BNL Finance has been highly critical of Tesla Motors Inc (NASDAQ:TSLA) for years, ever since it touched $200/share in 2013 on nothing more than promises for mass electric car production. Still, we never denied Elon Musk’s genius, or that Tesla made great cars. Our pessimism has always been about the valuation relative to competitors like GM and Ford Motor Co (NYSE:F), a valuation that we could not grasp.
Nonetheless, TSLA stock did go higher after our bearish call, but has mostly been dead money ever since, still trading at $200 three years later. That said, Tesla stock’s lack of performance is easy to explain.
It is hard to justify that Ford and GM are only 5o% more valuable when both are 25x larger in total revenue. Yes, Tesla handles manufacturing, charging, car sales, etc., but even a more complete business model does not support such a lofty valuation. Furthermore, if Tesla were to remain a manufacturer only, one could argue that TSLA stock is poised for half-a-decade or longer of flat returns and volatile trading.
The one exception is if Elon Musk uses Tesla as a holding company for his genius mind. If he spans beyond electric cars and makes Tesla more like Amazon.com Inc (NASDAQ:AMZN), the sky is the limit. The key, however, is that whatever else Tesla and Elon Musk do must have success. That would then warrant an inflated valuation as you would no longer be valuing Tesla on the potential for electric cars, but electric cars, whatever else Musk does, and whatever else he may do in the future, much like Amazon stock.
We believe that’s exactly what Tesla and Elon Musk just did. Tesla is now electric cars, batteries, and solar roofs. And most importantly, we think Tesla is going to succeed in each business. In fact, I am willing to bet that solar panels and batteries are more lucrative than its electric car business.
Tesla makes consumer-friendly solar roof
We believe Tesla’s announced solar roof is so revolutionary and disruptive to the utility services industry, that we have completely changed our outlook on TSLA stock. It is no longer a “Sell”. This is quite unusual for us given that we are by all accounts a “show me first, speculate later” research firm.
What makes us so optimistic is that Elon Musk seems to get what other solar panel makers and solar enthusiasts tend to forget. Musk said that for its new Powerwall and Powerpack to work with solar roofs, it “needs to be beautiful, affordable and seamlessly integrated“. It’s that “beautiful” part that gets lost in translation.
Most solar panel companies try to reduce consumer and business costs by installing solar panels on the south side of structures. Tesla is going with the approach of eliminating roofing tiles altogether, with an extremely durable and “beautiful” glass tile.
Go to page 2 for TSLA stock outlook and an unseen catalyst for Tesla