Analysts at RBC Capital believe Tesla's (NASDAQ:TSLA) Megapack utility-grade battery storage business could be worth substantially more than its standalone car business.
The firm, which has an Outperform rating and a $297 price target on Tesla, said the Elon Musk-led company believes the world needs at least 2TWh of annual battery storage at scale, which analysts assume will be reached around 2040.
"This could yield $600B in annual industry revenues," analysts wrote. "A 15% market share could mean at least $90B in Tesla-specific battery storage
revenue."
"Applying a 15x cap goods EBITDA multiple results in a $345B EV for Tesla's Megapack business, and discounting this back to 2024 from 2040 results in a $120B valuation," analysts added.
In addition, RBC Capital believes its assumptions are conservative as it assumes Tesla maintains its 15% market share despite having a 30% cost advantage over peers and that margins stay constant despite battery prices coming down.
Analysts also value Tesla's car business conservatively at around $70 billion, well below their Megapack business valuation. However, the firm still thinks autonomy is central to the investment case and that Tesla's new affordable model, slated to start production in the second half of 2025, "should be the next catalyst for shares."