Running on Empty: Tesla’s Battery Day Fails to Convince

Tesla’s (TSLA) Battery Day is now behind us and planet earth is still rotating in the same direction. Ok, no one thought Tesla would announce the development of a battery to spin earth the other way, but expectations were sky high going into the event. In the end, according to RBC Capital analyst Joseph Spak, the content on offer was somewhat of a letdown.

“Overall, we believe Tesla’s long-awaited battery day disappointed elevated expectations, as it highlighted some near-term stagnation in the price reduction of current lithium ion batteries,” Spak said. “While next-gen battery/manufacturing technologies and products are ambitious, some are not unique and others could be further out than hoped. While we still believe TSLA is overvalued, given the interest in the name, weakness could be bought.”

Spak has an Underperform (i.e. Sell) on TSLA shares along with a $290 price target. Investors are in for a sharp drop, according to the analyst, as the figure represents possible downside of 24% in the coming months. (To watch Spak’s track record, click here)

Tesla plans on eventually taking battery production in house and will make its own ‘tabless’ batteries to boost its vehicles’ range and power. The Tesla made batteries will also reduce costs significantly. Musk also promised that in roughly three years, a $25,000 Tesla electric car would be available and revealed plans for the Model S to go as fast as 200 mph.

But Spak homes in what he considers Musk’s most “revealing statement.” Musk believes every car company will eventually have long-range electric cars and autonomous driving capabilities, yet argues Tesla’s manufacturing skills outstrip those of its rivals.

“We don’t believe this is the case today,” Spak said, “So in many respects, taking this at face value means a race between traditional OEMs catching up on electric vs. Tesla improving manufacturing.”

While many of the plans outlined could take years to materialize, Musk’s ambition is not in doubt. The CEO argues Tesla can eventually sell 20 million units a year, which Spak notes “is almost 2x either Toyota or VW, the world’s largest automakers.”

So, that’s RBC’s view of Battery Day, how does Tesla fare amongst Spak’s colleagues? Not that much better. The stock has a Hold consensus rating based on 6 Buys, 14 Holds and 10 Sells. The Street expects shares to be changing hands at a 16% discount over the next 12 months, considering the average price target comes in at $319.96. (See Tesla stock-price forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.