Morgan Stanley bullish on Tesla's energy storage segment

By Medha Singh

(Reuters) -Morgan Stanley raised its valuation for Tesla's energy storage business, expecting a global surge in demand for power driven by the artificial-intelligence boom, and the company's ability to grow its market share in the segment.

The brokerage lifted the value of the unit at $50 per share of its $310 price target, up from its previous estimate of $36 apiece, while reducing its forecast for Tesla's 2030 auto sales.

It estimates that the profit generated from a fully utilized megafactory, which manufactures large-storage batteries, is equal to that from selling 1 million Tesla vehicles.

"It's no wonder that investors are starting to consider the real possibility that Tesla Energy may be worth more than Tesla Auto," Morgan Stanley analyst Adam Jonas said.

Tesla shares have surged nearly 44% in the past 10 sessions, their longest streak in more than a year, after a dour start to the year.

The daily trading turnover for Tesla shares overtook AI darling Nvidia last week for the first time in six months, per LSEG data.

Oppenheimer said in a note on Tuesday it expects to see Tesla's energy storage sales to surpass $3 billion in the current quarter, but added that "the value of its full-self driving /AI platform is the key to whether shares will continue moving higher or begin to moderate again."

In April, CEO Elon Musk said Tesla would likely launch full-self driving software this year, which would be a big profit generator.

Tesla deployed 9.4 gigawatt hours of energy storage products in the second quarter of 2024, more than double of that in the January-March period.

Its products include the Powerwall home power backup system, and Megapack, meant for large-scale commercial projects and utilities.

Energy storage and generation accounted for 6% of Tesla's 2023 revenue, and the rest came from the auto segment, according to LSEG data.

(Reporting by Medha Singh and Akash Sriram in Bengaluru; Editing by Shinjini Ganguli)