Most investors only think about electric cars when they think about Tesla. But the company’s solar power and storage battery business could be a major factor in the performance of Tesla shares, according to a new analyst note.
Alex Potter, an analyst with Piper Sandler, raised his price target on Tesla shares to $928, up $199 from his previous price target. And he believes an underappreciated key to the company’s future performance is the non-automotive part of the business that currently accounts for only 6% of its revenue.
“It’s easy to forget that Tesla sells batteries and solar power products,” he wrote Wednesday. “Clearly, the market is big enough to ‘move the needle’ – and perhaps large enough to surpass the automotive segment.”
Tesla is ramping up production of Solarglass Roof, its solar panels that look like roofing tiles instead of the traditional solar panels that many homeowners think are ugly.
It also sells large batteries known as the Powerwall, which can store the excess electricity that is created during the day by the solar panels, rather than feeding excess power into the electrical grid the way other solar panels do.
The note from Potter projects that Tesla’s solar and battery business could reach about $80 billion a year in the 2030s, up from only $1.6 billion in 2019. The company’s auto revenue came to $18.5 billion last year.
Potter believes that many of the buyers of Tesla’s solar panels and batteries will be owners of Tesla cars who want to power them with clean energy rather than with utility-generated electricity.
“As curmudgeons rightly note, charging EVs with coal-based electricity isn’t very ‘green,’” Potter wrote. “So Tesla’s next challenge will entail making it cool to generate and store one’s own solar power.”
Potter believes that the growing number of Tesla vehicle owners will want to buy the solar panels and batteries. even if the purchase doesn’t save them money. Many who have bought electric cars have already shown a willingness to pay a premium price for an electric rather than gasoline car.
“This story has already played out in the automotive segment, and in the coming years, we think Tesla will replicate its success in energy generation and storage,” he said.
To test this theory, Potter said he recently installed the Tesla solar panels and battery in his own house in Minnesota to help charge his Tesla Model X.
“The results have been illuminating so far, and we’re upping our price target accordingly,” he wrote.
Shares of Tesla (TSLA), which have been on a very strong run for the last eight months, were up more than 5% following Potter’s note, crossing the $900 a share mark once again. Shares have more than doubled in value so far this year and are up more than 400% since the 52-week low at the start of June.