Walmart sues Tesla for fires on their Solar Roofs from the Solar Tiles. Does this WMT lawsuit against TSLA Stock mean anything? Should you sell your TSLA Stock? Is it time to buy more TSLA Stock? Is Tesla Stock a buy after this news? Over the last few years, WMT installed solar panels from Tesla in 240 stores. According to WMT, the agreement was that WMT would lease or license its roof space to TSLA for the solar panels in exchange for lower energy costs and Tesla would retain ownership of the panels and handle their maintenance. Here's a quote from the filing: "To state the obvious, properly designed, installed, inspected, and maintained solar systems do not spontaneously combust and the occurrence of multiple fires involving Tesla's solar systems is but one unmistakable sign of negligence by Tesla". Now WMT states that there have been fires at 7 stores that have these panels installed - and WMT claims the solar panels were the culprit and this in turn cost WMT millions in repairs. WMT wants to now get compensated from TSLA for the repair costs, AND they want to have Tesla remove the systems.
Even with this news, TSLA stock was down only 2.2%! This is a perfect example of when a stock is beaten up so badly, and oversold so much, that even bad news and a lawsuit can't pull the stock lower. Even with the drop of 2.2%, the stock is up over 26% from it's lows - showing us that investors don't want to let the stock price go lower and possibly implying that the bears are losing control here in the stock. Another reason this isn't too big of a deal for Tesla is because right now, their bread and butter is their cars, not solar panels. The solar business was purchased by Tesla from a company called SolarCity for $2.6B in 2016, and since then it's just of just been a side project for the company.
The energy business, formerly SolarCity, brings in anywhere from $300-$400M in revenue per quarter for Tesla and is pretty much stagnant growth. And comparing this to their total revenue every quarter, the energy business is tiny for Tesla, accounting for less than 6% of the revenue last quarter. What I'm trying to get at here is that this lawsuit, even if true, won't hurt Tesla as much as the media want's it to seem. The 2.6B acquisition may have been a bad deal, but even if they write that off as a loss and close off their energy division, the company will continue growing just fine. The way I see it here is that the downside is limited, but the upside had a lot of potential if they do seriously focus on this portion of the business.
Just a few days ago, Tesla came out and lowered prices on their Solar Tiles, possibly in an effort to begin ramping this business. The new pricing offers each tile at $50/month, undercutting any competition and pretty much coming in as one of the cheapest, if not THE cheapest, solar tile option for consumers. Tesla claims that installing these tiles can save a homeowner well over $1000 a year - so it could pay for itself very quickly - if it works well. This could be an interesting thing to keep an eye on moving forward because despite these lawsuits from WMT, nothing is proven yet. I'm not ruling out the fact that the tiles were in fact the cause of these fires, but it will be up to WMT to prove it in court really. But if the market tells us anything here, it shows that investors could care less about this lawsuit.
So do I believe we'll see a big selloff in TSLA stock? Clearly not - and I believe we may remain in consolidation mode for the next little while - moving from $210-240/share until we see some truly bad news surrounding the core of their business - the cars, or if we see some truly exceptional news surround the core of their business - the cars. This lawsuit doesn't add any more risk to the business, and as a TSLA shareholder, I'm not going to be selling my shares on this news.
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