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Moody’s Lifts Tesla’s (NASDAQ:TSLA) Rating; Stock Rises

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Moody’s upgraded Tesla’s credit rating, lifting its junk status. A better rating ensures lower borrowing costs and a higher competitive advantage.  

The credit rating agency Moody’s (NYSE:MCO) has lifted electric vehicle (EV) maker Tesla’s (NASDAQ:TSLA) credit rating one notch above junk status, a Bloomberg report stated. As per Moody’s, Tesla’s debt now has investment-grade status but is still at the lowest level of investment grade at Baa3. TSLA stock is up over 2% in pre-market trading as of this writing.

In the prior review, Moody’s had rated Tesla’s debt at Ba1, the highest level of junk rating. An investment-grade credit rating means the company can tap a larger pool of investors at a relatively cheaper rate. Some of the reasons cited by Moody’s for lifting Tesla’s ratings include its leading position in the EV market, an expanding product line, domestic manufacturing facilities, global expansion, and low levels of debt.

In October 2022, S&P Global (NYSE:SPGI) lifted Tesla’s credit rating to investment grade. The only caveat to the rating agencies’ grades remains Elon Musk and the baggage that he carries. Along with leading Tesla, Musk also leads SpaceX and recently bought social media engine Twitter, thus dividing his time and attention between various ventures.  

One important aspect of Tesla’s credit rating that benefits the company is the current price war among EVs. Tesla has been slashing the prices of its EV models for quite some time now to maintain a higher number of deliveries.

Moreover, Musk has promised the masses a less complicated, smaller version of EVs in the range of roughly $25,000 in the coming years. A better credit score will improve the chances of Tesla raising more capital if it needs to meet capex and working capital requirements. All in all, the lift in the credit rating is a boon for Tesla to both become a blue-chip value company as well as preserve its competitive advantage.

Is TSLA a Good Stock to Buy?

Analysts remain split on Tesla’s stock trajectory. With 12 Buys, four Holds, and two Sell ratings, Tesla has a Moderate Buy consensus rating on TipRanks. Also, the average Tesla price target of $215.07 implies 17.4% upside potential from current levels. Meanwhile, TSLA stock has zoomed 69.5% so far in 2023.


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