$TSLA Investors Debate Gigafactory Value

Tesla Motors continues to race ahead in advance of the big reveal of a planned battery factory.

During Tesla’s earnings conference call Feb. 19, CEO, founder and chief architect Elon Musk promised to announce details of a “gigafactory” sometime this week. Shares have climbed more than 8% since the call.

Some of the three-day climb is due to Tesla’s guidance. The company said it expects to deliver 35,000 Model S electric sedans in 2014. The total is nearly 56% higher than last year and more than most analysts expected. The company also plans to ramp production from 600 cars a week to 1,000. By the end of the year, the first prototype Model X electric SUVs should also be on the road.

But, judging from cashtagger comments, today’s price action is all gigafactory and what it could mean for Tesla’s third generation mass-market car.

$TSLA http://stks.co/i0JsR I would be willing to bet Musk makes good on his plan. Skeptics are short-sighted

— Jason Yi (@Jason100) Feb. 24 at 11:58 AM

$TSLA news this week, musk likes games and knows the market,, could have a bombshell coming >define: gamechanger LetsC

— J (@candiswave) Feb. 24 at 02:05 PM

Here’s what Musk has revealed so far. The gigafactory will address one of the main factors preventing Tesla from churning out more cars—battery production. Tesla, which currently partners with Panasonic, $PC, for its lithium ion batteries, has blamed inability to get more of the special batteries needed for its electric vehicles as the chief reason why it does not delivery more Model S cars each quarter.

In last week’s letter to shareholders announcing quarterly earnings, Musk again said that “battery cell supply” would constrain production for the first half of the year. However, he noted that battery supply would improve significantly in the second half of 2014.

The gigafactory will help Tesla roll out its highly anticipated mass-market electric vehicle. During the earnings conference call last week, Musk said that, though the Tesla’s current car plant will be able to produce a third-generation Tesla vehicle, “the gigafactory is really there to support the volume of the third-generation car.”

Tesla will partner with multiple entities to build the factory, chief of which will likely be Panasonic. Musk said last week that the factory will combine the pre-cost materials in the battery cells: anode and cathode materials, separators, etc.

Tesla expects to absorb nearly all of the lithium ion batteries produced and would probably still need to bring in more lithium ion batteries from factories around the world.

The gigafactory will be powered, primarily, by wind and solar and include a battery recycling plant.

Since the announcement on the Feb. 19 earnings call, 9 firms have boosted the price target on Tesla’s stock. On the low-end of the new upgrades is JPMorgan with $137 share price. On the high-end is Dougherty & Co with a $325 target, according to data from the Analyst Ratings Network.

Some cashtaggers say the excitement over the factory and electric cars has driven Tesla’s valuation too high. The company has a $26.66 market cap and a price to 2015 earnings ratio of nearly 59X, according to stats on Yahoo Finance. It posted a GAAP loss of $0.13 EPS, which includes stock based compensation and leasing revenues, since Tesla’s banking partners assume the risk for defaults not Tesla. Non-GAAP EPS of $0.33 beat Wall St. consensus estimates.

The incredible $FB $NFLX $TSLA bubble goes on and on … fantastic companies, yes, but psycho valuations …

— Stray Trader (@StrayTrader) Feb. 24 at 01:27 PM

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