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Tesla (TSLA) Increases Deutsche Bank Credit Lines by $500M

Zacks Equity Research

Shares of Tesla Motors, Inc. TSLA fell 0.5% to close at $207.70 on Dec 21, after the electric carmaker announced that it has increased two credit lines with Deutsche Bank by a total of $500 million. This increase comes only a couple of months after CEO Elon Musk stated that the company would not need to raise any additional capital or debt in the fourth quarter of 2016 (read more: Tesla Unlikely to Raise Capital in 2016 for Proposed Merger).

However, on Dec 15, Tesla amended the ABL Credit Agreement, dated Jun 10, 2015, with Deutsche Bank. As a result, the revolving credit under the agreement has increased by $200 million with provisions to raise it by another $50 million. The company’s subsidiaries Tesla Finance LLC and Tesla 2014 Warehouse SPV LLC also amended the Loan and Security Agreement, dated Aug 31, 2016, with Deutsche Bank to increase the maximum facility limit under the agreement by $300 million. Under this agreement, Tesla was earlier allowed to borrow up to $300 million for its direct vehicle leasing program till Aug 31, 2017.

Price Movement

Tesla has been underperforming the Zacks categorized Auto Manufacturers-Domestic industry for most of the year. Year to date, the share price of Tesla has fallen 13.2% while the industry has witnessed a 3.6% gain.

Tesla has been facing production-related issues for a long time, as a result of which it has failed to meet delivery targets in the first two quarters of 2016. This, along with the losses incurred by the company, pulled down its share price. Tesla’s stock was also affected by the announcement of the SolarCity acquisition due to concerns related to the losses of the latter, debts and cash outflow. However, now that the acquisition is completed, investors are expected to shift their focus to Tesla’s growth plans.

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Zacks Rank & Key Picks

Tesla currently carries a Zacks Rank #3 (Hold). Some better-ranked auto stocks include Allison Transmission Holdings, Inc. ALSN, America's Car-Mart Inc. CRMT and Rush Enterprises, Inc. RUSHA , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has a long-term growth rate projection of 11%.

America's Car-Mart has a long-term expected growth rate of 45.5%.

Rush Enterprises has a long-term expected growth rate of 15%.

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