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Why I Think Tesla Isn’t Overvalued

Tesla (Nasdaq: TSLA) is best known for the iconic cars that started today’s electric vehicle revolution. They are the products of its founder and CEO, Elon Musk.

Many analysts think the company is extremely overvalued. They point to the company’s high stock price and price-to-earnings (P/E) ratio.

But Tesla isn’t just a car company.

I’ve written about this on several occasions in the past. But analysts just don’t seem to get it, and it warrants repeating.

In Musk’s words, Tesla is a “sustainable energy company.” Making some of the most desirable and exciting EVs on the market is just one part of the company’s business.

It’s becoming increasingly clear that Musk’s words are ringing true… and that Tesla’s high price and P/E ratio are justified.

Moving Into the Energy Business

Musk first announced in 2015 that Tesla would be expanding into the energy business with energy storage and solar power.

Tesla then unveiled the Powerwall, an energy storage battery for homeowners.

And it was a big hit. It meant energy storage for the masses.

By May of last year, Tesla had installed about 100,000 Powerwalls globally. By May of this year, that number had doubled to 200,000.

Additionally, about two years ago, Tesla launched its Megapack, a utility-scale and commercial energy storage product.

Each Megapack is a shipping container-sized unit. It contains a 3-megawatt-hour battery system.

Also inside are inverters, control electronics and temperature control systems. The price of a single Megapack is a cool $1 million.

That may sound high. But in the utility-scale world, that’s actually not a bad deal. Plus, the bigger the system, the cheaper the Megapack is.

To date, Tesla has installed Megapacks in more than 50 countries. And it’s deployed more than 6 gigawatt-hours of storage at more than 1,000 industrial sites.

Demand for Tesla’s Megapack is brisk. California projects can expect deliveries in 2022.

But if storage developers in any other market want Tesla’s Megapacks, they’ll have a long wait. Tesla is quoting delivery times into 2023.

More Than Just EVs

Let’s look at how Tesla’s storage business has done so far this year. This includes its Powerwall and Megapack deliveries.

In the first quarter, Tesla deployed 445 megawatt-hours of storage. That was a 71% increase year over year.

In the second quarter, Tesla deployed 1,274 megawatt-hours of storage. That was a 204% year-over-year increase.

It’s clear that Tesla’s energy business is out-accelerating its car business. The rest of this year should be just as record-breaking as the first half.

Tesla can sell all the Powerwalls and Megapacks it can make. As Tesla continues to improve its battery manufacturing capacity, this segment of its business is set to soar.

That justifies Tesla’s high share price and P/E ratio. And you might want to consider a few shares of this sustainable energy company for your portfolio.

Good investing,

Dave

Disclaimer: David Fessler owns shares of Tesla.

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