Tesla Motors (NASDAQ:TSLA) has gyrated sideways over the past month trading in lock step to Nadaq more or less. It traded higher with the broader market rally upon hopes that Europe sovereign debt crisis will be resolved after France and Germany unveiled a comprehensive new package to ease the euro zone’s debt crisis.  The stock remained largely flat but volatile over the rest of the week.
Last Tuesday, Tesla announced in its SEC filing that it will source lithium-ion battery cells from Panasonic Corp through December 31, 2015 at long-term preferential pricing for its first sedan – Model S, which is supposed to go on the market by mid-2012. The Model S will compete in the market with the likes of GM’s (NYSE:GM) Volt and Toyota‘s (NYSE:TM) plug-in hybrid for Prius.
Tesla will purchase cells for at least 80,000 cars that it plans to build over a four-year period, including for 6,000 Model-S vehicles in 2012 which have already been pre-booked.  Panasonic has been supplying battery cells to Toyota since 2009 and also invested $30 million in Tesla in November 2010. The preferential pricing will help Tesla maintain its margins and meet its cost targets. On Friday, Tesla’s stock volatility increased as its CEO, Elon Musk discussed the companies electric car on CNBC. 
Our price estimate for Tesla stands at $39, implying significant upside to the current market price.