As expected, Tesla Motors showed off its stationary storage offerings at its scheduled event on Thursday, and now analysts are weighing in on the announcement. The automaker showed off the Power Wall, which is a stationary storage system for homes and small commercial applications, and the Power Pack, a utility-scale storage system.
Tesla aims to change the grid
Tesla CEO Elon Musk said they aim to move the electric grid from fossil fuels to renewable energy sources. Musk said lithium-ion batteries are the piece that’s been missing and that they will become a key part of the grid once it becomes based on renewable energy. Musk said 2 billion of Tesla’s Power Packs could handle storage for the entire grid focused on renewable energy. He also said again that the gigafactory they are building in Nevada will just be the first of several. Further, he said Tesla’s batteries are the most viable stationary storage system.
Carlson Capital's Double Black Diamond fund added 3.09% net of fees in the second quarter of 2021. Following this performance, the fund delivered a profit of 5.3% net of fees for the first half. Q2 2021 hedge fund letters, conferences and more According to a copy of the fund's half-year update, which ValueWalk has been Read More
The first customers to receive Tesla’s Power Packs are Amazon Web Services, Target and Jackson Family Wines. Tesla’s stationary storage systems will be available in limited supply in about three months. The automaker is already taking orders for the first storage systems. Production will begin at Tesla’s EV manufacturing facility in Fremont, Calif. but then move to the gigafactory, which is currently under construction in Nevada.
How much are Tesla’s storage systems worth?
A major topic Wall Street is now debating is how much Tesla’s stationary storage systems should add to the automaker’s stock price. Barclays analyst Brian Johnson has a Neutral rating and $190 per share price target on Tesla. He did not change his target price for Tesla after the announcement because he was already factoring in a battery business, which he estimates will contribute about $2.30 per share in earnings by 2020.
That would amount to $42 per share in Tesla’s stock price at its present value. He said he’s giving Tesla “the benefit of the doubt” with a 13% operating margin and a full ramp of 15 GWh of battery pack production by 2020. He noted that there are risks involved with these numbers and that these estimates should be discounted for those risks.
Stifel analyst James Albertine is at the other extreme on Tesla, placing an even higher value on Tesla’s storage systems. He estimates an incremental share price opportunity of between $60 and $70 per share “for a relatively conservative set of projections based on a discount to standby generator household penetration over a 10-year period.” Albertine has a Buy rating and ultra-bullish $400 per share price target on Tesla Motors.
Deutsche Bank analyst Rod Lache and his team also have a Buy rating on Tesla with a price target of $245 per share. They side with Albertine in seeing Tesla’s energy storage systems as being an important part of the automaker’s growth story. Although they reserve judgment on the products because they want more details, they believe Tesla Energy will likely “be more significant than investors currently perceive.” Further, they said their $245 per share target price and current model for Tesla do not include any benefit from Tesla Energy.
The bulls and the bears on Tesla’s announcement
Of course Tesla has been and will continue to be a polarizing stock for some time. Johnson offered a summary of both the bullish and bearish views of this week’s product unveiling. According to the Barclays analyst, bears believe Tesla’s battery pack announcement may be an attempt to deflect attention away from the weakness in the company’s auto business. Further, he said they suggest this will increase the pressure on Tesla’s gigafactory and that a sharp ramp could be difficult. Also bears will continue to question Tesla’s chance at success, noting that it depends on reducing costs, garnering subsidies from states and pricing structure in utilities.
On the other hand, bulls see a large addressable market in stationary energy storage which offers big growth opportunities, according to Johnson. Some bulls even say the addressable market is actually three target markets and note that several states have already taken the leap.