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Tesla’s highly anticipated battery technology day begins Tuesday, where it will be held together with the company’s annual shareholder meeting.
The
Tesla
(ticker: TSLA) shareholder meeting starts at 4:30 p.m. EST. Investors can watch on the web by accessing this link or by navigating through the Tesla investor relations site.
“So much has been written on Tesla’s upcoming battery day that offering yet another detailed set of expectations would be repetitive,” writes JMP Securities analyst Joseph Osha in a Friday research report. He’s focused on three things: new battery chemistries, larger batteries, and a plan to eliminate transition metals from cells. “All of this drives higher energy density per unit of weight, and lower cost per unit of stored energy.”
Lower costs and more power help electric vehicles compete with traditional gasoline-powered cars. Osha rates Tesla shares the equivalent of Hold, but doesn’t publish a price target for the stock.
Transition metals are elements in the middle of the periodic table such as Cobalt. Tesla management has talked about reducing Cobalt usage for years, mainly for cost. Cobalt can cost $30,000 to $40,000 a ton. That’s more than other metals cost including other elements used such as nickel.
Coming into the event, expectations are high. Shares are up 121% over the past three months and up 428% year to date as of Friday’s closing price. Both returns far exceed comparable returns of the
S&P 500
and
Dow Jones Industrial Average
over the same spans.
“We believe the positive news is largely priced into shares post the recent rally,” writes Cowen analyst Jeffrey Osborne in a Friday research report. He is waiting to hear about future manufacturing plans and believes Tesla could take more responsibility for manufacturing battery cells, instead of purchasing batteries from firms such as
Panasonic
(6752.Japan).
Investors can expect Tesla stock to be volatile around the event—but that isn’t new. Tesla stock is roughly four to five times as volatile as other stocks.
One way to measure volatility is to look at stock options pricing. A Tesla call option at the current stock price expiring in December costs roughly costs $95, or about 22% of the current stock price. A
3M
(MMM) call option with the same characteristics costs about 5% of the underlying stock price.
No matter what Tesla says it will do, investors should buckle up. It’s going to be a wild ride.
Write to Al Root at allen.root@dowjones.com