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Tesla – Much More Than A Car Company

September 21, 2020 By Mircea Vasiu

Tesla is once again in the news as its CEO, Elon Musk, says that the company has a short at a record quarter and urges employees to do their best in the days ahead. It is not the first time when Musk calls for the support of his employees. This time he asked for its employees to sell as many cars possible before September 30. 

However Tesla is much more than a car company. Tesla energy, its energy division, has huge potential ahead, and it represents one of the reasons why investment houses keep elevated targets for the company’s share price.

Tesla Energy – The Jewelry Behind Tesla

One day ahead of the Battery Day, it is worth having a look at Tesla’s energy division. While still small (it generated around $2 billion in the 2019 fiscal year), it has the potential to reach $200 billion in the years ahead, according to many analysts.

The market for stationary batteries, small and large, is growing at fast rates. Green trends seen in Europe and other developed countries lead to strong demand for green energy too. It is projected that renewable energy will reach 40% of electricity generation by the end of the decade and into the next one. Energy storage revenues, therefore, are likely to increase considerably, with Tesla in the leading spot to make the most of these trends.

The ultimate aim is that Tesla will act as a giant electric utility, a distributed global utility that could easily outgrow its automotive business.

After failing to be included in the S&P 500 index, Tesla gave back some of its gains. However, long-term investors focus on the company’s vision and how it executes it.

While Tesla trades at extremely high valuations, it keeps beating the market expectations. The current call from Musk suggesting it has a chance at a record quarter implies that things were not that bad in the past three months. For Tesla to have a chance at a record quarter during the pandemic, it means that the company weathered the crisis much better than the market expected.

Any improvements announced on Battery Day, suggesting a potential increase in energy storage revenue is likely to push the company’s share price higher. Coupled with Musk’s message to the employees, it may be enough to send the price above $500, despite the recent split.