Inside Tesla's Wild Ride Last Week

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis. 

Tesla Motors (NASDAQ: TSLA  ) was one of the market movers last week, with the stock touching a low of $123.93 on Monday, Dec. 2, only to close the week about 11% higher on Friday at $137. Last Tuesday was a particularly busy day for shares of Tesla, as the stock climbed on unusually high volume of 25,625,400. Let's take a closer look at what caused the move last week, and what investors can anticipate in the week ahead.

Last week's defining "Tesla" moments
More than 25 million Tesla shares traded hands last Tuesday, pushing the stock higher by 17% that day. Good news from German investigators, as well as an analyst upgrade from Morgan Stanley (NYSE: MS  ) , was to thank. First, a German probe into recent Tesla Model S fires found "no manufacturer-related defects." While a U.S. investigation by the NHTSA is still under way, the seal of approval from the German Federal Motor Transport Authority was nonetheless encouraging.

On top of this, Morgan Stanley analyst Adam Jonas reiterated his support for the stock by naming Tesla his top pick among stocks within the auto sector. Commenting on the Model S fire incidents, Jonas said his firm is "impressed there have only been three fires since the car has gone on sale over 17 months, 22,000 units and some 130 million miles driven ago." As a result, Morgan Stanley now has a price target of $153 on shares of Tesla.

Tesla gained even more attention later in the week, after SolarCity (NASDAQ: SCTY  ) announced a new solar-powered storage system that uses Tesla's lithium-ion batteries. This is a perfect fit for the electric-car maker, particularly because Tesla's CEO, Elon Musk, is already a majority shareholder in SolarCity. It also helps that Musk is cousins with SolarCity's CEO Lyndon Rive.

SolarCity installs commercial and residential solar panels, and helps customers finance them. However, the company's new industrial grade energy storage system promises to be a big win for both SolarCity and Tesla. The technology behind these power storage units helps solar users save money, and acts as a backup generator during power outages. In fact, the system automatically uses stored electricity during peak hours when energy companies charge the highest rates.

SolarCity's new smart battery storage system, called DemandLogic, should be a big draw for businesses, because of rising utility demand charges. As SolarCity's chief technology officer Peter Rive explains, "Utilities have altered their rate structures such that demand charges are rising faster than overall energy rates, and businesses are bearing the bulk of those increases."

Moreover, these units should be easy to sell, especially considering SolarCity will customize the size of the system so that businesses immediately save more on energy costs than they spend on the storage service, according to a company press release. Tesla's industry-leading battery technology now gives SolarCity another advantage over competitors in the space.

In fact, SolarCity co-founder JB Straubel says: "The economics and scale that Tesla has achieved in the automotive market now make stationary energy storage more cost effective and reliable than it has ever been in the past. We expect this market to grow very rapidly now that we have crossed this economic threshold."

Looking ahead
Tesla kicked of this week on a high note, with shares trading around $139.75 at the time of this writing. However, with the recent Model S fires and other setbacks, it seems investors have lost focus of what really matters to Tesla's future. With 2014 just around the corner, Tesla is readying the release of its first all-electric crossover vehicle, the Model X. As Tesla's Model X cars begin to hit the road in the year ahead, I suspect we'll see the stocks momentum return in full force.

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