Analyst Predicts Tesla's Energy Sector to Quadruple, Calling it 'Apple-esque'

Independent investment bank and financial services firm William Blair has said that Tesla's stock is a buy because it has built an Apple-esque energy ecosystem. Amid declining sales for the company and a series of questions surrounding Musk, Tesla's stock price has plummeted about 17% this year.

On Thursday, analyst Jed Dorsheimer from William Blair rated Tesla as outperform and said that the electric vehicle manufacturer's energy business is underestimated as data centers continue to drive the growth of electricity demand and the rise of renewable energy.

We view Tesla Energy as the most underappreciated component of the Tesla story and expect the narrative will shift toward the energy storage business in light of tempered EV expectations in the near term, he explained.

The three key drivers of Tesla's energy storage business include data center construction, efforts to stabilize the U.S. power grid, and integration of renewable energy.

Combined with the auto business and longer-term opportunities like AI, robotaxi, and robotics, we see Tesla as a technology leader with an 'Apple-esque' ecosystem for the future of energy, Dorsheimer said.

Tesla's products have long been compared to Apple's, and its cars are sometimes called iPhones on wheels.

However, William Blair's focus on Tesla's research is on its energy business, which includes solar panels, charging stations, and battery packs for residential and utility companies.

Dorsheimer estimates that by 2028, Tesla's energy business could have a compound annual growth rate of 50%, increasing the department's revenue contribution from 6% to 25%, quadrupling it.

We view Tesla's Megapack as the standalone leader in energy storage and believe it will capture significant market share in each of those areas, he added.

According to the report, Tesla's Megapack could become the fastest-growing business of the company, with higher profit margins compared to the electric vehicle business. The "Megapack" is a large rechargeable battery network that provides energy storage capacity for utilities and large commercial projects.

Our analysis forecasts that Megapack will be Tesla's fastest growing product and meaningfully increase the EPS contribution from $0.14 in 2024 to $2.35 in 2028, Dorsheimer said.

However, not everyone is so convinced about Tesla. For example, well-known Tesla investor and CEO of Gerber Kawasaki Wealth and Investment Management, Ross Gerber, recently said that he has sold about half of his stake in the car manufacturer because no one is interested in buying the company's cars or robots.

[I] fear that Tesla's best days are behind it, he said.

Overall, William Blair did not set a target price for Tesla but said its premium valuation is justified.

We believe the halo effect created by Musk, the company's culture of first principles, and the technology advantages it has established warrant its significant valuation premium, Dorsheimer said.