Deutsche Bank Wants To Better Understand How Solar Will Benefit Tesla Shareholders

The market was not impressed by Tesla Motors Inc TSLA CEO Elon Musk’s “Master Plan Part 2,” which was unveiled on Wednesday. Tesla’s stock is down 2.8 percent so far on Thursday, and Musk’s presentation has been widely-criticized for lack of financial details.

Deutsche Bank analyst Rod Lache breaks down Musk’s plan into four pillars:

• 1. Creating an integrated solar energy and battery storage product (in conjunction with SolarCity Corp SCTY)
• 2. Expanding Tesla’s vehicle offerings to include a compact SUV, a pickup truck, a bus and a heavy-duty truck
• 3. Developing, validating and achieving regulatory approval for fully autonomous vehicles
• 4. Applying autonomous vehicles in innovative ways, such as the creation of ride sharing fleets

While the big picture is certainly impressive, Lache shares the market’s concerns.

“The document is relatively short on details, and it does not contain any economic or financial objectives (these will be needed eventually, as capital markets will be called upon to provide a key ‘material’ for the execution of this plan),” Lache explains.

Deutsche Bank notes that none of Musk’s objectives were surprising and anticipates that pillars 2-4 will be the primary drivers of potential value creation.

“We continue to work on better appreciating whether Solar is in fact ‘good’ business for Tesla shareholders (To be clear, we are not yet convinced of this: The business has, and will continue to consume significant amounts of capital; The NPVs ascribed to SCTY’s projects are highly dependent on government incentives and they are presented using relatively low discount rates; Valuation metrics used bt TSLA investors appear to be quite different that those used by SCTY investors),” Lache adds.

Deutsche Bank maintains a Hold rating on Tesla and a $290 price target.

Disclosure: the author has no position in the stocks mentioned.

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