Morgan Stanley analysts raised questions about the relative value of Tesla (NASDAQ:TSLA)'s business segments compared to auto.
The US investment bank highlights the surging interest in Tesla Energy, fueled by "Gen AI acceleration spurring a multigenerational increase in energy demand" and Tesla's "2x beat in 2Q Tesla Energy storage deployments."
This has led them to adjust their valuations. Morgan Stanley states, "Of our unchanged $310 Tesla price target, Tesla Energy now represents $50/share vs. $36 previously (a $183bn business)." Conversely, they've reduced their forecasts for Tesla's core auto business, citing "continued EV deceleration in the wake of rising China protectionism and a Hybrid renaissance."
As a result, Morgan Stanley has lowered its 2030 US BEV penetration estimate to 20%, down from 25%, and reduced its 2030 Tesla auto sales projection to 5.7 million vehicles. This translates to a $15 per share reduction in their core auto valuation.
The note also emphasizes the growing dominance of energy storage within Tesla Energy.
They note, "Tesla Energy is now 95% energy storage revenue – rising to 97% over time." This shift, coupled with CEO Elon Musk's claim that "Energy is Tesla's highest margin business," suggests that Tesla Energy may be increasingly valuable compared to the traditional car business.