted that his Tesla upgrade is based only on the company’s main electric car business. The analyst did not change his outlook on Tesla Mobility, Tesla Energy, or Solar City.

"Although other auto companies have launched and will continue to launch electric vehicles, we are not aware of any other auto company that is building out the necessary after-sales infrastructure to support a significant volume of electric vehicles in the car parc," Jonas wrote in a note. "EV infrastructure will be crucial to enable an ownership and operating experience commensurate with the product."

The Morgan Stanley analyst pointed to Tesla’s Supercharger network, the company’s eclectic charging station network, as an advantage over its competition. Jonas also restated that he believes technology companies, and not other car markers, will prove to be Tesla’s biggest competition.

On top of the Morgan Stanley upgrade, Baird’s Ben Kallo reiterated his Tesla “outperform” rating on Monday. Kallo also raised his Tesla price target to $411 per share from $368 per share.

"We expect strong demand for the Model 3 and believe the total addressable market will likely be underestimated, but think it will be an ongoing process to ascertain global demand," Kallo wrote in a note. "We think the large US market will support sales of the Model 3, and significant additional opportunities exist internationally."

Kallo pointed out that Tesla’s net orders jumped to 1,800 per day after the first Model 3s were delivered recently to Tesla employees. He also noted that CEO Elon Musk is confident that Tesla can produce 10,000 Model 3 vehicles per week within the next year.

The Baird analyst pointed to Tesla’s other business segments, such as solar energy, as potential long-term strengths. "We continue to believe Tesla Energy may be underappreciated by investors, and think the segment could be as important as the auto business over the long term," Kallo noted.

Shares of Tesla jumped over 2% in early morning trading on Monday, yet the stock has leveled off a bit since then. Tesla is currently a Zacks Rank # 3 (Hold).

Despite the bullish Tesla takes on Monday, a New York University finance professor said on Friday that he thinks one of the company’s recent moves is very strange. Aswath Damodaran, who is regarded as a company valuation expert said he doesn’t understand why a company that is losing cash, like Tesla, chose to raise its debt total and not sell stock.

Tesla raised $1.8 billion in bond offerings on Friday from underwriter Goldman Sachs. The deal came in $300 million above projections. The company made the move to help reach its massive Model 3 production goals.

“If you look at the trade off, you can see quickly that Tesla is singularly unsuited to using debt,” Damodaran wrote in a blog post on Friday. “It is a company that is not only still losing money but has carried forward losses of close to $4.3 billion, effectively nullifying any tax benefits from debt for the near future (by my estimates, at least seven years)… While the benefits from debt are low to non-existent, the costs are immense.”

Damodaran raised his fair value Tesla estimate to $192 a share from $151 a share.

Bottom Line

Tesla stock has climbed from $213.69 per share at the end December to the $363.89 per share it rests at today. However, Tesla remains a divisive stock on Wall Street with valuations coming in all over the place.  

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