Why Tesla's Battery Business Has It On The Right Path

Tesla Motors Inc TSLA started as a scrappy startup. The company struggled for some time, nearly went bankrupt and could have been sold to Google Inc GOOG.

Analysts dismissed the rumor that Google may be still interested in acquiring Tesla. They aren't the only ones who expect Tesla to avoid a merger, but it could eventually happen -- for the right price.

"I don't see Tesla really getting bought by anybody," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "I think the chance to buy Tesla a while ago was at a much lower market cap."

Udall said that if investors could get a significant premium for a leveraged buyout or a hostile takeover, a merger might occur.

"I don't think shareholders would refuse a $400 share price," said Udall, adding that Tesla co-founder Elon Musk doesn't have the power to stop that large of a takeover. "[But] I don't see it. That's a lot to pay for a comp that has yet to fulfill the promise."

Regardless, Udall has high hopes for Tesla's battery initiative.

"The battery technology gets them to where they at least deserve the market cap," he continued. "I don't know if they deserve to be higher."

As far as Tesla's core automobile business is concerned, Udall said that he doesn't think the company will get much bigger.

"The auto business will become smaller and smaller and the battery business will get bigger and bigger," said Udall.

Related Link: How Apple Could Help Tesla By Building A Car

Where Are The Startup Competitors?

Musk has said that he knew an automobile startup was unlikely to succeed. That didn't stop him from starting the business, however -- so why haven't others done the same?

"Capital is the barrier to entry," Tigress Financial Partners analyst Ivan Feinseth told Benzinga. "There's rumors that Apple would make a car. Apple has more than enough money. Apple has an incredible brand name and probably one of the most loyal and largest customer bases that has ever existed."

Apple Inc.'s AAPL rumored automobile has taken center stage now that the company has abandoned any and all plans to build a television set.

"But of course, when companies go outside of their core capabilities and focus, [that] is also when they run into trouble," Feinseth added. "It is surprising to me, however, that the big three automakers did not embrace or create, a while ago, a pure electric vehicle."

That said, Feinseth is a fan of the Chevy Volt and Cadillac ELR because they offer "a gas engine that turns a generator that powers an electric motor."

"One of the concerns of the Tesla is this range anxiety of running out of battery power with no place to charge up, 'cause there's no portable type of charger," said Feinseth. "If you run out of gas, somebody can bring you some gas. I think that's the disappointment in the auto industry, in my view, that they didn't embrace other drivetrains and technologies."

Having witnessed Tesla's success, Feinseth expects other automakers to start working on a proper competitor -- if they aren't already.

"Telsa made a quality product and that's how they got to where they are," he added.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.