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Digging Into Deutsche Bank's Bullish Tesla Model

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In a report published Sunday, Deutsche Bank analyst Rod Lache commented on Tesla Motors Inc (NASDAQ: TSLA)'s upcoming product announcement (the introduction of a line of home and utility grid sized stationary storage products) on Thursday, noting that the new product has the potential to be "more significant" than the Street currently expects.

Lache noted he has not yet factored any benefit from the new market opportunity as the market has been provided with insufficient information for the purpose of financial modeling. The analyst added that Tesla is expected to provide details on the cost and benefits of the new product on Thursday, but in the meantime he provided a model based on existing knowledge of Solar PV, Solar PV with Stationary Storage and the status quo of purchasing electricity from the grid for a homeowner.

Lache added that Tesla faces a $800 million revenue opportunity in battery storage systems by 2018.

"Our model suggest that the economics of stationary storage with PV are already compelling," Lache wrote. "On a combined basis, we believe that the combination would help reduce the cost of energy from a typical home in California by approximately 10 percent. Since most Solar PV systems are installed with long term benefits in mind, we believe that most home solar PV installers will be interested in this product.

Related Link: What 2 Street Firms Think About Tesla's Big Announcement

Model Assumptions

  • Solar and Storage System with 6kW PV Output and a relatively small Li-Ion pack at 6kWh on average.
  • The installation of a residential PV system would cost $13,500. Stationary storage would add $2,700 after a 30 percent tax credit. On the battery side, it costs Tesla $225/kWh to manufacture an automotive Li-Ion pack and this cost will decline to $150 by 2018 and $100 by 2020.
  • The use of a stationary storage battery is "significantly" different from an automotive pack, suggesting the need to replace a battery every eight years.
  • Batteries will be sold with a warranty and there will be minimal operations and maintenance (O&M) costs. In addition, future stationary storage battery replacements will be made at significantly lower costs than today.

Shares remain Buy rated with an unchanged $245 price target.

Latest Ratings for TSLA

Oct 2017Evercore ISI GroupDowngradesOutperformIn-Line
Oct 2017Morgan StanleyMaintainsEqual-WeightEqual-Weight
Oct 2017Standpoint ResearchDowngradesHoldSell

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Posted-In: Deutsche Bank Rod Lache Solar PV Tesla Batteries Tesla Solar PowerAnalyst Color Analyst Ratings


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