Does Tesla Really Need To Be In The Solar Roofing Space And Can It Succeed?
Elon Musk recently announced plans of making a revolutionary “solar roof” that would integrate solar panels with battery power packs.
“Create a smoothly integrated and beautiful solar-roof-with-battery product that just works, empowering the individual as their own utility, and then scale that throughout the world. One ordering experience, one installation, one service contact, one phone app.”
The company wants to replace 5 million housing roofs with its new solar product. However, Tesla has failed to give any pricing or cost data for this “solar roof” and how it would compare to a traditional roof with solar panels. This product does not look like a slam dunk idea, given that others much more experienced in the material industry such as Dow Chemical Co (NYSE:DOW) have tried and failed. It is simply much cheaper and easier to install normal solar panels on mounting structures rather than integrating solar cells into the roof tiles.
The rooftop solar business model is facing pressure as USA customers move more towards the self-financing route, rather than the third-party financing model which SolarCity champions. The rooftop solar industry is not an easy one to crack and in my opinion, it seems difficult for Tesla to make this solar roof product into a major revenue stream. While Elon Musk might cite the synergy between solar energy and energy storage for entering this segment, it looks a bit far-fetched to me. Should Tesla start manufacturing steel just because it uses it a lot in electric vehicles?
Conclusion
Tesla Motors Inc (NASDAQ:TSLA) has never been a cheap stock and is currently priced to perfection with a P/B of 15.3x and a P/S of 5.9x. The stock has jumped up by almost 25% in the last 3 months and is trading near its 52 week high. News of faster than expected production at its “Gigafactory” and Elon Musk’s proximity to Donald Trump have been the key triggers for the stock. However, the company has a lot on its plate as it fights other technological and auto majors in the rapidly changing transportation industry, which is on the cusp of a major paradigm change with autonomous technology.
It will take a huge effort and all the resources that Tesla can muster to keep ahead in this rapidly evolving industry. Its vision to expand into trucking and buses makes sense keeping in mind the synergy with its electric cars. However, I am not convinced that Tesla has much of a future in the cutthroat solar energy (or solar roofing) industry. It is a distraction that Elon Musk could do without and Tesla investors would sleep better at night if the company torpedoed its solar plans and focused fully on getting its energy storage and electric vehicle plays right.
The article TSLA stock: Does Tesla Motors Inc Have A Future In Solar Energy Space? originally appeared on amigobulls.com. Watch our analysis video on TSLA
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