Tesla Motors Inc (NASDAQ:TSLA) shares are still up nearly 8% thanks to last night's earnings beat, although they have retreated slightly from their highest levels. Now Wall Street is turning its attention to the automaker's plans for the gigafactory.
Tesla plans gigafactory call
Last night investors were anxious to talk about Tesla Motors Inc (NASDAQ:TSLA)'s plans for the massive battery building facility. However, CEO Elon Musk said there was too much information to go through and that the subject was so vast that it deserved its own call, which they will hold next week. The whole point of building the factory is to solve the number one issue facing Tesla right now: a shortage of batteries. In order to be able to build the Generation III mass market vehicle in 2017, the automaker will have to tackle this issue.
Musk did hint on last night's earnings call that they night have to do a capital raise in order to fund that gigafactory and said that the timing for that raise may be right because of the automaker's increased stock price.
Tesla's valuation remains high
Barclays analyst Brian Johnson and his team maintained their Equal-Weight rating on Tesla Motors Inc (NASDAQ:TSLA) in the wake of last night's earnings report. In spite of the positive surprises, they just can't get past the company's valuation. Johnson notes that in November, they cut their 2014 Model S delivery estimate to a little under 30,000 because they thought Tesla would continue to deal with fallout from the Model S fires.
However, he notes that demand has remained strong even though there was an initial negative impact from the fires.
China, gigafactory as Tesla's wild cards
As a result, he has increased his delivery estimate from 30,000 up to 35,000 for 2014. He sees China as the major "x-factor" in terms of Tesla Motors Inc (NASDAQ:TSLA)'s 2014 and 2015 deliveries. He said although initial demand is robust, he still needs to see more clarity regarding deliveries for the area because Musk has said that all of their orders from China won't be fulfilled this year.
The Barclays team did raise their price target on Tesla Motors Inc (NASDAQ:TSLA) from $120 to $180 per share because of their higher delivery estimates and a higher probability of success with the Generation III vehicle.
Johnson also notes that the gigafactory offers even more questions regarding Tesla Motors Inc (NASDAQ:TSLA). He has not included the costs of building the factory in his estimates or the potential revenue the automaker might make from non-automotive sources like grid storage. He said optionality could provide even further upside as investors consider these non-automotive sources in terms of additional revenue for Tesla.