Tesla traders bet on Musk bat­tery pitch to spark rally

The Pak Banker - - FRONT PAGE - NEW YORK -AFP

Fas­ten your seat­belt, be­cause Tues­day is Tesla's "Bat­tery Day", and some in­vestors ex­pect Chief Ex­ec­u­tive Elon Musk's pitch on the elec­tric car maker's en­ergy stor­age ad­vances to re-en­er­gize its rally fol­low­ing a re­cent 21% stock slump. Tesla's stock has re­cov­ered in the runup to the event sched­uled and it gained 1.4% in early trad­ing on Mon­day, helped by a leaked email from Musk that said the com­pany was hope­ful of rack­ing up record car de­liv­er­ies in the third quar­ter.

Many an­a­lysts ex­pect Musk to un­veil bat­tery im­prove­ments ex­tend­ing the Palo Alto, Cal­i­for­nia au­tomaker's lead over Gen­eral Mo­tors, Volk­swa­gen and other ri­vals. Tesla op­tions are pric­ing in a stock move of around 17% - up or down - by Fri­day, said Christo­pher Mur­phy, co-head of de­riv­a­tives strat­egy at Susque­hanna Fi­nan­cial Group. Tesla's stock has more than made up for a his­toric slump on Sept. 8 af­ter it was un­ex­pect­edly left out of a group com­pa­nies join­ing the S&P 500, and it has surged over 400% year to date. Still, Tesla re­mains be­low its Aug. 31 record high close. An­a­lysts, in­clud­ing those with neu­tral rat­ings on Tesla's stock, ex­pect ma­jor ad­vances from Musk.

"We (and the mar­ket) ex­pect the an­nounce­ments to be sig­nif­i­cant, ce­ment­ing Tesla's cost and tech­nol­ogy lead for sev­eral more years," UBS an­a­lyst Pa­trick Hum­mel wrote in a client note on Sept. 11, adding he ex­pects a new dry elec­trode cell tech­nol­ogy to help speed man­u­fac­tur­ing and lower costs.

Bat­ter­ies make elec­tric cars cost more than gaso­line-pow­ered ones, so the abil­ity to pro­duce low-cost, lon­glast­ing bat­ter­ies could put Tesla cars on a more equal foot­ing and help usher in main­stream ac­cep­tance. Musk in Au­gust sug­gested on Twit­ter that Tesla may be able to mass pro­duce bat­ter­ies with 50% more en­ergy den­sity in three to four years, which could even en­able elec­tric air­planes.

A much hyped "Au­ton­omy In­vestor Day" in April last year failed to stop a five-month de­cline in the com­pany's stock. At that 2019 event, Musk said that Tesla rob­o­taxis with no hu­man driv­ers would be avail­able in some US mar­kets in 2020, con­tin­u­ing a habit of mak­ing bold pro­nounce­ments and set­ting dead­lines Tesla does not meet. "Even if Tesla pro­vides overly am­bi­tious as­pi­ra­tions at Bat­tery Day, we nev­er­the­less ex­pect the event to re­in­force Tesla's long-term growth nar­ra­tive cen­tral to the stock, while also re­in­forc­ing in­vestor per­cep­tion that Tesla is ahead of other au­tomak­ers," Credit Suisse an­a­lyst Dan Levy wrote in a Sept. 16 re­search note.

New bat­tery cell de­signs, chemistrie­s and man­u­fac­tur­ing pro­cesses are just some de­vel­op­ments that would al­low Tesla to re­duce its re­liance on its long-time bat­tery part­ner, Ja­pan's Pana­sonic. Cowen an­a­lyst Jef­frey Osborne said in a re­cent client note he ex­pects Tesla to an­nounce it is bring­ing bat­tery cell pro­duc­tion in­house, and for Musk to fo­cus on work done on "mil­lion mile" bat­ter­ies. Eight Wall Street an­a­lysts rec­om­mend buy­ing Tesla's stock, while 10 rec­om­mend sell­ing and an­other 15 are neu­tral. The me­dian av­er­age price tar­get is $305, which is 31% be­low Fri­day's close. Un­der­scor­ing many in­vestors' con­cerns that Tesla's stock has be­come over­val­ued, it is trad­ing at about 150 times ex­pected earn­ings over the next 12 months, about dou­ble its five year av­er­age, ac­cord­ing to Refini­tiv.

SIN­GA­PORE -REUTERS

A woman poses as she shows the re­cline of a busi­ness class seat dur­ing a tour of SilkAir's new air­craft, the Boe­ing 737 Max 8 at Changi Air­port in Sin­ga­pore.

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