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Wall Street bear concedes Tesla is way ahead of others in one key area of electric vehicles

Wall Street bear concedes Tesla is way ahead of others in one key area of electric vehicles

Key Points

  • "We expect Tesla to highlight why its work in battery gives it a clear competitive advantage vs. other automakers," Credit Suisse said.
  • While Credit Suisse did not budge its pessimistic stock rating or price target, analyst Dan Levy said he and his team visited Tesla's Gigafactory 1 in Nevada and came away impressed by its strategy.
  • "We believe Tesla is leading in the areas that will likely define the future of carmaking – software and electrification," Credit Suisse says.
  • An employee fits a battery pack under a Tesla Model S automobile on the final assembly at the Tesla Motors Inc. factory

    Credit Suisse thinks Tesla's focus on its electric vehicle batteries, both in development and production, is a key advantage for Elon Musk's company over other automakers.

    "While we hold an Underperform rating on Tesla, we nevertheless believe it's important to give Tesla its credit where due," Credit Suisse analyst Dan Levy wrote in a note to investors on Monday. "We believe Tesla is leading in the areas that will likely define the future of carmaking – software and electrification."

    Tesla shares rose 5.7% in trading.

    The firm has a notably pessimistic view of Musk's company, with a $200 price target that represents the expectation that Tesla's stock will drop 44% from its current price of nearly $360 a share. While Credit Suisse did not budge its rating or price target, Levy said he and his team visited Tesla's Gigafactory 1 in Nevada and came away impressed by Tesla's battery strategy.

    "Tesla is likely ahead of others on batteries – the core of the electric powertrain," Levy said.

    Levy noted that last year Tesla had a total 44 gigawatt hours (GWh) of battery capacity, with 35 GWh from its Nevada Gigafactory and 9 GWh imported from Panasonic. According to Levy, that's so far ahead of the industry that it is just shy of the 46 GWh of all other automakers in the world combined. GWh is a unit that measures energy output and represents 1 billion watt hours.

    Next year Tesla is expected to host "Powertrain Day," which Levy expects will shed light on Tesla's battery strategy – including increasing production, decreasing cost and improving each battery's efficiency.

    "We expect Tesla to highlight why its work in battery gives it a clear competitive advantage vs. other automakers," Levy said.

    – CNBC's Michael Bloom contributed to this report.

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