The buzz around the Tesla Motors Inc (NASDAQ:TSLA) Gigafactory continues to grow, and even analysts who would normally view the stock as overpriced at just shy of $250 are recommending that investors hold onto their stocks until Tesla Motors CEO Elon Musk holds a meeting sometime this week giving more details about his plans for battery production.
At the moment, there isn’t a lot of information, but it’s a clear sign of the respect that Wall Street has for Musk that the running assumption is that he can disrupt multiple industries with his new project.
Musk hints at solar industry impact
“Very shortly, we will be ready to share more information about the Tesla Gigafactory. This will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation,” Musk wrote in the most recent Tesla shareholder letter. “We feel highly confident of being able to create a compelling and affordable electric car in approximately three years. This will also allow us to address the solar power industry’s need for a massive volume of stationary battery pack.”
When pressed for more details during the recent earnings call, Musk would get into any specifics except to say that completing the Gigafactory within three years is a high priority and that a fresh capital infusion is “a good idea,” hinting that another round of major financing is around the corner.
Investors are excited because Musk hinted in his letter at being able to solve one of the major problems facing the solar industry, and really the renewable energy industry in general, how to smooth out power generation from a source that you don’t control. If a solar plants could store excess energy produced during the day for use at night (or during bad weather) it would let them supplant a larger portion of a country’s energy mix. Until now battery tech hasn’t been up to the challenge.
Stifel won’t try to value Tesla until we know more
“We think the opportunity to supply the energy storage market could be much more significant, making sales from the Model E (and frankly any vehicle) pale in comparison,” wrote Stifel analysts James L. Albertine and Lucy Webster, rating Tesla Motors Inc (NASDAQ:TSLA) Hold and declining to put a price target, presumably because an valuation made today could radically change as soon as we have more information nabout the Gigafactory. Morgan Stanley went even further, doubling its 12-month price target in a report that pushed Tesla stocks to record highs near $250.
The primary reason for wanting the Gigafactory, as Musk said in the letter, is to increase production of Tesla Motors Inc (NASDAQ:TSLA) cars and to bring the overall cost down so that he can release the economy class Tesla Model E within the next few years, but when we finally know more about the facilities it will be the energy sector implications that most people are thinking about.