Tesla dilution still remains a risk: Analyst

Why to be cautious on Tesla: Pro

Tesla announced plans Thursday to offer $500 million of common stock in yet another public offering.

And while the electric carmaker's shares were higher on the news, closing up 1.8 percent, it doesn't necessarily mean Tesla's plan to raise capital for its expanded supercharger network, new Model S and gigafactory will come without some dilution, according to UBS auto analyst Colin Langan.

"The stock is up a little bit today probably more so for the fact the issuance was expected and I think people were expecting something a little bit larger," he said, noting that past offerings raised more than $1 billion. "Long-term dilution still remains a risk."

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Tesla display at the Geneva car show on March 4, 2015.
Fabrice Coffrini | AFP | Getty Images

The stock offering comes just weeks after the company lowered its full-year sales guidance amid production problems with its SUV Model X. Nonetheless Tesla CEO Elon Musk, who intends to buy $20 million shares in the company's latest offering, has reiterated his goal to produce 500,000 vehicles by 2020.

But in order to reach that level of adoption Tesla will have to battle unusually low gas prices as oil sits at six-year lows. That much hasn't played such a factor with previous models at a $100,000 luxury price level, but with the Model S the company will need to both win over a more value-oriented customer and bolster its charging network, Langan said.

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"That is also one of our concerns long term, you're going to really need to ramp up the number of charging stations around the world," he said. "That's going to drive higher capex, higher R&D costs—not only in the U.S. as a factor—but it's probably even more of a factor in parts of Europe and China where there's already a lot of concerns."

UBS downgraded Tesla to a "sell" in July with a $210 price target.

Disclosure: UBS, its affiliates or subsidiaries beneficially owned 1 percent or more of a class of Tesla's common equity securities as of last month's end.