RBC maintains an Outperform rating and a $297 price target on Tesla, underlining the continued importance of autonomous driving for Full Self-Driving (FSD) and the Robotaxi initiative. This assessment underscores the potential significance of Tesla’s utility battery business compared to its well-established automotive sector.
RBC Capital suggests that Tesla’s Megapack utility-grade battery storage business could potentially exceed the value of its standalone car business.
According to the analysts, Tesla, under Elon Musk’s leadership, says there is a global need for 2TWh of annual battery storage by 2040, with an estimated industry revenue of $600 billion.
The analysts suggest that with a 15% market share, Tesla’s specific battery storage revenue could amount to at least $90 billion per year.
RBC Capital says that by applying a 15x cap goods EBITDA multiple, the Megapack business is valued at $345 billion, with a discounted 2024 valuation of $120 billion based on 2040 projections.
The assumptions made by RBC Capital are considered conservative, as they say Tesla must maintain a 15% market share despite a 30% cost advantage and constant margins amidst decreasing battery prices.
Interestingly, the analysts say they value Tesla’s car business at around $70 billion, placing it below their valuation for the Megapack business.
Despite this, RBC Capital emphasizes that autonomy is central to Tesla’s investment case and says that the new affordable model, expected to start production in H2 2025, should be the next catalyst for shares.
On another front, Ford Motor enables electric vehicle owners in the U.S. and Canada to access Tesla’s Supercharging network for faster charging. Initial demand may lead to supply constraints, and a non-Tesla adapter is necessary. Ford won’t pay Tesla for this service, and adapters are complimentary until June, after which they’ll be priced at $230.
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