Tesla Stock Likely to Move Higher in 2017
Tesla Motors Inc (NASDAQ:TSLA) has had quite a rough ride over the past few months as investors punished TSLA stock over the fatalities involving Tesla “Autopilot,” uncertainties surrounding the SolarCity Corp (NASDAQ:SCTY) acquisition, and fallout with Mobileye NV (NYSE:MBLY).
Things started getting better as the electric car maker announced better-than-expected deliveries for the third quarter and missing the fourth quarter by a narrow margin.
Tesla stock is trading near $238.00 levels, not seen since June last year when it hit a high of over $240.00. So, what has changed?
Investors and analysts are getting more convinced that “Model 3” production may be on track and may turn out to be a hit with the customers. Although competition is heating up in the electric vehicle space, the other players have a lot of catching up to do in building a competitor to the “Supercharger” network Tesla has. Without a supporting infrastructure, demand for electric vehicles is unlikely to grow higher. Tesla also owns the “Gigafactory” that will supply the battery packs to its mass-market Model 3, which is another unbeatable advantage.
News has come in that Tesla has confirmed that Model 3 drive unit production will happen at the Nevada Gigafactory, which would entail an investment of around $350.0 million and creation of additional 550 jobs. (Source: “Tesla confirms Model 3 drive unit production at the Gigafactory, announces $350 million investment & 550 more jobs,” Electrek, January 18, 2017.)
This is great news not only for Model 3 production, but also for Tesla stock as it looks forward to a better relationship with the incoming Trump administration. As the capacity grows, the number of employees could reach 10,000.
Tesla cars are also way ahead in autonomous driving technology, something that competitors will find hard to match, for the time being. TSLA stock shall gain from Tesla having the first-mover advantage.
Panasonic Corporation has recently expressed its intention to extend its partnership with Tesla Motors in the self-driving technology space as well. The Japanese firm is the sole supplier of batteries for Tesla cars and the upcoming Model 3, and had already announced its plan to invest around $1.6 billion in the battery factory. (Source: “Panasonic aims to move Tesla auto partnership beyond batteries: CEO,” Reuters, January 19, 2017.)
In an interview on Thursday, Panasonic CEO Kazuhiro Tsuga said they are extremely interested in Tesla’s self-driving system and want to jointly develop devices such as sensors for that.
Early January, Tesla also announced that battery cell production had begun at the Gigafactory. Tesla and Panasonic began the mass production of lithium-ion battery cells, which would be used in Tesla’s energy storage products and Model 3. The Gigafactory is being built in phases and the current structure is less than 30% complete.
This month, Tesla also surprised everyone by hiring Chris Lattner as the Vice President of Autopilot Software. This move is great as Chris is well known for his engineering excellence and previously worked with Apple Inc. (NASDAQ:AAPL) for 11 years. Under his leadership, Tesla shall gain further speed in autonomous driving space.
There is huge potential in the energy storage products—the “Tesla Powerwall” and the “Tesla Powerpack.” The battery sales are impressive and once the Gigafactory starts producing these products at a faster rate, Tesla stock will receive further lift.
To top it all, the tension between Donald Trump and Elon Musk seems to have evaporated with the latter now a member of Trump’s business advisory committee. These factors are likely to keep the positive momentum in the stock going.
Cash flow is set to improve further this year and with none of the uncertainties surrounding the business as compared to last year, Tesla is likely to see better days ahead. The only risk to TSLA stock would be if there is any problem related to the Model 3 and its roll out. That is something investors would not be pleased with and has the potential to hit Tesla stock hard.