Tag: Tesla

Tesla’s Energy Business: The Next Big Growth Driver?

Posted on by slightbourne@noblecapitalmarkets.com

As Tesla continues to dominate headlines with its electric vehicles and ambitious plans for autonomous driving, a less-discussed segment of the company is quietly becoming a potential game-changer. Tesla’s energy business, particularly its energy storage division, is showing signs of becoming a major contributor to the company’s bottom line and future growth prospects.

In a recent production and delivery report, Tesla revealed that it had deployed a record-breaking 9.4 GWh (gigawatt hours) of battery energy storage in the second quarter of 2024. This figure represents more than double the amount deployed in the first quarter, signaling explosive growth in this sector.

Tesla’s energy storage solutions range from residential Powerwall units to utility-scale Megapack installations. A single Powerwall can store enough energy to power a small home for a day, while a Megapack installation boasts the capacity to provide electricity to 3,600 homes for an hour. This scalability allows Tesla to cater to a wide range of customers, from individual homeowners to large utility companies and municipalities.

The financial performance of Tesla’s energy business is equally impressive. In the first quarter of 2024, the segment generated $1.6 billion in revenue and $403 million in gross profit. What’s particularly noteworthy is the gross margin of 24.6%, significantly higher than Tesla’s overall gross margin of 17.4% for the same period. This robust profitability comes at a crucial time for Tesla, as its automotive business faces margin pressure due to recent price cuts aimed at stimulating demand.

Wall Street is taking notice of this shift. Adam Jonas, an analyst at Morgan Stanley, dubbed the Q2 energy deployment figures a “show stealer” and valued Tesla Energy at $36 per Tesla share, or approximately $130 billion. This valuation suggests that the energy business could be a substantial component of Tesla’s market capitalization in the future.

The growth potential for Tesla’s energy storage business is closely tied to broader technological and infrastructure trends. The increasing adoption of artificial intelligence and the subsequent need for more data centers are expected to drive a “multigenerational increase in energy demand,” according to Jonas. This surge in electricity needs, coupled with the ongoing transition to renewable energy sources, positions Tesla’s energy storage solutions as a critical component of future power grids.

Moreover, the Inflation Reduction Act in the United States is likely to accelerate investments in grid infrastructure, potentially creating more opportunities for Tesla’s energy products. As utilities and businesses look to modernize and stabilize the power grid, Tesla’s Megapack installations could play a crucial role in load balancing and ensuring reliable power supply.

While much of the investor focus has been on Tesla’s automotive innovations, including the anticipated launch of a lower-priced electric vehicle and the reveal of its robotaxi concept, the energy business could provide a significant upside surprise in upcoming earnings reports. This diversification of revenue streams may also help to stabilize Tesla’s financial performance, reducing its reliance on the cyclical automotive market.

It’s worth noting that Tesla’s energy business isn’t limited to storage solutions. The company also produces solar roof tiles and conventional solar panels, although these products have received less attention in recent years. As the energy storage business continues to grow, it may create synergies with Tesla’s solar products, offering customers comprehensive energy solutions.

As we approach Tesla’s Q2 earnings report in July 2024, investors and analysts will be keenly watching the performance of the energy storage segment. If the strong deployment figures translate into substantial revenue and profit growth, it could mark a turning point in how the market perceives Tesla – not just as an automaker, but as a diversified energy and technology company.

In conclusion, Tesla’s energy storage business is emerging as a powerful growth driver for the company. With its impressive profit margins, scalable solutions, and alignment with global energy trends, this segment could play a crucial role in Tesla’s future success and valuation. As the world continues its transition to sustainable energy, Tesla appears well-positioned to capitalize on the growing demand for advanced energy storage solutions.

Take a moment to take a look at Noble Capital Markets Research Analyst Mark Reichman’s coverage list for more emerging growth energy companies.

Is Elon Musk Transforming Tesla Into an AI Company?

Posted on by slightbourne@noblecapitalmarkets.com

In the rapidly evolving world of technology, Elon Musk and Tesla are shaking things up with what appears to be a strategic shift towards artificial intelligence (AI) and robotics. As electric vehicle (EV) demand cools in 2024, Tesla seems to be pivoting its focus to autonomy, Full Self-Driving (FSD), and its hotly anticipated robotaxi program. This potential redirection has piqued the interest of investors, particularly those hunting for undervalued and overlooked opportunities among small and micro-cap stocks.

The signs of transformation at Tesla have been mounting. Most notably, the company recently announced layoffs impacting over 10% of its global workforce, with key executives departing in what Musk framed as part of the “next phase of growth.” Compounding the speculation, reports emerged that Tesla shelved plans for its $25,000 next-generation Model 2 vehicle to prioritize the robotaxi initiative instead.

Musk himself has stoked the flames, proclaiming on Twitter that “Tesla is an AI/robotics and sustainable energy company.” This bold statement marks a clear departure from Tesla’s automotive roots, signaling that a broader pivot to artificial intelligence may be underway.

Analysts tracking the company have been sounding alarms. Emmanuel Rosner at Deutsche Bank believes Tesla’s future now hinges on “cracking the code on full driverless autonomy” – a formidable challenge layered with significant technological, regulatory and operational hurdles. Morgan Stanley’s Adam Jonas went so far as to say “it seems” Tesla is exiting the traditional EV auto industry altogether, though he doesn’t expect vehicle production to cease immediately.

For investors, particularly those scouring small and micro-cap stocks for overlooked gems, Tesla’s AI ambitions could foreshadow seismic shifts ahead. Analysts warn of a “potentially painful transition in ownership base” as dyed-in-the-wool electric vehicle investors may “throw in the towel” and be replaced by tech funds with far longer investment horizons suited for frontier AI bets.

If Tesla does successfully reinvent itself as an AI juggernaut, sector valuations and comparable companies would be turned on their head. Traditional automotive benchmarks may no longer apply, forcing investors to reimagine their investment theses from scratch.

To be sure, the rewards of being at the vanguard of automated driving and machine intelligence could be immense. But the associated risks are equally daunting as Tesla stares down imposing technological barriers, regulatory quicksand, and operational growing pains. For nimble investors, the transformation could open doors to diversify into AI and robotics through an established player boasting visionary leadership and deep pockets.

When Tesla reports first quarter earnings next week, all eyes will be glued to Elon Musk for clarity and insight into precisely where he plans to steer this potential AI metamorphosis. The report could prove revelatory in glimpsing the future trajectory of a company that may be in the midst of redefining itself as the vanguard of a new technological epoch.

For small and micro-cap investors perpetually searching for the next undervalued, under-the-radar opportunity, Tesla’s AI aspirations warrant close scrutiny. While hazards abound, the potential rewards of getting in on the ground floor of a transformative technology upstart could be nothing short of game-changing.

Tesla Slashes Workforce by Over 10% as Demand Softens

Posted on by slightbourne@noblecapitalmarkets.com

In a move that has sent shockwaves through the electric vehicle industry, Tesla Inc. announced plans to lay off more than 10% of its global workforce. The decision, confirmed by CEO Elon Musk in an internal memo, comes on the heels of a disappointing first-quarter delivery report that missed analyst estimates and left the company with an excess inventory of over 46,000 vehicles.

The layoffs, which are expected to impact at least 14,000 employees out of Tesla’s 140,000-strong workforce, are part of a broader effort to cut costs and increase productivity as the company prepares for its “next phase of growth,” according to Musk’s memo. The move underscores the challenges facing Tesla amid a slowdown in EV demand, both in the United States and globally.

“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” Musk wrote in the memo. “As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally. There is nothing I hate more, but it must be done.”

The announcement has sent shockwaves through the industry, with analysts offering mixed reactions to the news. Dan Ives, a noted Tesla bull at Wedbush Securities, described the layoffs as an “ominous signal” that speaks to tough times ahead for the company. “Demand has been soft globally, and this is an unfortunately necessary move for Tesla to cut costs with a softer growth outlook,” Ives said, adding that the move signals that Musk is navigating a “Category 5 storm.”

However, not all analysts view the layoffs as a negative development. Garrett Nelson, an analyst at CFRA, sees the move as consistent with actions undertaken by other automakers – and particularly EV pure-plays such as Rivian and Lucid – amid slowing EV growth rates. “We view the announcement as a sign of the times, but the fact Tesla is taking action to reduce costs amid the slowdown should be positive for the bottom line,” Nelson said.

The layoffs come at a critical juncture for Tesla, which has long been hailed as a pioneer in the electric vehicle space. After years of breakneck growth and ambitious expansion plans, the company now finds itself grappling with a rapidly changing market landscape. Rising interest rates and higher overall prices have dampened consumer demand for electric vehicles, while increased competition from legacy automakers and upstart EV manufacturers has intensified pressure on Tesla to maintain its competitive edge.

Musk has repeatedly emphasized the importance of affordability in driving EV adoption, fueling speculation that Tesla was working on a next-generation vehicle that would start at around $25,000. However, recent reports suggesting that the company had canceled the project were met with a swift denial from Musk, who instead teased the debut of a Tesla robotaxi on August 8.

As Tesla prepares to report its first-quarter earnings on April 23, all eyes will be on the company’s ability to weather the current storm and chart a course for long-term growth. The layoffs, while painful, may be a necessary step in ensuring Tesla’s long-term competitiveness in an increasingly crowded and challenging market.

China’s BYD Overtakes Tesla in EV Sales as Global Competition Heats Up

Posted on by slightbourne@noblecapitalmarkets.com

The electric vehicle (EV) race is heating up on the global stage. Recent data shows Chinese automaker BYD has overtaken Tesla as the top selling EV maker in the fourth quarter of 2023. BYD sold over 525,000 battery electric vehicles from October to December, surpassing Tesla’s nearly 485,000 deliveries.

This shift signals China’s rising prominence as a major force in the EV industry. With enormous growth potential in the world’s largest auto market, Chinese companies like BYD are positioned to reshape the competitive landscape. Their success has wide-ranging implications for investors across the auto and battery supply chains.

BYD’s meteoric growth is fueled by China’s EV-friendly policies. The government has implemented aggressive targets, mandating that new energy vehicles comprise 20% of sales by 2025 and become mainstream by 2035. China is reaching these goals years ahead of schedule thanks to subsidies and infrastructure spending. New energy vehicle sales exceeded 30% of the market in the first 11 months of 2023.

Tesla still led BYD in total global EV sales for full-year 2023, delivering 1.8 million vehicles versus BYD’s 1.57 million. But BYD is closing the gap rapidly, with sales up 73% last year. The company aims to double its international dealer network in 2023 and boost overseas sales five-fold.

To accommodate this growth, BYD plans to construct its first passenger EV plant in Europe. The facility in Hungary will complement BYD’s existing European bus factory. This international expansion mirrors China’s broader effort to increase exports and take on traditional automakers like Volkswagen and Renault in their home markets.

The intense competition has sparked a price war in China, with Tesla and others slashing costs in 2022 to retain market share. While this boosted sales, it eroded industry profit margins. Surging raw material prices also squeezed margins across the supply chain. Battery-grade lithium carbonate rose over 280% last year.

Take a look at some emerging lithium companies by taking a look at Noble Capital Markets’ Senior Research Analyst Mark Reichman’s coverage list.

Sourcing enough lithium and other battery metals remains a concern. According to Benchmark Mineral Intelligence, demand growth for lithium-ion batteries will require global lithium supply to expand eight-fold by 2030. Companies are racing to secure upstream supplies and lithium producers’ stocks have benefited.

But the launch of new mines takes time. Geopolitical factors may also constrain near-term growth in critical mineral supply from key regions like South America. This supply/demand imbalance poses a risk to the pace of EV adoption worldwide.

Investors will closely watch how BYD navigates these headwinds. Vertically integrated automakers like BYD with control over more battery and mineral assets may have an advantage. But no company is immune from margin compression if prices remain elevated.

Regardless, China’s trajectory toward EV supremacy seems clear. The country boasts advantages in scale, cost, and the supply chain that will be difficult for rivals to replicate. Tesla’s position appears secure as the leading global luxury EV brand. But Chinese automakers are poised to dominate the larger mass-market segments.

For investors, this reshuffled landscape demands a reassessment of portfolio positioning. Companies tied to China’s booming EV ecosystem warrant consideration. However, risks around growth assumptions, valuation, and competitive dynamics in a rapidly evolving industry must be weighed. While the road ahead remains challenging, China has signaled plans to set the pace in the global EV race.

Tesla’s Dojo Supercomputer Presents Massive Upside for Investors

Posted on by slightbourne@noblecapitalmarkets.com

Tesla’s new Dojo supercomputer could unlock tremendous value for investors, according to analysts at Morgan Stanley. The bank predicts Dojo could boost Tesla’s market valuation by over $600 billion.

Morgan Stanley set a sky-high 12-18 month price target of $400 per share for Tesla based on Dojo’s potential. This implies a market cap of $1.39 trillion, which is nearly 76% above Tesla’s current $789 billion valuation.

Tesla only began producing Dojo in July 2022 but plans to invest over $1 billion in the powerful supercomputer over the next year. Dojo will be used to train artificial intelligence models for autonomous driving.

Morgan Stanley analysts estimate Dojo could enable robotaxis and software services that extend far beyond Tesla’s current business of vehicle manufacturing. The bank nearly doubled its 2040 revenue projection for Tesla’s network services division from $157 billion to $335 billion thanks to Dojo.

By licensing self-driving software powered by Dojo to third-party transportation fleets, Tesla could generate tremendous high-margin revenues. Morgan Stanley sees network services delivering over 60% of Tesla’s core earnings by 2040, up from just 30% in 2030.

Thanks to this upside potential, Morgan Stanley upgraded Tesla stock from Equal-Weight to Overweight. The analysts stated “Dojo completely changes the growth trajectory for Tesla’s autonomy business.”

At its current $248.50 share price, Tesla trades at a lofty forward P/E ratio of 57.9x compared to legacy automakers like Ford at 6.3x and GM at 4.6x. But if Morgan Stanley’s bull case proves accurate, Tesla could rapidly grow into its valuation over the next decade.

In summary, Tesla’s AI advantage with Dojo makes the stock’s premium valuation more reasonable. Investors buying at today’s prices could reap huge gains if Dojo unlocks a new $600 billion revenue stream in autonomous mobility services.

The Power and Potential of Dojo

Dojo represents a massive investment by Tesla as it aims to lead the future of autonomous driving. The specialized supercomputer is designed to train deep neural networks using vast amounts of visual data from Tesla’s fleet of vehicles.

This differentiated AI training will allow Tesla to improve perceptions for full self-driving at a faster pace. As self-driving functionality becomes more robust, Tesla can unlock new revenue opportunities.

Morgan Stanley analyst Adam Jones stated: “If Dojo can help make cars ‘see’ and ‘react,’ what other markets could open up? Think of any device at the edge with a camera that makes real-time decisions based on its visual field.”

Dojo’s processing power will permit Tesla to develop advanced simulations that speed up testing. The supercomputer’s capacity is expected to exceed that of the top 200 fastest supercomputers combined.

Tesla claims Dojo will drive down the costs of training networks by orders of magnitude. This efficiency can translate into higher margins as costs drop for autonomous AI development.

Dojo was designed in-house by Tesla AI director Andrej Karpathy and his team. Karpathy called Dojo the “most exciting thing I’ve seen in my career.” With Dojo, Tesla is aiming to reduce reliance on external cloud providers like Google and Amazon.

Morgan Stanley Boosts Tesla Price Target by 60%

The potential of monetizing Tesla’s self-driving lead through Dojo led analysts at Morgan Stanley to dramatically increase their expectations.

Led by analyst Adam Jones, Morgan Stanley boosted its 12-18 month price target on Tesla stock by 60% to $400 per share. This new level implies a market value for Tesla of nearly $1.39 trillion.

Hitting this price target would mean Tesla stock gaining about 76% from its current level around $248.50. Tesla shares jumped 6% on Monday following the report as investors reacted positively.

Jones explained the sharply higher price target by stating: “Dojo completely changes the growth trajectory for Tesla’s autonomy business.”

He expects Dojo will open up addressable markets for Tesla that “extend well beyond selling vehicles at a fixed price.” In other words, Dojo can turn Tesla into more of a high-margin software and services provider.

Take a look at One Stop Systems (OSS), a US-based company that designs and manufactures AI Transportable edge computing modules and systems that are used in autonomous vehicles.

Will Elon Musk Inspire and Excite on Investor Day 2023?

Posted on by phoffman@channelchek.com
Image Credit: Trubni (Instagram)

Will Tesla Investors be Inspired or Disappointed on March 1 (Investor Day)?

Tesla’s Investor Day is March 1st. The lead-up to these events is usually filled with speculation of how the founder, Elon Musk, may surprise EV fans and the investment community. Tesla’s (TSLA) innovations and unique marketing and distribution have made it the most valuable car company in the world. Part of that marketing is the mystique and confidence Musk brings whenever he has an audience. The company is also inspiring as it is less than 20 years in the making and is leading a revolution in how automobiles are built, driven, and fueled.

As plans are kept under wraps, most of the rumors as to what to expect fall in the category of speculation. Below are some of the most likely ideas from past announcements from Tesla and across the internet since the meeting date was announced.

Battery Production

Sourcing raw materials for batteries to make certain new EVs have all the needed components is becoming a concern among car manufacturers.

News has leaked of a proposed $3.6 billion Giga factory to produce up to 100 Gwh of batteries. The factory is expected to be in Nevada and eventually be used to assemble the Tesla semi when production eventually starts.

Tesla is expected to build a processing facility to make lithium hydroxide from spodumene concentrate in Corpus Christie, Texas. The location is good for shipping, and it is close to sources of sulfuric acid from the oil industry. This would be the first lithium hydroxide production facility in the U.S. If true, it would help Tesla fulfill the raw material sourcing requirements of the Inflation Reduction Act to qualify its cars for the $7,500 federal tax credit.

Those deals are at market prices; Tesla would reap the profits from processing the spodumene concentrate into hydroxide, but the bulk of the profit from the material supply accrues to the mining company. Tesla has hinted previously of plans to enter the lithium mining business.

The $25,000 EV

First mentioned in 2020, Tesla’s proposed $25,000 car earned the nickname “fluffy pillow” after Musk showed a picture of an object covered by a blanket that many thought resembled a large pillow. The project was put on hold in early 2022 when Musk said Tesla had too much on its plate.

Tesla’s existing best sellers, the Model 3 and Model Y, have been around for a while, a new model, whether it is the truck or an affordable entry level car would freshen up the line-up.

New Factory

Tesla’s production goals put it at or near capacity. The current factory capacity is listed as 1.9 million vehicles per year. The current goal is six million cars a year by 2026. This would require the expansion of existing plants and then some. A new factory takes three years to design, construct, and get rolling. So planning would have to start now. Musk is more likely to build a new plant than change his production goals.

Thoughts from across the internet suggest this could be in Indonesia or Mexico. Cars built in Mexico could qualify for the $7500 tax credit to purchasers.

Capital Raise

To accomplish the above requires money. Currently, there is construction in progress building out Tesla’s German and Texas factories. Billions more would be needed to implement other plans.

There is as of recent reporting, $22 billion in cash on Tesla’s balance sheet. This is a snapshot of quarter-end and not an accurate representation of the company’s finances. Offsetting this large number is $15 billion in trade payables and $7 billion in accrued payables, much of which is due soon.

Tesla may have to go to the market to raise cash for projects that will be presented on March 1st.

About Tesla Day

The investor event will be live-streamed from Tesla’s Gigafactory in Texas, with some of the company’s institutional and retail investors attending in person. According to Tesla’s press release, investors will be able to see its most advanced production line as well as discuss long-term expansion plans, the generation 3 platform, and capital allocation.  

Paul Hoffman

Managing Editor, Channelchek

Sources

https://ir.tesla.com/press-release/tesla-announces-date-2023-investor-day

https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/14/fact-sheet-president-bidens-economic-plan-drives-americas-electric-vehicle-manufacturing-boom/

https://www.barrons.com/articles/tesla-cars-brand-rank-51674047645

Retail Switches Tesla Stock Ownership Into Plaid Mode

Posted on by phoffman@channelchek.com
Image Credit: Steve Jurvetson (Flickr)

Tesla Stock Attracts Retail Bottom Fishing

Cathie Wood isn’t the only one favoring Tesla (TSLA) at recent valuations. Retail accounts have just made it their favorite stock in 2022 as transactions outpace the old favorite, Apple (AAPL). Money from retail trading accounts flowing into the company founded by Elon Musk increased by 424% to $15.41 billion, versus $2.94 billion in 2021. To be fair, the iPhone maker isn’t too far behind, as retail made $15.21 billion in cumulative purchases during the same period.

Vanda is a global independent research company that provides tactical macro and strategic investment analysis to institutional investors. In the firm’s, last research note of 2022, Marco Iachini, senior vice president of research at Vanda, shed some light and data on retail’s current favorite as institutional traders are placing more and more importance on money flows from self-directed investors.

Tesla’s share price has been moving lower in recent weeks as investors and analysts have been critical of the steps the billionaire has taken at his social media company, including the level of focus he has given to his new acquisition.  They also show concern of the interrelationship between Musk’s wealth, Twitter’s financial needs, and any tie-in with how Tesla may trade.

Source: Koyfin

Tesla shares are headed for a 60% decline in 2022, which is the worst sell-off since its 2010 public offering. Tesla’s year-to-date loss outpaces the S&P 500’s decline of 18% and the Nasdaq 100’s drop of 31%. The old favorite, Apple stock, has given up 23% during the year.

On a wider scale, investors in Tesla, Apple, and other large-cap tech companies have been slammed this year after two years of above-average returns. Vanda underscored Tesla’s popularity, saying the stock makes up about 11% of the average retail portfolio.

On the Robinhood platform, Tesla is the ninth most popular stock of the year, with Microsoft filling the top position.

Many institutional investors have, over the years, used retail interest as a sign of what to stay away from or even short. “Given its growing importance, we view retail activity around it as a crucial signpost for what may be an eventual full-fledged capitulation in 2023,” said Iachini, who wrote the research note. This flies in the face of institutional chief investment officer and founder of ARK Invest Cathie Wood, who has purchased slightly more than 445,000 shares of the EV manufacturer since October. Over the previous year and a half, Wood has been a net seller of Tesla.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://finance.yahoo.com/news/cathie-wood-loads-tesla-amid-063957962.html

https://markets.businessinsider.com/news/stocks/tesla-tsla-apple-stock-price-investors-popular-favorite-retail-markets-2022-12