Benzinga | May 21, 2021 11:44AM EDT

BofA Cuts Tesla Price Target By $200, Predicts Another Equity Offering: What You Need To Know

One Tesla Inc (NASDAQ:TSLA) Wall Street analyst reduced his price target for the stock by 22% Friday and said investors should expect yet another equity offering from Tesla in the near future.

The Tesla Analyst: BofA Securities analyst John Murphy reiterated a Neutral rating on Tesla and cut the price target from $900 to $700.

Related Link: Consumer Reports Slams Tesla's Full-Self Driving Capability

The Tesla Takeaways: In the note, Murphy said stock sales are still Tesla's key source of funding at this point, and the stock's weakness in recent months reduces its ability to minimize dilution.

"Specifically, our thesis is predicated on the view that TSLA will continue to utilize its stock to raise capital through low-cost equity offerings in order to accelerate aggressive capacity buildout plans globally and drive units/revenue substantially higher, further cementing its status as the dominant EV automaker," the analyst said.

In January of last year, Tesla CEO Elon Musk said "it doesn't make sense to raise money because we expect to generate cash." Tesla subsequently raised $2.3 billion just weeks later and has since raised another $10 billion via two additional equity offerings in September and December of last year.

In the first quarter, Tesla reported 73.5% revenue growth, but regulatory credit sales and Bitcoin (CRYPTO: BTC) trading profits still accounted for more than 100% of the company's net income.

Benzinga's Take: Tesla's stock is down 17.2% in the last month. However, investors looking to buy the dip should remember that Tesla is still up more than 1,350% overall in the last two years and trades at 15.7 times sales and 93.9 times forward earnings, a very high valuation compared to both auto stocks and large-cap tech stock peers.

Photo courtesy of Tesla.