Tesla "Gigafactory" Could Send Stock Through the Roof (Nasdaq: TSLA)

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Updated as of 8:30 AM EST, Feb. 27, 2014

Tesla Motors Inc. (NASDAQ: TSLA) has narrowed its location search for the new "Gigafactory" to sites between 500 and 1,000 acres in Arizona, New Mexico, Nevada, and Texas. The plant is projected to open in 2017 and will cost up to $5 billion.

The Gigafactory will employ approximately 6,500 and will reach full output capacity by 2020. At that point, the plant will be able to supply power for more than 500,000 vehicles annually.

"The Gigafactory is designed to reduce cell costs much faster than the status quo and, by 2020, produce more lithium ion batteries annually than were produced worldwide in 2013," the company stated.

**The original story published Feb. 25, follows below**

Last week, Tesla Motors Inc. (Nasdaq: TSLA) Chief Executive Officer Elon Musk teased some new information about the massive Tesla "Gigafactory," but he's saving the big details for this week.

Musk stated that sometime this week (no one knows exactly when) he will make an announcement about the much anticipated Gigafactory. Many expect the factory to revolutionize the lithium battery market.

In November, Musk hinted that the factory could equal the output capacity of every lithium ion battery plant in the world, combined.

The location of the plant is unknown, and that has added to the mystery of the Gigafactory. Analysts at Baird & Co. have estimated the plant could cost between $2 billion and $5 billion. Estimates from Wedbush Securities are closer to $10 billion. 

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"[The Gigafactory] will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation," Musk said in a letter to shareholders. "Working in partnership with our suppliers, we plan to integrate precursor material, cell, module, and pack production into one facility."

Accelerated battery production will be key to Tesla reaching its lofty sales goals.

In Tesla's Q4 earnings report, the company projected selling 35,000 Model S sedans in 2014. That's a delivery growth of 55% from 2013.

In the same report, the company admitted to a "production bottleneck" that it has been working through. Despite the bottleneck, the company expects to produce 1,000 vehicles a week by the end of 2014 - up from its current production of 600.

Once the Gigafactory is operational, that number should skyrocket.

The Gigafactory will also allow Tesla to offer more moderately priced vehicles, as the cost of battery production should drop significantly.

"With this facility, we feel highly confident of being able to create a compelling and affordable electric car in approximately three years," Musk said.

Tesla's signature vehicle, the Model S, retails at $69,000, but the "fully loaded" version of the car carries a price tag over $100,000. An affordable option will appeal to customers who are interested in electric vehicles but are turned off by the Model S's lavish price tag. 

While the specifics are still unknown, there's little doubt that the Gigafactory will increase the number of vehicles Tesla offers and sells.

But it's the Gigafactory's impact on other markets that could truly send Tesla Motors and TSLA stock soaring...

A Huge Catalyst for Tesla (Nasdaq: TSLA) Stock

The increased vehicle production from the Gigafactory alone should be enough to lift TSLA stock. But that's just the tip of the iceberg for TSLA shareholders.

Lithium ion batteries are also used in laptops, tablets, and smartphones. Musk himself implied the far-reaching implications the factory will have in his shareholder letter, albeit briefly.

"This will also allow us to address the solar power industry's need for a massive volume of stationary battery packs," Musk said.

TSLA stock has been on a tear, up 69% in 2014 and 665% since the start of 2013. Tesla reached yet another all-time high today at $259.20.

Strong guidance figures from the Gigafactory announcement should send the stock even higher.

"[The Gigafactory] is the future of the company," Wedbush Securities Analyst Craig Irwin told CNN. "They need to cut the cost of the battery in half in order to make a half-million cars. This is how they are going to do it."

According to analysts polled by Thomson/First Call, four rate TSLA as a "Strong Buy," three as a "Buy," six as a "Hold," and just one as an "Underperform."

Nothing has been able to slow TSLA stock's momentum recently, and every announcement from CEO Elon Musk seems to provoke a jump in share price. This occasion should be no different.

What are your thoughts on TSLA stock and Tesla's newest Gigafactory plans? Can anything slow down this stock? Join the conversation on Twitter @moneymorning using #Tesla.

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