Is Tesla's Energy Division the New Powerhouse Behind Its Stock Surge
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As Tesla's stock (TSLA) continues to climb, many are beginning to wonder if the company's energy sector is the unsung hero behind this meteoric rise. For nearly a decade, Tesla has been quietly building its presence in the energy sector, but it’s only now that signs point to this division starting to genuinely impact the company’s market valuation.
Launched in 2015, Tesla’s Powerwall and Powerpacks aimed to revolutionize home and commercial energy storage. The acquisition of SolarCity shortly thereafter marked Tesla's foray into the solar energy landscape. However, the journey hasn’t been without its hurdles. Solar deployments have seen a dip since the acquisition, but energy storage has shown steady growth, especially with the introduction of the Megapack—a colossal battery system designed for utilities and large-scale projects.
The Numbers Speak Louder
Despite the growth of these innovative products, energy has been a relatively small slice of Tesla’s revenue, overshadowed by its predominant automotive business. Recent financial data underscores this point:
| $ in millions | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | YoY |
|---|---|---|---|---|---|---|
| Total automotive revenues | 19,963 | 21,268 | 19,625 | 21,563 | 17,378 | -13% |
| Energy generation and storage revenue | 1,529 | 1,509 | 1,559 | 1,438 | 1,635 | 7% |
| Services and other revenue | 1,837 | 2,150 | 2,166 | 2,166 | 2,288 | 25% |
| Storage Deployed (MWh) | 3,889 | 3,653 | 3,980 | 3,202 | 4,053 | 4% |
While Tesla’s automotive revenues dipped year-over-year, its energy division quietly registered a modest 7% increase. Yet the true excitement lies in what may be around the corner. Tesla's Q2 vehicle deliveries are down YoY, but the stock soared by 15% post-announcement.
The buzz came from Tesla revealing it deployed a staggering 9.4 GWh of energy storage in Q2—more than double the record-setting 4 GWh in Q1.
The Impact of Megapack's Mega Growth
This substantial deployment means Tesla's energy division could contribute around $3.7 billion in revenue for Q2, riding on an estimate of $400 million in revenue per 1 GWh of energy storage. That’s not a mere uptick—it’s a quantum leap that could finally position Tesla’s energy sector as a powerhouse in its own right, now projected to surpass the company's “services and other” revenue category.
This growth is driven, in part, by Tesla's production ramp-up at its Megafactory in California. But what’s even more compelling is the likelihood that Tesla moved some major projects from their backlog into the completion stage in Q2. Since Tesla only counts deployments once projects are commissioned, various factors can push the timing from one quarter to another.
Electrek's Take
What we’re witnessing is potentially the birth of a $15 billion annual business growing at a rapid pace. Tesla's reticence to detail margins from its energy sector notwithstanding, the disclosure of positive and increasing gross margins suggests robust profitability. Merging these factors, it’s no wonder the market took notice, driving the stock considerably higher.
In essence, looking at Tesla purely through the lens of its automotive endeavors might soon become a folly. The energy sector’s burgeoning revenue and deployment projects indicate that Tesla's future might be as bright in energy as it already is in automotive. And for savvy investors, this diversified growth might just be the jolt needed to power up portfolios.
For those looking to stay ahead of the curve, keeping an eye on Tesla’s energy advancements seems not just prudent—but potentially profitable.