How Tesla hits $600 per share

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Tesla’s biggest cheerleader has to be Global Equities analyst Trip Chowdhry. Chowdhry’s way out in front of the average Tesla price target of $277.50. His price target? $385. That’s more than 75 percent higher than the stock’s current price. Why’s Chowdhry so bullish?

As I wrote yesterday (in Tesla stock worth more than Big 3 combined?), Chowdhry sees Tesla not just as an electric car-maker, but rather a new transportation conglomerate that includes cars, power grids, self-driving sensor networks, and – perhaps most importantly – batteries.

The Gigafactory alone, Chowdhry says, could be worth $50 billion. That’s twice Tesla’s current market cap. The Gigafactory’s “impact will be huge, that many of us in 2015 cannot see,” he writes, “but the ingredients of creating a completely new industry are perfectly in-place… just like MSFT created the Software Industry, AMZN created the E-Commerce Industry, and then later Cloud Computing Industry… Tesla is creating an Energy Storage Industry with GigaFactory.”

Tesla broke ground on the Gigafactory in October 2014, and the plant is expected to be operational in 2017 and at full production speed by 2020, when Tesla anticipates it will be producing 500,000 batteries a year for its cars. Panasonic sees potential in the Gigafactory. The Japanese electronics company is initially investing “tens of billions of yen” – hundreds of millions of dollars – into the factory.

It’s a particularly interesting partnership as Tesla currently buys batteries for its cars from Panasonic. “Each Model S sedan contains more than 7,000 lithium-ion battery cells, which Tesla gets from Panasonic,” writes the Mercury News. “While the battery cells are similar to those used in laptops and game consoles, Tesla’s are specifically designed for electric vehicles and were jointly developed by Tesla and Panasonic.”

Juice for your home

During its last quarterly conference call, Tesla announced plans for an entirely new battery product: home batteries. The energy storage devices would store backup juice for solar-powered homes or traditionally-powered homes that want backup in case of outages. The batteries are said to have enough capacity to power a standard home for a week.

As the solar market grows, home battery systems will likely become common. That means we could see a marketplace for millions, or perhaps tens of millions of the new batteries. The U.S. solar industry is expected to complete its one millionth installation in 2015. That’s includes business and residential installations. “There are now over 17,500 MW of cumulative solar electric capacity operating in the U.S., enough to power more than 3.5 million average American homes,” SEIA writes.

The Gigafactory’s scale is hard to conceptualize. Once it reaches full capacity in 2020, it’s expected to produce as much battery power as was produced throughout the world in 2013. That’s huge, and it’s almost enough to make you buy into Chowdhry’s storyline.

If the Gigafactory did add $50 billion in market cap to Tesla’s stock price, shares would be trading at $598, and Tesla would be worth more than GM. It’ll be interesting to see if we’re truly seeing a revolution or Chowdhry’s just drinking Elon’s Kool-Aid.

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