- Tesla Master Plan is slowly taking shape.
- The company dropped “Motors” and acquired domain tesla.com from Silicon Valley engineer Stu Grossman.
- Has announced a joint venture with SolarCity to provide grid storage batteries and installation of solar panels in Kauai Island.
- The announcement provided the magic needed to rescue Tesla Motors’ stock price that had nose-dived to below $137 per share.
- Gigafactory already producing batteries for the Powerpack and Powerwall, and making profits.
- Is Tesla now a battery company that also produces automobiles?
In an announcement last month, Tesla (NASDAQ:TSLA) said it had made an all-stock offer worth $2.8 billion for SolarCity (NASDAQ:SCTY). The two companies would then form a clean energy shop that would provide home battery storage, solar panels and electric autos under one brand. This is part of the Original Tesla Master Plan #4 that has been on their website for 10 years (to provide solar power).
Tesla Motors Inc. Chief Executive Elon Musk expressed confidence that the majority of the shareholders will support the merger. The details were first presented in late June but were overshadowed by the Tesla’s Model S sedan traffic fatality. He has however proposed to pay between $26.50 and $28.50 a share towards the acquisition. The company is also opening an office in Africa.
Trillions of Dollars at Risk
Musk’s interest in solar energy has jeopardized trillions of dollars that the world’s utility companies have spent and invested in grid infrastructure and energy generating plants. It is expected that they are bound to put up stiff fight. Tesla is no longer just an automobile company, but has extended to investments in solar energy. The original Tesla Master Plan is taking the desired shape.
What does the change of name and acquisition of SolarCity mean to Tesla’s shareholders? It is clear that the master plan venturing in other areas in addition to automobiles. Let us have a look at the six months’ worth of stock price data for Tesla.
Figure 1: Tesla Stocks (source: marketwatch.com)
The company’s share price recovered from a low of $137 in early February to oscillate to the current $230 (as at going to press). The low price was occasioned by the announcement of interest in SolarCity. The upward movement was brought about by the Kauai Island deal. This shows that the investors are confident with the stock. However, expert analysis of the stock holds Tesla as neither a buy nor a sell, with Yahoo giving it the aggressive level in the risk graph.
Figure 2: Earnings Growth (source: Zacks Investment Research)
Tesla is expected to register year earnings per share (EPS) growth from the prior fiscal year. Although the auto industry is not expected to doing as fine, Tesla will be able to gain 39.32% growth by the end of this year. The automobile industry is expected to register EPS growth of 8.40%.
Analysts have suggested that Tesla’s earnings will growth at an average of 30% annually in the next five years with next years’ growth forecasted at 35.19%. With the acquisition of SolarCity, Tesla is bound to increase its risk levels. SolarCity has already ceased operations in Nevada due to draconian fees attached to rooftop solar power. More than 500 employees were laid off.
Musk is prepared not just to make electric vehicles, but also the means to harvest that energy that operates them. The utility energy giants are mad at the thought that individuals can make and use their own solar power. This is the mountain that Tesla must climb if the merger takes shape. The idea that utility companies must enjoy monopoly for survival has been entrenched in the society since the days of George Westinghouse and Thomas Edison when they were crafting the first grids. But just like franchise dealer laws (though they served the industry well) are now obsolete. The monopoly idea will soon be like internal combustion engine- an anachronism.