U.S. Markets

One of Tesla's biggest backers says the offering increases confidence in her $7,000 forecast

Key Points
  • ARK Invest founder and CEO Cathie Wood said on Thursday that Tesla's planned $2 billion offering "makes sense" and supports her bull case that shares can reach $7,000 in the next 5 years.
  • On Thursday Tesla said in a regulatory filing that it will offer 2.65 million shares, with expected gross proceeds of $2.3 billion before discounts and expenses.
  • "Our confidence level that this stock is heading for $7,000 over the next five years is very high," Wood said Feb. 5 on CNBC's "Fast Money."

One of Tesla's biggest bulls said the automaker's planned $2 billion stock offering, announced on Thursday, "makes sense" and will help propel the shares to her eye-popping $7,000 target in the next 5 years.

ARK Invest founder and CEO Cathie Wood, who has been a long-time Tesla bull, said on Twitter that the capital raise "increases our confidence that it [Tesla] will gain market share in the EV market during the next 5 years," which increases "the probability that our bull case for the stock is correct."

Tesla said Thursday that it will offer 2.65 million shares through underwriters Goldman Sachs and Morgan Stanley, with expected gross proceeds of $2.3 billion before discounts and expenses. CEO Elon Musk will buy up to $10 million worth of shares in the new offering.

Tesla shares have surged 80% this year in what's been an especially volatile time for the stock, which has seen shares whipsaw between double digit gains and losses.

The announcement comes just two weeks after Musk said Tesla would not seek to raise capital on the heels of the company's elevated stock price.

In Thursday's announcement, Tesla said it plans to use the proceeds "to further strengthen its balance sheet, as well as for general corporate purposes."

With the influx of capital, Wood said that she "wouldn't be surprised" if Tesla announced plans for another gigafactory in China, which she said would suggest "a vote of confidence in the resilience of that country."

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At the end of January Wood raised her 5-year target on Tesla to $7,000, based on the declining costs and growing demand for electric vehicles, as well as the company's growth potential in other areas like robotaxis.

"Our confidence level that this stock is heading for $7,000 over the next five years is very high," Wood said Feb. 5 on CNBC's "Fast Money." "We've arrived at that price by weighting the probabilities of 10 different scenarios, including bankruptcy, to be honest. So we've tried to be as fair and balanced as we could possibly be."

The firm, which has about $11 billion in assets under management, also believes that Tesla's battery developments put the company 3 to 4 years ahead of its competitors, and said that Tesla's autonomous-driving taxi service could translate to margins akin to software as a service companies.

Shares of Tesla opened lower and then reversed course, spending the day in the green and closing with a gain of 4.78% as investors like Wood came out in defense of the capital raise. 

- CNBC's Michael Sheetz and Kevin Stankiewicz contributed reporting.