Tesla </span> Next week hosts its much awaited Battery Technology Day. Analysts have used phrases such as "long anticipated," "major milestones" and "mind blowing" to describe the event.
Tesla (ticker: TSLA) CEO Elon Musk recently tweeted that “many exciting things will be removed.” He closed the tweet with a light-bolt emoji.
The event is a big thing for stocks. This will shape investor opinion about the future of electric vehicles and Tesla’s technical leadership. For Tuesday’s preparation, investors can divide potential topics into a few categories: battery cost, battery reliability, and battery capacity. New battery technologies should also be discussed. And investors should also be prepared to hear about the steady power, which includes the Tesla Powerwall business.
Cost is a big deal for all EV manufacturers, including Tesla. Historically, electric vehicles have been more expensive than comparable gasoline-powered models. This is essentially because high-tech batteries cost more than gas tanks.
Battery costs are falling. Some industry insiders tell Baron’s The cost is down 75% in the last 10 years. Today’s costing bogey battery is for cells to hit $ 100 per kilowatt-hour.
Credit Suisse analyst Dan Levy thinks Tesla’s event will focus on cost reduction, potentially offering $ 75 per kilowatt-hour. Cost reduction “may help unlock sales at lower price points and thus promote further growth,” Levy wrote in a recent research report. He equals the hold and aims for the stock at $ 400.
Morgan Stanley analyst Adam Jonas also holds shares equal to the hold. Their price target is low, however, at $ 272 per share. He asks in his event preview report, “Tesla may review plans … to target $ 50 per kilowatt-hour?” This is the lowest battery cell cost target Baron’s As seen in a research report by Wall Street. (Jonas’ preview note, by the way, has the “Mind Blowing” in the title.)
Anything below $ 100 per kilowatt-hour, with a credible plan to get there, should be a win for Tesla shareholders.
Wesbush analyst Dan Ives thinks a million miles of batteries will be “front and center” on Tuesday. It is a battery that can last up to a million miles through all charging bicycles. A battery that will last longer than the car body and open up opportunities for reuse and recycling. Battery reuse uses the second factor of cost reduction.
Ives rates hold shares and has a $ 380 price target for the stock. New Street Research analyst Pierre Ferragu also rated the share hold. Its price target is $ 300 per share.
Ferragu has a different opinion on the million-mile battery. He thinks it is irrelevant to Tesla’s long-term success. Other auto makers can achieve the same thing, so they believe that the reliability of the battery will not help Tesla differentiate its competition in the long run.
Instead, Fergu feels that Tesla’s secret project “Roadrunner” may be larger. The Roadrunner is an internal project, ostensibly designed to improve all aspects of battery design and manufacturing.
“The key to success is purely for chemistry, the design of cells, the development of the entire powertrain, and the manufacture of all of these components,” Feruga writes. The current set up is suboptimal. Tesla co-developed and did not manufacture chemistry and cell architecture. We see significant benefits in bringing everyone under one roof.
Faragu also discounts the importance of giant “tera-factories”, which are, in theory, orders of magnitude larger than Tesla’s Nevada Gigafactory.
(The numeric prefix tera is one with 12 zeros. Giga is 1, followed by nine zeros.)
Efficiency still matters. Tesla has enough battery capacity to make, 600,000 to 700,000 vehicles a year. The company will have the ability to ramp up to meet projected growth targets.
Ferrague believes investors want to know that by 2025 Tesla will have enough capacity to make 2 million cars. This means that the battery capacity increases by about 3x between now and then. (Tesla today has approximately 63 gigawatt-hours of battery capacity.) Morgan’s Jonas reports that Tesla is producing 439 gigawatt-hours of battery by 2030. This is a seven-fold increase in 10 years, or about 21% growth in an average year.
Any guidance from Tesla management about capacity can be compared with those figures.
The startup QuantumScape is merging with SPAC to become a publicly traded company. It plans to bring solid state battery technology to the EV market. Solid state batteries have greater power density – more power can, essentially, be shielded into a smaller unit, reducing costs and improving weight.
“Targeting solid state power density above 400 with solid state competitors [watt-hours per kilogram], We would hope [Tesla] To give our estimated time to reach such levels, ”wrote Oppenheimer analyst Colin Rusch in a report previewing Battery Day. Today’s battery has a capacity of about 260 watts per kilogram.
Musk recently tweeted about high energy density batteries, saying they were three to four years away.
Russell is eligible as a Tesla bull. He rated Tesla Stock Buy and aimed for $ 451 for the shares.
Investors should not forget about stable power. “Steady storage growth, while solid, has been far from Tesla’s previously announced targets,” Levy writes. “In 2014 Tesla cited Tesla Energy volume’s target of reaching 15 gigawatt hours by 2020 … they only had 1.7 gigawatt hours a year.”
One problem is that the capacity of the battery cell is constrained. Tesla has built busy cars. The storage market, according to Levy, is “nascent”, but represents a reduction in costs and a spurt in capacity.
Many analysts wonder whether Tesla will become a supplier to the EV industry. Selling batteries and battery systems to other auto manufacturers. This is a potential wild card.
Baird analyst Ben Kallo offered an interesting idea in his preview report. Tesla can “adopt an ownership model for batteries, whereby the company distributes energy assets similar to an electric utility.” He explains that Tesla already has an “Autobider”, a technology that helps manage the electricity stored in batteries.
Autobider is a new issue for an analyst. It often does not come on management conference calls.
There is much to follow, to be certain. Ultimately investors would like to believe that Tesla’s technical lead is sustainable and has enough capacity to make at least 2 million cars by 2025. With those milestones, bulls may have higher than average profit margins and growth in the future.
Tesla shares are up more than 400% year to date, better than comparable returns to date
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Tesla shares fell 4.2% on Thursday, but are still up more than 13% for the week. Tesla stock rose 4% in Friday trading.
Write Al root at [email protected]