Tesla gets a new 'buy' recommendation ahead of earnings

  • Tesla shares get new outperform rating from JMP Securities.
  • The automaker is set to report third-quarter earnings after Wednesday's closing bell.
  • "Our detailed modeling suggests the company can make it through the next 18 months without having to raise money, but there is little room for error," JMP says.

JMP Securities gave Tesla shares a new outperform rating on Wednesday, citing the automaker's collection of top talent and competition that continues to lag behind Elon Musk's electric car manufacturer.

JMP's message to buy Tesla comes hours before the company will report third-quarter earnings on an earlier date than expected.

"We believe the expertise Tesla has accumulated in key aspects of electric vehicle development and manufacturing is very difficult to duplicate," JMP's Joseph Osha said in a note.

"Stretched balance sheet, but we think Tesla can make it. The combination of the Model 3 ramp, capital spending plans, and pending debt repayments have left Tesla in a difficult position," the analyst said. "Our detailed modeling suggests the company can make it through the next 18 months without having to raise money, but there is little room for error. We believe the company would be well served by raising several billion dollars in additional equity capital."

The stock surged more than 12 percent on Tuesday after noted short seller Andrew Left changed his mind and went long the stock. Left and other investors are speculating Tesla's results after Wednesday's closing bell will be better than expected because the company moved up the date when it typically reports third-quarter results. In the past, they have been revealed in November and traders don't believe Tesla would be in a hurry to put out bad news.

Tesla shares closed down 1.9 percent in trading Wednesday at $288.50 a share, after climbing as much as 3 percent in premarket trading. The stock is up 11 percent in October even as shares of other automakers and technology companies struggle along with the broader stock market.

JMP initiated with a $350 a share price target on Tesla, which is more than 18 percent above Tuesday's closing price of $294.14 a share.

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