Hot alternative energy plays Tesla Motors (TSLA) and SolarCity (SCTY) already have a lot in common.
TSLA stock and SCTY stock are both slaying it so far in 2013, boasting respective gains of 320% and 365% year-to-date.
Both are also plays in the booming alternative energy space.
And both are in some way tied to business rockstar Elon Musk. Elon Musk is the CEO of Tesla, and is also the chairman of SCTY. Oh, and Elon Musk’s cousin Lyndon Rive is the CEO of SolarCity.
Now, though, Tesla and SolarCity aren’t just similar; they’re on the same team. The two sizzling Elon Musk stocks are both up this morning thanks to news of a supply deal. Tesla Motors will supply big battery packs to SolarCity. The batteries will provide backup power when the sun isn’t shining and thus lower electric bills.
TSLA Batteries Could Boost SCTY
The deal has several perks for SolarCity. To start, businesses with SolarCity panels are charged “not just for the amount of electricity they use over a certain period, but also for the level of electricity they need from the grid at any one time,” according to The Associated Press.
The Tesla batteries will help lower the “demand peaks” when the sun is not shining. On top of that, the batteries can also run the system for anywhere from several hours to several days if power goes out — definitely good news for SCTY customers.
SCTY stock is up over 6% on the news already, while TSLA stock has tacked on around 3%.
Of course, that’s hardly notable for Tesla stock, as the momentum play has been volatile this year and jumped almost 17% on Tuesday alone. TSLA stock investors were encouraged by news that the German Federal Motor Transport Authority said the Tesla Model S is defect-free.
As InvestorPlace’s Kyle Woodley put it, “Considering Germany knows a thing or two about auto engineering, I’m taking this is an opportunity to breathe easy and let Tesla Motors get back to doing what it does best. That’s making cars, and making people (namely, TSLA stock investors) money.”
If you remember, investors had been scared earlier by three Tesla fires. Many were concerned that the lithium-ion batteries used in the Tesla Model S were not safe … and the skepticism led to a 30% sell-off in TSLA stock.
The SolarCity deal is for those same lithium-ion batters. Of course, as The Associated Press noted, “The Tesla batteries for solar backup will be enclosed in steel cases — and they won’t be traveling down littered highways at 65 miles per hour.”
No wonder SCTY stock investors are doing nothing but smiling.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.