It has been a charged week for the tech-verse, with big announcements from Tesla Inc (NASDAQ:TSLA) and GoPro Inc (NASDAQ:GPRO) making waves through Wall Street. Tesla officially announced an over $1 billion price tag to its fundraising goal to get the Model 3 electric vehicle launch into gear for 2017. Bernstein and Baird size up Tesla from converse perspectives, outlining reasons the equity raise might come up short of expectations and in turn, why Tesla continues to be an odds-on favorite to buy. Meanwhile, though GoPro gave shareholders cause to cheer with an encouraging revenue guidance upgrade, Piper Jaffray continues to be wary on the overall product roadmap. Let’s dive in:
Is Telsa’s Plan to Garner $1.15 Billion for Model 3 Too Small or Just Right?
Tesla revealed its goal to raise $1 billion plus in cash to kick-start production of its mass market-targeted Model 3 electric vehicle forthcoming later this year. To secure this funding, the electric car giant will offer common stock valued at $250 million coupled with $750 million in convertible notes as well as an option for underwriters to buy a further 15% of each offering. This wise widely rumored on the Street that funding would soon be underway for Tesla, but the amount took analysts for a spin.
Bernstein analyst Toni Sacconaghi underscores, “The equity portion of the raise is small compared to prior years, and many investors likely expected a larger equity component. The total amount of equity raised will likely be $287.5M, or 25% of the total capital raise. This amount is only mildly dilutive to shareholders (<1%), which is far lower than the $1.7B and $750M of common equity raised in each of the past two capital raises. Moreover on the convertible debt portion of the offering ($862.5M), Tesla is using derivative instruments to mitigate dilution from its convert (something it did in each of its previous convertible offerings). We note that last year Tesla issued all equity in a more dilutive transaction.”
The analyst reiterates a Hold rating on shares of TSLA with a $250 price target, which represents a 5% downside from where the stock is currently trading.
Baird analyst Ben Kallo approaches the giant from a far more bullish perspective, seeing upside ahead for Tesla shares. For the bears who cry claims of the deal not being large enough, the analyst is unperturbed, betting on Model 3 to take off in the long-term.
As such, the analyst reiterates a Buy rating on TSLA with a $368 price target, which represents a nearly 40% increase from current levels.
“We view the offering positively as it should help de-risk the Model 3 launch, provide additional capital for Model 3 production equipment and/or investment in the gigafactory, and remove an overhang on the stock. Bears will likely say the deal is too small, although we believe this displays TSLA’s confidence in the Model 3 timeline and anticipate shares will move higher. TSLA remains a favorite pick for 2017,” Kallo concludes.
TipRanks analytics exhibit TSLA as a Hold. Out of 18 analysts polled by TipRanks in the last 3 months, 7 are bullish on Tesla stock, 6 remain sidelined, and 5 are bearish on the stock. With a loss potential of nearly 6%, the stock’s consensus target price stands at $247.13.
GoPro Guidance Update Excites Investors, But Leaves Piper Jaffray Bearish
GoPro shares were rising almost 16% yesterday once founder and CEO Nicholas Woodman announced a one-two punch: the action camera maker will be removing 270 jobs and will soar to the top of its revenue outlook for the first quarter of this year.
Investors leapt to invest in the stock, with Woodman highlighting, “We’re determined that GoPro’s financial performance match the strength of our products and brand,” adding, “Importantly, expense reductions preserve our product roadmap and we are tracking to full-year non-GAAP profitability in 2017.” Yet, Piper Jaffray analyst Erinn Murphy continues to be unimpressed in the action camera maker’s overall picture in terms of demand and rising rivalry from fellow drone makers.
As such, the analyst reiterates an Underweight rating on shares of GPRO with an $8 price target, which represents a close to 7% downside from where the stock is currently trading.
“We are reiterating our UW rating on shares of GPRO following the company’s press release in which Q1 revenue was communicated at the high end of guidance range ($190- $200M) and full year profitability was reaffirmed. While this is a positive step for GPRO, we remain concerned around product demand and significant competition in the newly entered drone market. We note that full year profitability will be driven by additional restructuring, as operating expenses are expected to decline over 30% to $495M on a non-GAAP basis. Reductions will occur from each expense segment (R&D, S&M, G&A), and are not expected to impact the company’s product roadmap,” Murphy contends.
Taking under account new revenue and expense guidance, the analyst has lifted her sales projections for the financial year of 2017 from $1,253 million to $1,263 million, with EPS kicked up from ($0.87) to ($0.24).
According to TipRanks, Erinn Murphy is ranked #4,394 out of 4,558 analysts. Murphy has a 40% success rate and faces a loss of 6.7% in her yearly returns. However, when recommending GPRO, the analyst collects 14.1% in average profits on the stock.
TipRanks analytics demonstrate GPRO as a Sell. Based on 14 analysts polled by TipRanks in the last 3 months, 1 rates a Buy on GoPro stock, 7 remain sidelined, and 6 are bearish on the stock. The 12-month average price target stands at $8.50, which aligns with current levels.