Tesla Motors: My Latest Stock Market Analysis

Tesla MotorsTesla Motors, Inc. (NASDAQ/TSLA) is one of the most talked-about and heavily traded stocks on the market. My initial thesis about the company that lay behind my stock market analysis was that it was overpriced based on the sales of its electric car. The company counts its sales in the tens of thousands each month, not the hundreds of thousands as reported by the major non-electric auto manufacturers. But it seems there’s more to this tech stock than we initially knew.

When the stock was previously trading above $200.00, I thought a downside move to $185.00 and below could be in the works. The stock did falter and slide—well down from its record high of $291.42 in September 2014.

Tesla Motors Chart

Chart courtesy of www.StockCharts.com

Tesla Motors’ Game-Changing Product

While the future of Tesla and its supercharger highway network remains positive in view until it can achieve higher penetration rates, the company announced a possible game-changer that adds another angle from which to analyze its stock market potential.

Founder Elon Musk followed through with the company’s advanced alternative battery technologies when he introduced the lithium ion “Powerwall Home Battery” into the mix. In doing so, he also gave us a glimpse into the future of the company as a technology company; not just as a car manufacturer.

While we are at the early stages of Tesla trying to sell the batteries, my research into the battery technology shows promise for the company.

The Powerwall system involves the use of solar panels to collect energy that is then funneled into the battery’s storage or directly into the home through an electrical inverter. The thinking is that you can use stored electricity from the battery at times when the power cost from your utilities is high in order to save money. At low-cost energy times, you would use power from the utility while the battery stores the solar energy.

The concept makes sense. Prices range from $3,000 for the 7-kWh battery unit to $3,500 for the 10-kWh unit. The batteries can also be combined for use in larger homes.

Tesla is now taking orders, plus it has aligned third-party resellers. The batteries will be manufactured at the company’s new five-million-square-foot battery plant in Nevada. There is already speculation that Musk needs more space at the plant—which is bullish for the demand.

The early indications suggest the demand for the batteries is very strong. Sales of 100,000 units would generate nearly a third of a billion dollars in added revenues. This is quite reasonable. The battery could ultimately add another $1.0 billion in revenues in addition to the trailing $3.5 billion in current revenues over the past 12 months.

What’s Next for Tesla?

Tesla is currently trading around $243.00. The average consensus target price is $269.00; but this doesn’t include the battery stream.

While I would be careful on entering the stock as an investor, I’m certainly intrigued by it; especially on market weakness. Interested investors can also consider using longer-term call options as an alternative.