Once completed, the Gigafactory will be the world’s largest factory of any kind, and eventually manufacture lithium-ion batteries for 500,000 vehicles annually, as well as for other purposes. Batteries are the limiting factor for electric cars, so Tesla’s fix is to single-handedly double the world’s lithium-ion battery production.
While the Gigafactory — which is less than a third complete, and is expected to be finished by 2018 — has been expensive to build, estimated at $5 billion, it will accelerate the pace at which Tesla can become profitable since the Gigafactory can boost margins on unit sales of the Model S and Model X (and eventually the Model 3).
Bottom Line for TSLA Stock
Tesla stock should be owned, not traded. While the company is spending tons of cash to deliver on its aggressive Model 3 production production totals for later this year, it’s tough to bet against Musk.
Assuming the company does reach its delivery target and begin Model 3 production this year, TSLA stock — currently at around $229 — is poised to regain its 2016 high of around $270.
That would come out to roughly 20% returns in 2017.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.