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.
"We have a shot at a record quarter for vehicle deliveries, but will have to rally hard to achieve it. This is the most number of vehicles per day that we've ever had to deliver," Musk said in the email seen by Reuters. "It's also extremely important that we keep factory output as high as possible over the remaining 10 days. This is vital for the California market."
The quarter-end rallying cry has become a familiar theme in recent quarters at Tesla.
Tesla's U.S. production, which was suspended from the end of March to early May due to the COVID-19 lockdown, has recovered in the current quarter. Former Wall Street analyst and Tesla bull Gary Black on Sunday forecast 144,000 deliveries for the July-to-September quarter. Tesla's previous quarterly sales record was set in the fourth quarter of last year, when it delivered 112,000 vehicles.
In the second quarter this year, Tesla delivered 90,650 vehicles, beating analysts' estimates and shrugging off a factory shutdown that hurt its output.
Many analysts expect Musk to unveil battery improvements on Tuesday, extending the Palo Alto, California, automaker's lead in EVs 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, long-lasting 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 U.S. 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 in-house, 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.
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