Shares of Tesla (TSLA) are under pressure on Tuesday after CEO Elon Musk said via Twitter that what the company will announce at its "Battery Day" unveiling will affect long-term production - especially Semi, Cybertruck, and Roadster production - but will not reach "serious high-volume production" until 2022. Meanwhile, Morgan Stanley analyst Adam Jonas said he believes Tesla's Battery Day may be more significant to the broader auto and electric vehicle industry than to Tesla shares specifically given his belief that investors should be prepared for Musk to offer Tesla's advanced battery patents and proprietary technology to competing battery companies and automakers to use essentially "for free."
'SERIOUS' OUTPUT NOT UNTIL 2022: Tesla CEO Elon Musk said on Monday that what the company will announce at its Battery Day unveiling on Tuesday night will affect long-term production - especially Semi, Cybertruck, and Roadster production - but will not reach "serious high-volume production" until 2022. "We intend to increase, not reduce battery cell purchases from Panasonic (PCRFY), LG & CATL (possibly other partners too)," Musk tweeted. "However, even with our cell suppliers going at maximum speed, we still foresee significant shortages in 2022 & beyond unless we also take action ourselves."
BATTERY DAY MORE SIGNIFICANT TO INDUSTRY: Ahead of Tuesday's highly anticipated Battery Day meeting, Morgan Stanley analyst Adam Jonas said he believes the event may be more significant to the broader auto and electric vehicle industry than to Tesla shares specifically given his belief that investors should be prepared for Elon Musk to offer Tesla's advanced battery patents and proprietary technology to competing battery companies and automakers to use essentially "for free" to catalyze higher EV adoption. "In fact, we would be surprised if Tesla did not make efforts to make their advanced technology widely available for other firms to replicate," added Jonas, who is of the view that Tesla is taking an open source approach to its battery technology, although he acknowledges that the company has not commented on this to his knowledge.
While General Motors (GM) claims its Ultium battery system is chemistry and form factor agnostic, Tesla's "Battery Day" could raise investor questions over the long-term value of the technology and costs related to re-engineering current systems, added the analyst. Jonas has an Equal Weight rating and $272 price target on Tesla shares.
Also discussing the possibilities of Tesla's Battery Day on September 22, Baird analyst Ben Kallo speculated the company could unveil a low-cost battery, plans to significantly expand battery cell manufacturing capabilities, the potential for stationary energy storage management, and said he saw an off-chance they could discuss future revenue streams related to batteries. Kallo has a Neutral rating and $332 price target on Tesla shares.
TARGETS RAISED AHEAD OF BATTERY DAY: On Wednesday of last week, Credit Suisse analyst Dan Levy raised the firm's price target on Tesla to $400 from $280, while keeping a Neutral rating on the shares. The analyst said he expects Battery Day to effectively be "Master Plan Part 3." Tesla has talked to long-term battery capacity of 2 TWh - more than 30-times its current capacity, he noted, with the sharp increase supporting growth in three areas, namely auto, stationary storage, and supply to others. Specifically in auto, Levy pointed out that battery growth underscores Tesla's ambition of selling 20mn vehicles/year, which would make it 2-times the size of Toyota (TM), and is 40-times Tesla's volume this year. While he sees this as "overly aggressive," he nevertheless foresees Tesla reaching 5mn units over time.
Deutsche Bank analyst Emmanuel Rosner also raised his price target on Tesla to $400 from $300, keeping a Hold rating on the shares ahead of the company's Battery Day. Tesla could unveil a new insourced manufacturing system to ramp up battery capacity, improved cell chemistry and a decline in the cost curve, Rosner told investors in a research note of his own. While media and investors' expectations for the event are high, these announcements could meet many of them, and reinforce Tesla's position as a technology leader, the analyst added. Rosner believes ongoing enthusiasm for electric vehicle plays and the expected confirmation of ongoing technology lead by Tesla could continue to support its "high valuation."
PRICE ACTION: In Tuesday morning trading, shares of Tesla have dropped over 5% to $425.49.
Tesla
-24.56 (-5.47%)
General Motors
-0.26 (-0.87%)
Toyota
+0.74 (+0.56%)
Panasonic
+ (+0.00%)