Tesla's New Solar-Roof Product Announcement Long On Ideas, Short On Specifics

Barclays says Tesla Motors Inc TSLA’s new solar roof product was “more of an idea for a product than a product itself.”

Last Friday, Tesla CEO Elon Musk unveiled solar roof panels that integrate with updated Powerwall system batteries at an event at the Universal Studios theme park near Los Angeles. There was no information on timing or cost of the solar roof.

Barclays analyst Jon Windham said the solar roof product is likely to compete only at the high end of the market in roof-top supportive policy frameworks, such as in Southern California.

“In our view, the most likely path forward for the solar roof will be a very high-end, niche product that scales overtime, similar to Tesla's automobile strategy,” Windham wrote in a note.

In the medium term, the analyst expects conventional roof-top to remain the primary form of distributed generation capacity.

Although the Tesla announcement is not a negative for current roof-top players, it adds long-term upside potential to the distributed solar generation market. Specifically, if Tesla finds success in its new product, the analyst noted that other players like SunPower Corporation SPWR and Sunrun Inc RUN would potentially enter this market.

Windham said the new solar roof potentially blurs the line between "roof" costs and "solar" costs and may provide tax opportunity beyond a conventional roof-top solar system.

Windham has an Underweight rating and price target of $20 on Tesla.

“In our view [...] if a traditional roof cost $42,000 and a solar roof cost $60,000, then if the 30 percent ITC is applied to the entire cost of the roof, the tax credit would entirely offset the solar cost,” Windham added.

At the time of writing, shares of Tesla were up 0.63 percent to $201.22.