Tesla Energy's Q2 Surge Prompts Morgan Stanley to Boost Price Target

Tesla's Q2 vehicle delivery report highlighted the impressive performance of its energy division, prompting Morgan Stanley to reconsider its price target for Tesla shares. Analyst Adam Jonas noted a record 132% increase in energy deployments, leading to a revised valuation of Tesla Energy.

Morgan Stanley Reconsiders Tesla Price Target After Record Q2 Energy Division Growth

The second-quarter vehicle delivery report, released last week, was the subject of much discussion regarding Tesla's energy unit.

Morgan Stanley and its analyst Adam Jonas are contemplating the division as a more significant factor in their analysis of the $310 price target it has set for Tesla's shares, according to the numbers Tesla reported for its energy storage deployments in Q2.

“It’s no wonder that investors are starting to consider the real possibility that Tesla Energy may be worth more than Tesla Auto,” Jonas said in a note.

The majority perceive Tesla as a car company in the grand scheme of things. However, Tesla is considerably more than that. It is also a software, robotics, and AI company that employs large-scale energy storage units and constructs cars.

Although the Tesla stock price has increased since it reported a delivery beat of 6,000 units over Wall Street consensus estimates, the energy division's performance is likely the most significant shock and one of the reasons more analyst firms are increasing their price targets.

According to Teslarati, the company's energy deployments experienced a significant surge in Q2, considerably surpassing its previous record. Tesla experienced a remarkable 132% increase in Q2, a company record at the time of its announcement.

Tesla Energy Surpasses Expectations with Record Q2 Deployments, Reflecting Musk's Vision

In the first quarter, Tesla reported deployments of 4.053 MWh; however, this was severely eclipsed by the 9.4 GWh it reported in the second quarter. It all stems from statements made by CEO Elon Musk several years ago.

Nearly five years ago, Musk stated during Tesla's Q3 2019 Earnings Call that the Energy division could comprise a significantly more significant portion of the company than the automotive division.

“It could be bigger, but it will certainly be of a similar magnitude,” he said. “It would be difficult to overstate the degree to which Tesla Energy is going to be a major part of Tesla’s activity in the future…I think both, over time, will grow faster than automotive. I think, especially, if you look at sort of — if you look at, like, year-over-year growth, it will be absolutely incredible … over the course of, say, a year, gigantic increase.”

Jonas shares this opinion. Indeed, according to Reuters, his $310 price target has been deconstructed to indicate that auto accounts for $284 of it. Energy was previously responsible for only $36 of the $310.

Now, he is increasing the price to $50 per share. This also influenced Morgan Stanley's decision to decrease its 2030 auto sales.

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