Energy storage is set to become a major revenue earner for Tesla (NASDAQ:TSLA) in 2017. Recent moves in Europe and Asia show the promise this holds for the company as the energy storage industry takes off worldwide. Some analysts are now starting to recognize this, most recently, Baird. It made Tesla a “top pick” based on what it believes to be an accelerating energy storage business. This caused Baird to give Tesla a price target of $338 (the current stock price is $226.99). Indeed, its stock price rose markedly on the back of an announcement about battery production at the Gigafactory. This is possibly the start of Tesla’s energy storage being a positive catalyst for its stock price.
My article in October laid out many of the reasons why energy storage was so promising for the company. Recent developments reinforce my thesis.
Tesla’s Advantage
Tesla’s vertical integration model means it is able to integrate up and down the supply chain and produce products like solar panels, racking, inverters and energy storage all in-house. The ability to integrate an inverter with storage gives Tesla many opportunities to entice customers. An inverter turns direct current energy from solar panels into the alternating current used by the grid and by home circuits. As Musk said at a recent earnings call, “solar and batteries go together like peanut butter and jelly.”
Both solar and battery prices continue to fall. Critics who say prices won’t fall further don’t back their argument with good reason. The electricity grid has not really changed since the days of Thomas Edison and, alternative energy and battery storage should completely change everything.
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