Update: Tesla Gigafactory Financing And Earnings

| About: Tesla Motors (TSLA)


Nikkei has reported initial and eventual Panasonic investments in Tesla's Gigafactory.

This additional investment by Panasonic in Tesla helps to confirm the long-term plan and valuation I laid out when covering Tesla's convertible bond sale.

An announcement in the upcoming earnings report would be right in line with the originally projected time-line.

Other recent news gives investors reason to focus on such progress in the long-term plan rather than this quarter's numbers.

Nikkei is reporting that Panasonic "has reached a basic agreement" to participate in the Tesla Motors (NASDAQ:TSLA) "Gigafactory". According to the report, the initial investment would be 20-30 billion yen, or just under $200-300 million, with additional investment up to $1 billion being made as capacity at the factory scales up. While the Nikkei has made some misleading and inaccurate statements on other occasions, this report corroborates previous statements by Kazuhiro Tsuga, Panasonic's CEO. It should also be noted that Panasonic already owns a stake in Tesla as the result of a $30 million investment in November of 2010. Based on that, one could say that the initial outlay reported here is merely reinvesting the profits from Panasonic's 1.4 million Tesla shares.

Tesla has already raised $2.3 billion in a convertible bond offering to finance the project. I've previously covered just how good the terms of that sale were, and how they imply a $360 long-term price tag for Tesla shares. The key to this valuation is viewing Tesla as a vertically integrated supplier to a new electric economy, much as ExxonMobil (NYSE:XOM) is for oil & gas. This report, if true, puts Tesla somewhere between one half and three quarters of the way towards the total $4 to $5 billion dollar projected cost of the project.

Investors should look for further confirmation or announcements in Tesla's upcoming earnings call, scheduled after the market closes on Thursday, July 31st. The consensus is for EPS of 4 cents per share, though analyst estimates vary widely, from 22 cents to 5 cent per share loss. A lot of attention has also been given to delivery projections. However, given that Tesla has been interrupting production in order to increase and upgrade manufacturing capacity, I think investors would do well to look past this quarter's numbers to updates on how the longer term plan is playing out. Today's report has been one positive data point.

Disclosure: The author is long TSLA. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.