Tesla, Inc.’s Megapack Business Could Surpass Car Sales, Analyst Says
As Tesla’s core electric vehicle business faces challenges, analysts are turning their attention to the company’s ancillary ventures. One particular segment that has caught the eye of sell-side analysts is Tesla’s Megapack utility-grade battery storage business.
Following a recent Battery Storage Facility Tour, RBC Capital Markets analyst Tom Narayan highlighted the potential of Tesla’s Megapack business. He pointed out that the utility-grade battery storage business could potentially be worth substantially more than Tesla’s standalone car business.
Tesla envisions a need for 2 Terawatt-Hours of annual battery storage on a large scale by around 2040, according to Narayan. He estimated the battery storage industry’s annual revenue at $600 billion, with Tesla’s specific storage revenue projected at $90 billion, assuming a 15% market share.
Narayan calculated a $120 billion valuation for Tesla’s Megapack business by applying a 15x cap goods EBITDA multiple and discounting it back to 2024 from 2040. Despite the promising outlook for the battery storage business, Narayan reiterated that autonomy remains central to Tesla’s investment case. He also anticipates the launch of a new affordable model in the second half of 2024 or 2025 to serve as the next catalyst for Tesla’s shares.
Narayan maintained an Outperform rating and a $297 price target for Tesla stock.
While Tesla’s automotive sector has faced challenges in the past year, with subdued EV demand and consumer caution, analysts like Alexander Potter from Piper Sandler emphasize the rising importance of battery-related revenue for Tesla’s overall profitability. Potter projected that Tesla’s energy business could generate ten times the revenue expected from Cybertrucks by the 2030s and suggested that over half of Tesla’s net profit growth between 2023 and 2025 could come from the sales of stationary batteries.
Despite the challenges in the automotive sector, analysts see a bright future for Tesla’s ancillary ventures, particularly the Megapack utility-grade battery storage business. As Tesla continues to diversify its revenue streams, investors and analysts are closely watching how these ventures could potentially surpass the company’s core car business in the future.
