Tesla – Moderate Buy

Electric car market leader Tesla (TSLA) has a secret weapon: battery technology. Chronically underserved by most of science, being able to store energy has been something of an also-ran in technology circles for years.

Now, that’s changing, thanks in large part to the surging electric car market. Tesla is increasingly leading in batteries, and its latest move should put some extra spark in its operations. I’m still neutral on Tesla, but this move helps to exploit Tesla’s market advantages.

The last 12 months for Tesla featured plenty of gains. However, most of those gains were lost over the last two months. Around late February and early March 2021, Tesla stock saw a dip, which was followed by a quick recovery.

By mid-April, the company recovered sufficiently enough that it was trading above early March’s levels. The gains didn’t hold, and by mid-May, the company was nearly back to its dip level of early March. However, that second dip started a gradual climb that carried on all summer and into mid-October.

Mid-October saw a massive surge that held until early November. That started a much more volatile period of trading. A series of jumps and pullbacks followed, leading us to today. The company is currently trading around the same level it was in mid-October before the surge began.

The latest news, meanwhile, might help bring Tesla back to its surge levels. Tesla has enlisted Panasonic to begin mass production on its latest battery.

The project is set to begin by the end of March 2024. Dubbed the 4680 battery due to its dimensions—46 millimeters wide and 80 millimeters tall—it’s around five times larger than batteries Tesla is currently using. In turn, it’s set to lower production costs and offer more range. Both of these factors are likely to improve Tesla sales going forward.

Wall Street’s Take

Turning to Wall Street, Tesla has a Moderate Buy consensus rating. That’s based on 16 Buys, seven Holds, and six Sells assigned in the past three months. The average Tesla price target of $1,068.40 implies 23.9% upside potential.

Analyst price targets range from a low of $313 per share to a high of $1,580 per share.

A New Spark for Tesla?

Things haven’t been good for Tesla lately. The 52-week high is long since left behind. A growing array of competitors is emerging and challenging Tesla’s status as a market leader. Meanwhile, the CEO sold off stock at an almost frantic pace, and there doesn’t seem to be much new in the pipeline to get Tesla its gee-whiz factor back.

However, there’s always been one hole card that we never hear much about for Tesla: batteries. Tesla’s developments in battery technology have always been a quiet but present part of its operations, potentially fueling gains beyond those produced by electric cars alone.

Look at the recent successes seen at Generac (GRNC). Though it’s lost a lot of ground itself in the last couple of months, Generac has made quite an advance offering backup power systems to those concerned about storms or other outages.

In fact, Tesla recently lost its director of engineering to Generac. The Tesla-driven Megapack battery project in Texas, meanwhile, demonstrates the impressive potential Tesla batteries have to power everyday life.

Tesla’s electric cars are certainly a powerful seller; just ask Ford (F), who’s actively trying to get in on that market itself. However, Tesla’s batteries are an underappreciated part of Tesla’s overall operations. Offering a better way for households to store power to get them past brief grid outages could be a real winner if Tesla pursued it a bit harder.

Tapping Panasonic may be just the way to help get the new batteries up and running in a way that lets them make a difference. Granted, it’s still about two years until the new batteries will have much impact. Still, good news is good news, even if a bit delayed.

Tesla’s dividend history doesn’t bear much scrutiny, as it’s mostly not there. Insiders are increasingly buying shares, though hedge funds are a bit hesitant to buy in on Tesla further. Overall, it all adds up to a mixed bag, but with some noteworthy potential lurking behind the scenes.

Concluding Views

As an electric car maker, Tesla is increasingly under fire. More firms are getting into the market; the growing Chinese contingent is sewing up the Chinese market that Tesla struggles to fully realize. Legacy automakers are poised to use their economies of scale to make their presence fully known. Tesla is clinging to an ever more tenuous position as a leader.

However, Tesla’s great advances in battery technology might be the key to a comeback for the company. Giving people a way to power their homes in an emergency as well as their cars might be the best thing the company could do yet.

With Generac making a play on Tesla’s engineering muscle, it’s clear that the applications are there. I’m still neutral on Tesla because there’s a great plan in the making here, but it remains to be seen just how much of it will come to fruition.