What to Expect from Tesla’s Energy Segment in 2019



Wall Street analysts on Tesla

Since Tesla’s (TSLA) inception, analysts have remained divided in terms of its future growth prospects. While the automotive business remains its primary focus, Tesla also expects its Energy Generation and Storage segment to yield highly positive returns in the long term.

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Energy segment

In 2015, Tesla launched Powerwall, a part of its Tesla energy product (TAN) (PBW) portfolio. Powerwall is a wall-mounted rechargeable energy storage device that can be used to store solar or grid energy and power homes with that energy later. Similarly, for large commercial spaces, TSLA offers Powerpacks, which can store a much higher amount of energy.

In June 2016, Tesla acquired energy services provider SolarCity to give a push to its Energy Generation and Storage segment.

In the fourth quarter of 2018, Tesla’s revenue from its Energy segment stood at $371 million, up 25% YoY (year-over-year). In the quarter that ended in December 2018, the company reported an 11.5% gross margin from its Energy segment compared to 5.5% in the quarter that ended in December 2017.

Outlook for 2019

Tesla expects its Energy segment’s revenue to significantly increase in 2019, primarily with the help of significant growth in the energy storage business.

During its fourth-quarter earnings event, Tesla informed investors that a newly built production line at its Gigafactory 1 was helping it boost its Powerwall and Powerpack production. With this, the company aims to more than double its energy storage deployments in 2019 to over two gigawatt hours.

Tesla’s Energy segment’s contribution to its total revenue is still very low. In the fourth quarter, the segment accounted for only ~5.1% of its total revenue, which is why investors may continue to pay more attention to its Automotive segment’s growth in the near term.

On the positive side, the demand for solar energy products is quickly increasing across the world. Tesla might need to increase its production capacity of energy generation and storage products to compete with its energy segment peers, which include Enphase Energy (ENPH), SunPower (SPWR), and Johnson Controls (JCI).

Next, we’ll take a look at Elon Musk’s recent tweets about Tesla’s car production in 2019.


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