Tesla Motors Inc., Adam Jonas, and the Gigafactory

Let's say you had the opportunity to add Tesla Motors, (NASDAQ: TSLA  ) to your portfolio before it blows up again? The guy who thought that the electric-car company would grow exponentially in 2011 is predicting something equally as enticing today, and you should consider getting in on it. 

Time travel
Adam Jonas and Tesla have a long and loyal history. In 2011, the Morgan Stanley analyst was bullish enough to advise an overweight position on a company that offered a single very expensive car, the Roadster. Jonas had this to say about Tesla at the time:

The confluence of structural industry change, disruptive technology, changing consumer tastes and heightened national security creates an opportunity for significant new entrants in the global auto industry. California dreaming? We don't think so. In our view, the conditions are ripe for a shake-up of a complacent, century-old industry heavily invested in the status quo of internal combustion. The risks are high. So is the opportunity. Enter Tesla.

He went further, he valued Tesla (which was trading around a measly $26) at a whopping $70, a whole 148% increase. 

Roadster. Source: Tesla Motors

Now look what's happened
Okay, back to reality where Tesla now trades around $250 and the "Gigafactory" has just been announced. Jonas now says that he thinks the stock should actually be trading at $320. What do you do? You listen and strongly consider buying.

Here's what he had to say on Feb. 25:

Tesla's quest to disrupt a trillion $ car industry offers an adjacent opportunity to disrupt a trillion $ electric utility industry. If it can be a leader in commercializing battery packs, investors may never look at Tesla the same way again ... Tesla says it will team up with partners to build the world's largest Li-ion battery pack facility in the US. We reflect the potential for lower battery costs through higher sales volume nearly doubling Tesla's share of the global car market to 90bps by 2028, driving our target increase.

What does that mean? We're not in Kansas anymore folks, Tesla has its sights set beyond cars. 

Where is Tesla going?
Batteries. By 2020 Tesla and Panasonic will be able to produce 30 gigawatt hours per year. To put that in perspective, that's more than the entire world produced in 2013.

We're talking a huge chunk of Tesla's supply chain being internalized. Targeted to start manufacturing in 2017, the Gigafactory will manage everything from processing raw materials to the assembly of the batteries. 

Tesla Model S. Source: Tesla Motors

Is Tesla worth the premium?
Yes. Very much so, yes. Sure there are a number of risk factors to be considered when talking about taking on such a huge endeavor. But Panasonic doesn't seem to have any reservations, as the Tesla partner is inviting Japanese materials makers to sign on to back the deal. The expected total investment in the facility will be in the ballpark of $4 billion-$5 billion. 

With great power
So what does this mean for for the Model S maker? It means that Tesla can continue to focus on how to get it's third-generation car into as many hands as possible as quickly as possible. It means that Tesla exepmlifies innovation and opportunity. It means that Tesla has been and will continue to be a great buy. 

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Read/Post Comments (6) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 03, 2014, at 8:14 PM, RobertFaheyJr wrote:

    Tesla fits perfectly as a puzzle piece between solar, electric, energy storage and transport. It will soon build products here and sell to China, the reverse of the norm. It will supply renewable energy instead of consuming non-renewable. Chalk one up for the USA. I'm lovin' every minute of this.

  • Report this Comment On March 03, 2014, at 8:22 PM, speculawyer wrote:

    The GigaFactory is what will really give Tesla a competitive edge against all its potential competitors.

  • Report this Comment On March 04, 2014, at 12:22 AM, indigood wrote:

    So how was the ride, Leah?

  • Report this Comment On March 04, 2014, at 9:49 AM, trclark81 wrote:

    Musk has a talent for never resting on his laurels and in the same stroke taking the bold, but smart step. And in Tesla's Gigafactory he is repeating what he successfully did with SpaceX. He's internalizing his supply chain. And what's more, he's profiting off of it, or at least positioning himself to.

    And the battery market is a pretty sure bet as everything from cars to mobile devices to aircraft to the electric grid is going to need them. And with a factory set to produce a monstrous bite of the battery market, he's putting himself right at the front door on the way into the battery market.

    I'm not 100% convinced it's worth what the stock value says it is. But I'm confident enough to have bought back in with the meager resources I have at my disposal. If there's one thing Musk is good for more than building solid businesses it's proving the naysayers wrong.

  • Report this Comment On March 07, 2014, at 5:06 PM, max1243 wrote:

    Help. Im a newbe at this. I have been trying to get this question answered. Which Panasonic stock is the one that has to do with the new Tesla Battery company.

    There are several Panasonic stocks ??

    max1243

  • Report this Comment On March 07, 2014, at 6:11 PM, TMFNewCow wrote:

    @max1243, Panasonic used to have an ADS that was listed on the NYSE under "PC" but they delisted last year. Panasonic still has an ADR that trades over the counter under PCRFY, but like any OTC stock beware of low volume, high spreads, illiquidity, etc.

    Hope that helps.

    -- Evan

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