Tesla's best bet for growth has nothing to do with cars or AI
Tesla's energy business was a key driver of revenue in the second quarter, without which its earnings would have been much worse.
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- Tesla's energy business juiced revenue in the second quarter.
- Tesla's growth isn't happening in autos right now.
- Investors warn that Tesla's immediate financial future still relies on autos.
Tesla has the juice to make it through the electric vehicle slowdown — literally.
Tesla's energy business was a key revenue driver in the second quarter as EV sales fell and robotaxi initiatives remain as murky as ever.
While Tesla's earnings per share fell short of analyst expectations from April to June, revenue outpaced expectations with a record $25.5 billion.
About $3 billion of that came from battery storage units and solar panels sold by its energy business. That's nearly double what that same business unit recorded in the same quarter of 2023.
In a tough start to 2024, Tesla's bright spots have been in areas other than its industry-changing electric vehicle lineup.
The company has posted two straight quarters of falling vehicle sales, with deliveries down 4.7% in the second quarter. A series of price cuts have eaten away at Tesla's bottom line only a few years after it first posted consistent profits.
That's increased Tesla's reliability in two areas its competitors struggle (or have no match for at all): energy generation and regulatory compliance, the latter of which generated another $890 million in revenue last quarter. Together, the two accounted for 15% of second-quarter revenue.
Analysts warn, however, that both of these revenue streams can be inconsistent and that Elon Musk's promised future robotaxi business is too far out to trust at this point.
"On earnings updates, the realities of the business fall back to (mostly) auto," UBS analyst Joseph Spak wrote in a note to clients following Tesla's second-quarter earnings report. UBS currently has a sell rating on Tesla's stock and a 12-month price target of $197 — about 10% lower than where shares were trading Wednesday.
As the investor community reacted to the latest financial results, Tesla's stock was down nearly 11%.