Wary Of Tesla? Play The Symbionts

by: User48601

In nature, symbiosis describes two different species that live and interact together. Often these relationships are mutually beneficial. For example, the goby fish lives on shrimp. The shrimp digs holes where both organisms live together. The shrimp is nearly blind, so it relies on a touch of the fish's tail to warn of approaching predators.

If you are like me, you love the products of Tesla Motors (NASDAQ:TSLA) but the stock price is too rich for your blood. Rather than investing directly in Tesla, you might consider these three "symbiotic stocks." If Tesla continues to grow and prosper, these companies will be buoyed as well.

1. Kuka Robotics (OTCPK:KUKAF)

Tesla has eight superchargers across the U.S. already, with 19 more planned for summer 2013 and a total of ~200 (by my estimation from the Tesla map) for 2015. Musk has stated that every one of the stations will have a battery swap option; beneath every battery swap station is a robot. Since the battery swap technology is the same that is used on the assembly line, the robot will most likely be a Kuka.

A Kuka robot arm like I see in photos of Tesla's factory sell for ~$100,000. For 200 robots, that equates to approximately $20M in new orders for Kuka. I think we can also count on Tesla expanding to another factory at some point, which will require a few dozen more robots. All told, Tesla might bring ~$22M in new orders to Kuka. (For comparison's sake, a recent order of 360 medical robots was estimated to be in the "lower double-digit million euro range.")

Kuka had revenue of $2.5B in 2012, so the Tesla orders would be a small drop in the bucket. However, Kuka went on a tear in 2012: profit increased by 51% and the company has a large backlog. Regardless of future Tesla orders, I believe Kuka is a good long-term investment.

2. SolarCity (SCTY)

SolarCity is primarily a solar installer/financier, but it also manufactures the superchargers for Tesla. Musk has stated that, eventually, he would like every supercharger station to be solar-powered. Whether the solar-power aspect is feasible is open for debate. Regardless, SolarCity stands to benefit from the large new Supercharger network.

Like Tesla, SolarCity has had an amazing 2013; it is up 274% YTD. By investing in SolarCity, one can gain exposure to the booming solar market while also making a bet on Tesla's future.

3. Panasonic (OTCPK:PCRFY)

I believe this is the most obvious "symbiotic stock." Panasonic has an agreement to provide 80,000 batteries to Tesla, and Panasonic has directly invested $30M in Tesla in order to "deepen the relationship." Even more so than Kuka Robotics, Panasonic is a huge company; its revenue for 2012 was $84B. A replacement Model S battery costs $8,000-12,000, so we could estimate the value of the present Panasonic-Tesla agreement (assuming a 100% markup to the consumer) at around $480M. Once again, the Tesla agreement is small potatoes from Panasonic's standpoint. However, an exclusive agreement with the fastest-growing, most innovative car manufacturer on the planet is a nice thing to have. The relationship will encourage Panasonic to improve its battery technology, which puts it in a good position to win future automobile battery contracts.

Now let's compare the performance of these four companies over the year to date. The chart below shows that TSLA and SCTY have both had a great year. In fact, they have grown more or less hand-in-hand. Some might say they have grown together because of Musk's influence (he is chairman of the board for SCTY and CEO of TSLA). I actually tend to downplay the Musk factor; I believe that both technologies just happen to be reaching maturity at the same point in time.

(Click to enlarge)

As far as value goes, I believe that Kuka Robotics might be the best buy among these four stocks. As I mentioned above, Kuka had an extremely strong 2012 and they have a $1.2B order backlog. I believe the stock deserves more than the 27% increase it has seen so far in 2013.

Disclosure: I am long SCTY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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