Tesla Energy Surges as Stock Slumps: A Look at the Profitable Growth

Tesla Energy Surges as Stock Slumps Post Earnings

As Tesla (TSLA) stock faces concerns over profitability and new product reveals, one part of the business is defying the odds and surging: Tesla Energy.

Tesla’s energy storage business, part of Tesla Energy, has been experiencing significant growth. From installations of Powerwall batteries for homes to massive Megapack storage facilities for utilities and municipalities, Tesla Energy is making waves in the energy storage industry.

In its Q2 financial report, Tesla announced that it deployed 9.4 GWh (gigawatt hours) of battery energy storage, its highest quarterly amount ever. This led to record revenues of $3.014 billion and a gross profit of $740 million for the unit.

The success of the Energy business is evident in its expanding gross margins, which reached 24.6% in Q2 compared to 18.4% a year ago. In contrast, Tesla’s automotive gross margin slipped to 18.5% from 19.2% a year ago.

Tesla Energy’s gross profit of $740 million now makes up 16.3% of Tesla’s total gross profit, nearly triple the percentage from a year ago. Analysts and investors are taking notice of this growth, with some comparing it to Amazon Web Services (AWS) within a tech behemoth.

Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments, praised the growth and profitability of Tesla Energy, likening it to AWS. The firm has even increased its Tesla holdings due to the success of the Energy business.

Following the strong Q2 results, several analysts have raised their price targets for Tesla, citing the impressive performance of the energy storage business. Cantor Fitzgerald increased its price target to $245, while Stifel reiterated its $265 price target and Buy rating.

Despite the optimism surrounding Tesla Energy, not all analysts believe it will be a savior for Tesla’s slipping overall gross margins. UBS analysts believe the success of the energy business is already priced into the stock, while Jefferies maintains a Hold rating with a $165 price target.

Nevertheless, Tesla Energy is becoming an increasingly important part of Tesla’s portfolio of ventures. With its profitable growth trajectory, it could potentially become the most valuable segment in the company in the coming years, much like Amazon’s AWS.

Overall, Tesla Energy’s success is a bright spot for the company amidst concerns over profitability and product reveals. As the energy storage business continues to thrive, it could play a crucial role in Tesla’s future growth and success.