Credit Suisse analyst Dan Levy may have a $200 price target for Tesla stock, but he admits that the electric-car maker is a leader in two areas key to the future of auto manufacturing: software and electrification.
“While we hold an Underperform rating on Tesla, we nevertheless believe it’s important to give Tesla its credit where due,” he wrote.
In a note on Monday, Levy said that Tesla’s batteries are one area of leadership—a view that was reinforced by his visit to the company’s Gigafactory 1 last week. In 2018, Levy notes, Tesla (ticker: TSLA) had a combined 44 gigawatt hours of battery cell pack capacity, compared with all other auto makers globally combined at 46 gigawatt hours. In other words, it produces a lot more batteries than any of its rivals.
“One of the core aspects of Tesla’s product lead over other EVs is superior battery energy density,” Levy wrote.
Tesla’s Model 3 has an estimated range of about 4.1 miles per kilowatt-hour, with the Model Y at about 4 miles per kilowatt-hour—both far more efficient than offerings from Ford (F), Volkswagen’s (VOW.Germany) Porsche brand, and Jaguar, a division of Tata Motors (TTM), that have recently hit the market or are coming soon.
He noted Tesla’s use of cylindrical cells, which offer more energy density than the prismatic cells used by competitors, who have mostly stayed with them because cylindrical cells can pose difficulties in assembly and thermal load management.
“Indeed, Tesla had a number of challenges along the way with its pack assembly (esp. for Model 3), yet its experience has allowed it to refine its product,” he wrote.
Ahead of Tesla’s next Powertrain Day in the first half 2020, Levy expects updates on capacity expansion, cost, chemistry, and collaboration strategies. “More broadly, we expect Tesla to highlight why its work in battery gives it a clear competitive advantage vs. other auto makers,” he wrote.
Despite the praise for Tesla’s batteries, Levy is among 15 bearish analysts listed by Bloomberg, compared with 11 bulls. There are 10 Neutral analysts.
Tesla stock rose 6.4% to $381.50 on Monday, while the Dow Jones Industrial Average gained 0.4% and the Nasdaq Composite Index rose 0.9%.
Write to Connor Smith at connor.smith@barrons.com
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December 17, 2019 at 05:30PM
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Even a Tesla Skeptic Thinks Its Batteries Are Superior - Barron's
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