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Rating agencyMoody's is confident that Tesla will be able to maintain its dominant position over its competitors, sales will continue to grow, new models will be launched and profit margins will be high. According to the credit rating agency, Tesla's bonds are no longer "junk." A first.

In the news: Moody's is changing its opinion on Tesla's debt securities.

  • The US credit rating agency is raising the car maker's bond rating to "reliable," or "Baa3" in the jargon. This is the first time Tesla has received such a positive rating, according to .
    • Tesla used to be in the "'junk' category," or "junk" in Dutch. That means the bonds are a risky investment.

Positive expectations

The gist: Why a better rating?

  • "The rating reflects Moody's expectations that Tesla will continue to be a leading manufacturer of electric vehicles, with a growing global presence and very high profitability," an sounds. It also refers to Tesla's prudent financial policies.
  • The rating agency also expects Tesla to market 1.8 million vehicles this year, following 1.3 million in 2022. Furthermore, Moody's points to the launch of the (this year) and a new car model, which is expected to be 50 percent cheaper to produce. Further, are expected to reach 15.8 percent this year, coupled with very good cash flow figures.

The details: Future ratings could still go either way.

  • The rating agency adds that it could give the car giant an even better rating, "if Tesla maintains a strong competitive presence globally as other automakers increasingly offer electric models."
    • But Moody's notes that Tesla needs to diversify earnings. This refers to the cheaper model in the pipeline. Thus, Musk's company must avoid a situation in which future depend almost entirely on the Model 3 and Model Y.
  • But: the rating could also be lowered again. That could happen when demand for Tesla's declines while competitors sell more cars. A lower rating is also possible when the profit margin dips below 10 percent.

Two good ratings out of three

Zooming out: there are three major rating agencies. Two of them have given Tesla a more positive rating.

  • The first favorable rating was not that long ago, Markets Insider recalls. Last October, S&P Global Ratings raised Tesla's rating and no longer referred to it as "junk."
  • The third major credit rating agency is Fitch Ratings. That one has not yet issued an opinion on Musk's company.

(ns/evb)

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