Morgan Stanley has raised its valuation for Tesla’s energy storage business, projecting a significant increase in global demand for power due to the artificial intelligence boom and the company’s potential to expand its market share in this sector.
The brokerage has increased the unit’s value to $50 per share within its $310 price target, up from the previous estimate of $36 per share, while lowering its forecast for Tesla’s 2030 auto sales.
Morgan Stanley estimates that the profit from a fully utilized megafactory, which produces large-storage batteries, is equivalent to that from selling one million Tesla vehicles.
“It’s no wonder that investors are starting to consider the real possibility that Tesla Energy may be worth more than Tesla Auto,” said Morgan Stanley analyst Adam Jonas.
Tesla shares have soared nearly 44% over the past 10 sessions, marking their longest winning streak in over a year following a sluggish start to the year.
Last week, Tesla’s daily trading turnover surpassed that of AI leader Nvidia for the first time in six months, according to LSEG data.
In a note on Tuesday, Oppenheimer projected Tesla’s energy storage sales to exceed $3 billion this quarter but emphasized that “the value of its full-self driving /AI platform is the key to whether shares will continue moving higher or begin to moderate again.”
In April, CEO Elon Musk announced that Tesla would likely launch its full-self driving software this year, which is anticipated to be a significant profit driver.
In the second quarter of 2024, Tesla deployed 9.4 gigawatt hours of energy storage products, more than doubling the amount from the January-March period.
These products include the Powerwall home power backup system and Megapack, designed for large-scale commercial projects and utilities.
Energy storage and generation contributed to 6% of Tesla’s 2023 revenue, with the remainder coming from the auto segment, according to LSEG data.