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Tesla share price: what drove the stock past the $900 mark?

The prospect of a stronger balance sheet, speculation of a new partnership, and a bullish broker note all likely contributed to Tesla's 6.88% run-up overnight.

Tesla share price in focus Source: Bloomberg

What drove the Tesla share price up?

Momentum, deal speculation, a bullish broker note, and the influence of a recently announced capital raise all likely contributed to Tesla's (TSLA) +6.88% share price run-up overnight.

The news was everywhere: Tesla’s market capitalisation reached US$168 billion and its share price finished out the session at the US$917 mark (a tad below its 52-week high of US$968.99).

The company’s share price has more than quadrupled in the last six months alone, practically an unheard of feat for a company of its size.

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A better balance sheet

Firstly and likely contributing to broader positivity around the stock, Tesla last week announced plans to raise US$2 billion in fresh capital through a new equity offering.

Given Tesla’s elevated share price, many market commentators believed a new cap raise was a matter of when not if, at this point.

Unsurprisingly, Telsa said it would use the proceeds of the raise to shore up its balance sheet as well as for general corporate purposes.

As a show of confidence, Tesla's celebrity CEO Elon Musk intends to purchase ~US$10 million of common stock as part of the planned raise.

A bullish case

Beyond a stronger balance sheet, Morgan Stanley’s Analyst Adam Jonas yesterday raised his bull case estimate on the tech-focused automaker to US$1,200 from US$650.

This bull case, said Jonas, ‘reflects 4 million units of auto volume by 2030 with a 12% operating margin. This compares with our base case forecast of 2.2 million units and a 10% OP margin by 2030.’

At current price levels that would suggest Tesla still has room to run, implying upside of ~30%.

In saying that, Morgan Stanley’s base case price target for the automaker stands at US$500 per share, with Jonas warning that Q1 is expected to be ‘notably weak’ for Tesla.

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A new deal in the works?

Finally, Reuters yesterday reported that Tesla is currently in talks with the Chinese battery manufacturer – Contemporary Amperex Technology (CAT) – to source a cobalt free battery for its Chinese produced vehicles.

Reuters wrote that:

‘Tesla has been talking to the Chinese manufacturer for more than a year to supply LFP batteries that will be cheaper than its existing batteries by a “double-digit percent,” said a person directly involved in the matter.’

This speculation however remains unconfirmed, with neither Telsa or CAT commenting on the matter.

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