Shares of Tesla Motors Inc. surged 16 percent Tuesday after a Wall Street analyst told investors that Tesla could shake up the electric utility sector as well as the auto industry.
Analyst Adam Jonas of Morgan Stanley wrote in a note to investors that Tesla could nearly double its share of the global car market by 2028. And it also could create another lucrative business by building battery packs for energy storage. He doubled his target price for Tesla stock to $320 per share from $153.
Tesla shares rose $34.65 to $252.30 in midday trading.
Tesla is expected this week to formally announce the building of a "Gigafactory'' to produce batteries with Panasonic and other partners. It would be the largest lithium-ion battery pack factory in the U.S.
Such batteries could be used at homes and businesses to store energy for times of peak electricity use. Electric companies nationwide are switching to a system that charges people more for energy during peak hours, such as early evening, and batteries could cut those costs.
"If Tesla can become the world's low-cost producer in energy storage, we see significant optionality for Tesla to disrupt adjacent industries,'' Jonas wrote, adding that the electric energy storage business is worth $2 trillion globally.
The factory would also cut the company's own battery costs, he wrote.
Tesla, led by billionaire Elon Musk, said last week it expects to deliver more than 35,000 of its Model S sedans this year, up 55 percent from last year as it expands in Europe and China. Musk said on an earnings conference call that Tesla plans to boost production to more than 1,000 cars per week from the current pace of 600 a week. The Model S starts around $70,000.
Tesla must also ramp up for the Model X, a new electric SUV that it will start producing later this year. The company also plans a less-costly car for the masses that could go on sale as early as 2016.
Jonas also gives a bear case for Tesla in his note with a price target of $100. That scenario has Tesla limited to a niche premium brand status as a small but thriving company.
He's now one of two analysts with price targets above $300. Ten others are below $253, with an average of $190, according to FactSet.
Stifel analyst Jamie Albertine, in an investor note Tuesday, said that Tesla has said the new battery factory is being set up to handle demand for the new "Model E'' lower-priced car for the masses. But Albertine, who hasn't placed a price target on the stock, wrote that the energy storage market could be far more significant to Tesla than vehicle sales.
"While we remain negative on TSLA shares above $200 as an automotive OEM (original equipment manufacturer), the energy storage opportunity requires a broader perspective and could very well justify current, if not higher valuation levels,'' Albertine wrote.
Tesla shares are up about 70 percent so far this year and are worth more than seven times what they were at the end of 2012.