Tesla Energy Surges with Record 9.4 GWh Storage Deployment

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When assessing Tesla’s stock, bullish Wall Street analysts emphasize that the company extends beyond just automotive manufacturing. A segment attracting significant attention is Tesla’s burgeoning energy business.

In its second-quarter production and delivery report, Tesla revealed it deployed 9.4 gigawatt hours (GWh) of battery energy storage—the highest quarterly figure in the company’s history. This number more than doubles the energy storage deployed in the first quarter, underscoring a remarkable growth trajectory.

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Tesla’s energy storage operations, under Tesla Energy, range from Powerwall batteries designed for home use to large-scale Megapack storage facilities. While a typical Powerwall can store 12.2 kilowatt-hours of energy, sufficient to power a small home for a day, a single Megapack installation can hold 3.9 megawatt-hours, capable of powering 3,600 homes for one hour.

In the first quarter of 2023, Tesla’s energy storage business generated $1.6 billion in revenue, contributing a robust $403 million in gross profit, translating to a healthy gross margin of 24.6%. In comparison, Tesla’s overall gross profit in Q1 stood at $3.7 billion, with a gross margin of 17.4%, a decline from the previous year’s 19.3%. The reduction was attributed to strategic price cuts in Tesla’s electric vehicle (EV) lineup to stimulate demand, which in turn impacted profitability.

Tesla’s automotive division, although accounting for the majority of the company’s revenue and profits, is currently a drag on the overall gross margin due to these price reductions. However, the promising growth in Tesla’s energy storage segment could play a significant role in improving the company’s financial health. The substantial increase in energy storage deployments in Q2 hints at a positive impact on Tesla’s earnings, a fact not lost on Wall Street.

Morgan Stanley’s Adam Jonas highlighted Tesla’s Q2 energy storage deployment of 9.4 GWh as a standout achievement, noting that it significantly exceeded the firm’s expectations. Jonas predicts that investors will increasingly focus on Tesla Energy, valuing it at $36 per Tesla share, or $130 billion, due to the business’s advantageous position in benefiting from investments in the U.S. electric grid spurred by the AI boom. Morgan Stanley has accordingly set a $310 price target on Tesla stock.

Jonas further anticipated that the rise in generative AI spending and the subsequent expansion in energy demand, electricity generation, and data center investments would create growth opportunities for Tesla’s energy storage business. Moreover, there is growing curiosity among Morgan Stanley’s clients regarding the long-term prospects of Tesla Energy and its Optimus robot unit, and their potential to drive Tesla’s future growth beyond Q2.

While much of Tesla’s stock appeal has revolved around the anticipated launch of a lower-priced EV and the impending reveal of its robotaxi on August 8, it could be the Q2 earnings report, due in less than two weeks, that offers a pleasant surprise to investors. If Tesla’s energy storage division reports another quarter of profitable growth, it might just bolster the stock’s performance.