It’s an understatement to say that for Tesla (NASDAQ: TSLA) and ETFs heavy on the stock, including the ARK Innovation ETF (NYSEArca: ARKK), that batteries are a significant deal. That thesis will soon be put to the test with Tesla’s battery day next week.
While Tesla stock has recently taken some lumps, analysts remain mostly enthusiastic about the name and that bodes well for ARKK.
“Credit Suisse analyst Dan Levy increased his price target for Tesla stock to $400 from $280 Wednesday, a 40% jump that works out to more than $100 billion in additional market value. His reasoning is simple: batteries,” reports Al Root for Barron’s.
Betting on Batteries
ARKK, now the largest equity-based actively managed ETF, is known for having one of the largest weights to Tesla among all ETFs, but there’s more to the story.
“Companies within ARKK include those that rely on or benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies (‘’Genomic Revolution’), industrial innovation in energy, automation, and manufacturing (‘Industrial Innovation’), the increased use of shared technology, infrastructure and services (‘’Next Generation Internet’), and technologies that make financial services more efficient (‘Fintech Innovation’),” according to ARK Invest.
As has been widely noted, Tesla is eyeing major opportunities with electric vehicle batteries, which could have positive, long-term implications for the stock and ETFs like ARKK.
Tesla “will host its highly anticipated battery technology event on Sept. 22. Investors are expecting updates on battery capacity, reliability, range, and technology. More bullish analysts, such as Levy, see Tesla eventually launching the third part of its so-called Master Plan, which could make the company a supplier of batteries and battery tech to the electric-vehicle industry,” according to Barron’s.
ARKK is up 10.51% over the past week, perhaps indicating investors are wagering battery day will move Tesla stock.
“Levy believes Master Plan 3 will be all about the batteries. Tesla has the capacity to make about 63-gigawatt hours of batteries a year, according to the analyst. A Tesla vehicle, for example, can come with a 100-kilowatt-hour battery pack. That means Tesla’s existing capacity can support about 630,000 vehicles a year. (Giga is billion and kilo is thousand. Tesla has 63 billion watt-hours of battery-making capacity, and a Tesla comes with a roughly 100,000 watt-hour battery pack.),” according to Barron’s.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.