Win McNamee/Getty Images News
- Moody's upgrades the long-term corporate family rating on Tesla (NASDAQ:TSLA) to Ba1 from Ba3 and keeps a Positive outlook on the electric vehicle maker.
- The ratings agency expects Tesla (TSLA) will maintain its position as the leading manufacturer of battery electric vehicles with a swiftly expanding presence in the U.S., Europe, and China. The anticipation is that Tesla will deliver nearly 1.4 million vehicles in 2022 with the considerable investments in new production facilities in Berlin and Austin, along with an increase in production capacity in its existing plants in Fremont and Shanghai, helping to boost production. Key snippets from the Moody's report are posted below.
- "Tesla's growing scale, regional production facilities and efficient manufacturing processes support Moody's expectation of an increase in EBITA margin to 16% in 2022, up from 12% in the last 12 months ended September 2021. While the margin contribution from the sale of regulatory emission credits will likely decrease, the sale of the credits added approximately 330 basis points to margin in the 12 months ended September 2021."
- "Moody's expects that a more competitive offering of battery electric vehicles by other automakers could start to exert some pressure on margins in 2023."
- "Moody's expects Tesla's financial policy to be prudent. Financial leverage steadily declined as earnings accelerated and Tesla repaid about $5 billion of debt in the last two years. Moody's estimates that debt/EBITDA dropped below 1 time at year-end 2021 and will remain at that level in 2022."
- "Moody's anticipates liquidity to remain very good. Tesla had a cash balance of $16 billion as of September 30, 2021. Furthermore, Moody's expects free cash flow to increase considerably in 2022, from an estimated $3.1 billion for 2021. Availability under Tesla's $2.3 billion asset-based revolving credit facility is very limited, however, because the unpaid principal balance was $1.9 billion as of September 30, 2021."
- Shares of TSLA are down 2.72% premarket to $904.66.
- Tesla (TSLA) is on Seeking Alpha's Catalyst Watch this week with earnings due out on Wednesday.