Deutsche Bank Downgrades Tesla: Market Already Pricing In Potential For Dominance In Battery Storage

In a report published Tuesday, Deutsche Bank analyst Rod Lache downgraded the rating on

from Buy to Hold, while raising the price target from $245 to $280. The downgrade is based on valuation, the analyst said. Analyst Rod Lache expressed optimism regarding Tesla's prospects, citing the company's EV opportunity. Tesla had announced its plans in late April "to leverage their scale and battery systems knowhow in Stationary Storage." Lache expects the market to "increase dramatically" by 2020 and believes Tesla "could become a dominant player." Lache added, however, "Tesla's shares appear to already reflect this opportunity." There is potential for 4.5 GWh per year, or $900 MM per yr, from utility integration of renewables by 2020. Energy storage is also expected to "increasingly replace" peaker plants. "We assume 25%, which would be 5.6 GWh and $1.1 bn). We also believe that 5% of the annual ~$20 bn spent on transmission upgrades may be substituted by storage ($1 bn/yr opportunity)," Deutsche Bank noted in the report. The EPS estimate for 2020 has been raised from $20.00 to $22.20. Lache expects Tesle to approach 500k vehicle sales per year and generate 15 percent operating margins on those sales. "We further assume that TSLA's Stationary Storage business ramps to 15GWh's per year," the report added.