Tesla Battery Day Disappoints, But Goldman Raises Its Price Target
Tesla had a tough time yesterday – the company’s share price declined more than 10% on the back of a disappointing Battery Day and a combination of risk-off market sentiment. Following shortly after the annual shareholders’ meeting, the Battery Day event was supposed to bring some incredible developments in the battery industry.
Elon Musk tweeted several days ahead of the event that the company will announce incredible news, and the market took it for granted. As such, just when the S&P 500 and Nasdaq declined last week, Tesla was resilient. In fact, last Friday, Tesla was one of the few companies trading with a bid tone, on the back of, you guessed, Battery Day.
What Did Tesla Announce on Battery Day?
If we look at what the company announced, it is positive for Tesla all around. Giving other market circumstances (i.e. risk-on market), the company’s share price would have flown over. Not this time. After failing at the $500 after the split, Tesla ended yesterday’s decline at $380/share.
Tesla unveiled at the event that its new 80 mm cell battery has five times the energy and six times the power of the previous generation. Also, it covers a bigger range by 16%. However, it is not the breakthrough the company is looking for and Musk still believes that the cell technology needs to advance more.
Another thing to consider was that Tesla plans to one million cars at the Shanghai factory in the long term and that it will scale the facility up. Considering that one in three cars already is produced in China, it comes as no surprise that Tesla pushes for bigger numbers there.
Also, Tesla vertical integration is supposed to result in over 50% dollar per KWh reduction in cost. In the course of the next three years, this will enable Tesla to build a $25k electric vehicle.
Once again, in a normal risk-on market, nothing looks unrealistic in what Tesla presented on the Battery Day. Just the opposite.
As a result, Goldman Sachs raised the price target for Tesla’s share price right after the event. Moreover, California announced a ban of all combustion vehicles in the state, starting with 2035.
What company is better positioned to take advantage of such changes that the very Tesla that declined 10% yesterday?