It’s not a $30,000 electric car, but if you’re a Tesla Motors Inc (NASDAQ:TSLA) bull, it’ll do.
As many speculated beforehand, Tesla Motors’ announcement Thursday night concerned an expansion from the road into homes and businesses. Specifically, TSLA announced the “Powerwall Home Battery” for homes, as well as the business-geared “Powerpack.”
Elon Musk expects the Powerwall, which is slated to come available in the U.S. this summer, to be used mostly for storing solar energy:
“Powerwall is a home battery that charges using electricity generated from solar panels, or when utility rates are low, and powers your home in the evening. It also fortifies your home against power outages by providing a backup electricity supply. Automated, compact and simple to install, Powerwall offers independence from the utility grid and the security of an emergency backup.”
How much backup? The $3,500 10-kilowatt-hour version should “allow you to run a handful of home appliances for a few days in case of an outage.”
Obviously, a little emergency energy for the ‘burbs doesn’t have nearly the sex appeal of a 3.1 0-to-60 time … unless you’re a TSLA stock holder, in which case, it absolutely does.
Finally, Something Else
Regardless of what you think about the potential for Tesla’s Gigafactory, that has long been a product with an extended timetable and numerous question marks.
Sure, Tesla’s Powerwall Home Battery and Powerpack systems come with their own question marks. The clear one: How quickly will we see adoption for these packs that run $3,000-$3,500 just for the home versions in a nation that, while increasingly adopting solar energy, hasn’t seen it go mainstream quite yet?
But it also provides a few answers that should perk up TSLA stock holders.
For one, it provides another potential avenue for growth outside of what currently is simply a small line of luxury vehicles. Critically acclaimed, in-demand luxury vehicles, yes, but vehicles that do have a cap given their high price (and thus limited market). Yes, TSLA will be pumping out Model X’s next year, but they’re expected to be priced in the same $70,000 range as Model S’s. The more affordable Model 3 isn’t expected to launch until 2017.
“SolarCity has announced that it will offer the Powerwall to its existing and new customers and that it will work with the company’s DemandLogic energy-storage system for businesses and government institutions.”
And Musk, being the fearless technological badass we all know and love, is doing what he did with Tesla’s other patents, opening up Powerwall patents for the sake of establishing other partnerships.
Aligning TSLA with solar interests is a savvy move that follows a very clear upward trend. According to the Solar Energy Industries Association, “solar accounted for 32 percent of the nation’s new generating capacity in 2014” — that’s up from 29% in 2013, and just 10% in 2012.
Or just look at SolarCity itself, which in 2014 brought in $255 million in revenues — more than double its sales from 2012.
All you need to do is look at the flat reactions in TSLA and SCTY to know that the Powerwall announcement was not only mostly expected, but also not a no-brainer home run that will change the game immediately.
But frankly, that encourages me more than it gives me pause.
TSLA is sticking its nose in a less flashy business that needs time to ramp, but one that addresses several overarching power issues such as eco-cleanliness and the fact that fossil fuels, while still plentiful now, are a limited resource. Moreover, these batteries could eventually represent a new stream of revenue that makes sure Tesla isn’t wholly dependent on its very limited line of cars.
$300 price target by July? Nah. But over the next few years, this could help tamp down some of the volatility we’ve come to know and loathe in TSLA stock … and eventually get us back to all-time highs.
Kyle Woodley is the Managing Editor of InvestorPlace.com. As of this writing, he was long TSLA and was considering initiating a position in SCTY within the next 48 hours. Follow him on Twitter at @KyleWoodley.
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