Tesla closed at $233.98 on Monday.
It's tempting to value Tesla relative to other automakers and original equipment manufacturers, but it's clear that the market is trading the stock like it belongs to a true game-changing company.
With that in mind, Archambault takes a somewhat unorthodox approach to deriving his price target.
"We quantify the option value of Tesla shares through a deep dive into the lessons learned from past disruptive technologies as well as the opportunity from stationary storage," he said.
"To measure what is truly transformational, we need draw on the experience of past technologies like the iPhone, the Ford Model-T, and selected consumer durables like refrigerators/laundry appliances/dishwashers."
Here's a summary:
If Tesla's auto business were to be truly disruptive (to the whole auto industry, not just luxury vehicles), then there would be considerable upside. Keying off the history of the iPhone, (adjusting for the replacement cycle) would imply 3.1mn units by 2025 and a PV of $442 per share. The Model-T trajectory implies 3.3mn units and $478 per share; and the volume implied by a basket of transformative durable goods (laundry appliances/dishwashers/refrigerators) gets us 1.8mn units and $329 per share. However, this is offset by our base case (broadly unchanged from our previous forecast) and a downside case where Tesla's present value is lower and hence we arrive at probability weighted share price of $180 for the auto business alone.
And then there's Tesla's hopes to change the energy storage industry:
We think the opportunity in stationary storage is significant. With plans to bring battery pack costs down to $125/KWh once the gigafactory is fully ramped, the math works to get to positive NPV projects on the commercial side, and widespread grid parity on residential solar may not be that far off, even without ITC and state tax credits. Based on the economics of the 15 GWh of capacity devoted to storage, we get to $1.33 of earnings accretion, from which we derive an additional PV of $20, bringing our six-month price target to $200.
With all that in mind, the $200 price target implies 14.5% downside.
Here's a summary of Archambault's model:
Goldman Sachs