Elon Musk's Bet Paying Off? Tesla Energy Segment Gets Thumbs Up From Top Analyst Even As EV Sales Dwindle

Morgan Stanley analyst and Tesla Inc. (NASDAQ:TSLA) bull Adam Jonas has revised his estimates for the company’s financials, giving significantly higher emphasis to Tesla’s energy generation and storage segment.

What Happened: Jonas retained his price target of $310 on Tesla shares, with the energy segment representing $50 per share, significantly higher than the $36 estimate before. The analyst also lowered his core auto valuation by $15 per share.

Jonas is now estimating the company to sell only 5.7 million vehicles in 2030 as compared to his previous estimate of 6 million vehicles, given the ongoing fall in demand for EVs and hybrid renaissance.

According to Jonas’ calculations, Tesla’s energy segment can now generate about $2 of EPS by 2030, particularly assuming that the operating profit from selling one Megapack will be equivalent to the profit made from selling 100 cars owing to the high operating margin for the energy storage business.

“Tesla’s renewed focus on the energy business, combined with its innovation, scale, and growing brand loyalty, is a recipe for real disruption for incumbent players in the market,” Morgan Stanley Clean Tech analyst Andrew Percoco said.

Why It Matters: In January, Tesla expressed expectations for the growth rate of deployment and revenue in the energy storage business in 2024 to surpass that of the automotive sector. Deployments will be volatile and impacted by logistics and global distribution of products, said the company, while adding that it still expects continued growth on a twelve-month basis.

In April, Musk said that the demand for its stationary energy storage products is “super high” and hinted that the company might make more batteries for energy storage than cars in the long term. “I think Tesla might end up doing more total Joules in stationary than mobile long-term," Musk said.

Earlier this month, during Tesla's annual shareholder meeting, Musk also said that the company is on track to complete a "massive number of energy deployments."

"We seem to be tracking to sort of a 200- to 300-percent year-over-year growth in energy storage deployment and stationary pack. So it’s giant. And the limiting factor really is being able to build more Megapacks and build more Powerwalls," he said.

In 2023, Tesla's energy segment accrued revenues of $6.035 billion, up 54% from 2022.

For the second quarter alone, Tesla deployed 9.4 Gigawatt-hours of energy storage products, marking its highest quarterly deployment yet, and a jump of nearly 132% from the first quarter.

Price Action: Tesla shares were trading 0.54% lower in pre-market trading on Thursday, after closing at $263.26 on the previous day, according to data from Benzinga Pro.

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