Credit Suisse analyst Dan Levy increased his price target for Tesla stock to $400 from $280 Wednesday, a 40% jump that works out to more than $100 billion in additional market value. His reasoning is simple: batteries.
Tesla (ticker: TSLA)—which currently has a market cap of more than $418 billion—will host its highly anticipated battery technology event on Sept. 22. Investors are expecting updates on battery capacity, reliability, range, and technology. More bullish analysts, such as Levy, see Tesla eventually launching the third part of its so-called Master Plan, which could make the company a supplier of batteries and battery tech to the electric-vehicle industry.
“We expect Battery Day to effectively be Master Plan Part 3,” wrote Levy in a research report.
Tesla’s Master Plan 1 was penned by CEO Elon Musk in 2006. His plan was to build a sports car and then use that money to build an affordable electric vehicle: the Model S. Then use the money made from the Model S to build an even more affordable electric vehicle: the Model 3.
All those goals have since been met.
Musk unveiled Master Plan 2, or “Part Deux,” as he called it, in 2016. That plan focused on residential solar and battery storage while expanding the vehicle lineup. Musk also talked about autonomous driving and robotaxis—enabling “your car to make money for you when you aren’t using it.”
Some of those goals, like full self-driving, are still in the works.
Levy believes Master Plan 3 will be all about the batteries. Tesla has the capacity to make about 63 gigawatt hours of batteries a year, according to the analyst. A Tesla vehicle, for example, can come with a 100 kilowatt-hour battery pack. That means Tesla’s existing capacity can support about 630,000 vehicles a year. (Giga is billion and kilo is thousand. Tesla has 63 billion watt-hours of battery-making capacity, and a Tesla comes with a roughly 100,000 watt-hour battery pack.)
Down the road, Levy sees Tesla announcing plans for up to 2,000 gigawatt-hours of capacity, more than 30 times today’s installed base. “We await color on the timing of this capacity expansion, but we would imagine Tesla is likely planning to achieve this capacity in the next 15 [to] 20 years,” he writes.
More battery capacity would allow Tesla to build out its residential and utility-scale battery storage business. It would also allow Tesla to sell batteries to other auto makers. “We have our doubts on Tesla as a supplier to others,” writes Levy. “However, Elon Musk recently tweeted interest in serving as a supplier to others.”
Despite the price target increase, he still rates share the equivalent of Hold. His “blue sky” scenario values Tesla at $630 a share, or more than $560 billion.
The average analyst price target for Tesla stock is about $300 a share, up from about $60 at the beginning of 2020. The stock is up about 432% year to date, to a recent $445. That’s far more than the comparable returns of the S&P 500 and Dow Jones Industrial Average over the same span. Tesla’s gains have made it the world’s most valuable auto maker by a wide margin.
Source : barrons
