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Tesla Motors (TSLA) Wants To Burn Money – $2.83 Billion On Solar

Tesla Motors Inc  has its sights set on SolarCity. Others say that Elon Musk has just endorsed himself. The tech-energy billionaire is the co-founder of both these companies, seated as CEO at Tesla and chairman at SolarCity. This week news broke out that Musk’s luxury EV firm is considering a near $3 billion bid for the solar company. While some may see the acquisition as an unneeded, risky and slightly self-indulgent splurge, it could spell great news for Tesla’s energy business.

Tesla Motors Inc (TSLA) Elon Musk speaking at the Model 3 unveiling in March
Elon Musk speaking at the Model 3 unveiling in March

Despite their executive similarities, the two companies function at separate ends of the alternative energy space. SolarCity Corp offers solar solutions to households across the U.S. while Tesla Motors is recognized as the world’s leading producer of electric cars.

Tesla isn’t all about EVs

You would be wrong, however, if you thought Tesla only focused on pushing out mind-boggling EVs. The company has in fact stuck its hand in a number of other energy ventures. Perhaps the most popular of these is its recently rolled out home energy kit, the Powerwall.

The Powerwall from Tesla Motors is a household power supply that derives its energy from solar panels. It can be used to power homes and small businesses in the evening or as a back-up power supply during blackouts. It appears to have got off to a great start last year. Numerous proud owners across the globe spoke of how excited they were to get the home gadget installed.

Tesla’s home power kit was first announced in 2015’s Q2. It was to come with an industrial counterpart, the Powerpack, The latter is the considerably less successful of the two. However, that could be due to the cult-like adoptive trend of private individuals translating poorly into the business sector. Fans of Tesla Motors are not unlike those of Apple Inc., which is renowned for having a near cult like consumer base that swears every other product off a worthless in comparison to the tech firm.

Tesla Motors Goes Solar

Anyway. Elon Musk explains how providing solar wouldn’t only be a step up for Tesla’s energy business. It would allow the firm’s buyers to indulge in a few more Tesla  products as well. According to Musk, when selling the Powerwall to a customer, “very often, if not almost always, they are curious about solar.”

Not being able to offer those people solar solutions is simply inefficient business, the CEO stated. Musk then turned to the Model 3 as an example, a car that pulled in nearly 400,000 paid pre-orders in under two months of its unveiling. “That same person at the same moment we could sell them roughly an equivalent value of solar panels and a Powerwall, effectively doubling the sale at that time.

According to Elon Musk, acquiring a solar business or setting one up was only inevitable for Tesla. He describes the deal as “blindingly obvious”. But Wall Street isn’t at all happy with Tesla Motors. Skeptics believe that the EV giant is in no position to make risks of this sort, especially with the number of obstacles already laid out ahead of it. The merger has been descibed as an “unneeded distraction”. Others have implied that SolarCity is already a struggling financially, and that Musk is merely adopting the firm to save it based on sentiment

Ups and Downs for Tesla

Tesla Motors Inc was the town craze a few short weeks ago. The hype that Elon Musk and his company derived from the Model 3 reveal and Model S revamp had Tesla shares soaring. It is now several weeks hence and most of the Model 3 celebrations have just about died down. Following aptly along is the firm’s stock value. From highs of $265 in April down to around $196 this week, Tesla Motors is once again reminded of its actual worth.

This year, the weeks building up to the Model 3’s showcasing were the most inflaming for Tesla. In a few more the affordable EV saga will prove to be the company’s best stock performance for the year to-date. It was clear for most analysts that the shares would plummet again though, as the trend is with most stocks that get a sudden powerful surge. The bad part is that the fall is usually a lot harder than the climb.

Gaining investment is difficult. Losing it is easy. Worse than that, once investors start losing interest, finding other reasons to dislike a stock is effortless.

Proof of this is Tesla’s share value of $280 around mid-2015. Fans of the EV company were simply ecstatic. The Model X was finally on its way. The Model S was winning awards. The doubted Model 3 was becoming more of a reality. Even the company’s Powerwall venture was getting huge attention. Indeed, “it is a good time to invest in Tesla,” analysts said. “Tesla Motors is where your money should be,” news outlets reported.

Wall Street Gangs up on Tesla

But obsessions eventually die down and after holding itself near $260 for a few months, things got bad for Tesla. The days building up the company earnings call were ridden with poor reviews. Analysts began to set lowered share price projections. The Model X was under fire. And its highly invested Gigafactory was was said to be far behind schedule. All this sent Tesla stock crashing down to around $140 per share.

The trend appears to be coming back around. With the excessive Model 3 praises behind us (and the EV world was teeming with news about the affordable EV for weeks), Tesla Motors Inc  is due for some hard press. The EV firm’s latest bid to take in SolarCity comes just in time for this too. Some experts are taken aback by how united Wall Street is on bashing the solar company’s purchase.

“It’s pretty rare to see Wall Street analysts this consistently negative about anything,” tweets Joe Weisenthal

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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.

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