Validation for Tesla Motors Inc CEO Elon Musk
Tesla Motors Inc (NASDAQ:TSLA) and its chief executive, Elon Musk, singlehandedly kick-started the electric car market before declaring solar energy as their next frontier. While most analysts scoffed at their ambition, a new report shows TSLA stock is on the right track.
The new report came from Bloomberg’s New Energy Finance (BNEF) division.
In their much touted year-end assessment, BNEF delivered a stunning rebuke to solar energy skeptics, saying that the lifetime price of solar energy is lower than coal or gas. But here’s the stunning part: solar energy is cheaper without subsidies. (Source: “Liebreich: A year of hectic change and off-target predictions,” Bloomberg, December 14, 2016.)
This jaw-dropping tidbit supports our earlier notes to readers. We previously warned that technology does not evolve in a straight line. Its growth is exponential. BNEF touched on similar points, reminding investors that solar energy uptake was growing faster than expected.
“If you need to build new generating capacity, and you can deal with the attendant variability at an affordable cost, renewable energy will beat any other technology in most of the world without subsidies,” wrote BNEF founder Michael Liebreich. [Emphasis added.]
This is a critical insight for investors and analysts looking to value TSLA stock.
If solar energy adoption happens quicker than analysts predict, it means TSLA stock could be seriously undervalued. The acquisition of SolarCity Corp (NASDAQ:SCTY) has officially closed, meaning that Tesla is officially in the business of solar energy production.
However, most analysts thought SolarCity would be a drag on TSLA stock. Few of them bought into Elon Musk’s argument in favor of the merger, but they may have to rethink after seeing this report. According to BNEF, solar energy is an undeniably red hot growth sector.
But that’s not the only good news the report held for TSLA stock.
There was also its review of the electric vehicle (EV) market. At the start of the year, BNEF issued a forecast that 35% of new car sales in 2040 would be electric vehicles.
Critics gawked. TSLA stock bears chuckled with glee. Even supporters of electric vehicles were doubtful.
But one by one, the big automakers got on the EV bandwagon during 2016. As a result, BNEF has updated its forecast to say that, “Surely by 2040 more than half of new cars will be electric.”
This time no was shocked and TSLA stock bears surely were not laughing.
Moreover, BNEF warned that further upgrade could be on the way. Why? Because technological evolution is exponential, not linear. Elon Musk understood this principle all along, as did those who stayed bullish on TSLA stock.