Canaccord Genuity had some positive things to say about Tesla recently, according to StreetGuru. Tesla is becoming the brand in energy generation and storage and Canaccord Genuity estimated that Tesla will reach $8 billion in revenue by 2025. “We expect the energy management platform to have strong demand, particularly in California, where electricity supply has fallen below both gross peak and net peak needs as a result of the transition to renewable sources leaving a gap in energy demand that needs to be compensated with imports from other states.”
StreetGuru also shared this on Reddit along with an image of Canaccord Genuity’s statement. In its statement, Canaccord Genuity said that it was maintaining its BUY rating while reducing its price target to $971 from $1,071 after Tesla’s Q1 2021 earnings. They explained that this is based on applying 60 times their 24 EV/EBITDA estimate of $18B. “While we acknowledge the rich multiple, we also believe TSLA maintains a meaningful market advantage which we are trying to capture.”
The company noted that with its recent upgrade, it believed that Tesla is becoming “The Brand in energy. In fact, the company discussed at length the need for renewable, distributed energy generation and storage, and its plan to permanently pair Solar Panel/Roof and Powerwall products for all future installations.”
Some other key takeaways from Canaccord Genuity’s report:
Megapack. Tesla’s Megapack will be using LFP cathode batteries which are similar to what the entry-level made-in-China (MIC) Model 3 and Y vehicles use. “This is significant, as Tesla ramps up their grid-scale energy storage product without drawing further on an already supply-constrained nickel-based battery production capacity used in 2170s.”
Doubling Current Cell Purchases. Tesla’s 4680 battery cells will reach production scale in 2022 and it’s doubling the current cell purchases from its suppliers in 2022. These suppliers include LG Chem, Panasonic, and CATL.
Autobidder. Canaccord Genuity pointed out that even though this is not a focus, Autobidder continues to enter new markets, such as ERCOT. The company believes that this is “a harbinger for Utility-scale and the tip of the spear for its Megapack storage solution.”
Strong Demand For Tesla Energy. Canaccord Genuity noted that it expects Tesla’s energy management platform to have strong demand, especially in California, where the electricity supply has fallen below both gross and net peak needs. This fall is a result of the transition to renewable sources and it left a gap in energy demand. That gap, according to Canaccord Genuity, needs to be compensated with imports from other states.
Accelerated Growth In Energy And Storage. Canaccord Genuity is expecting accelerated growth in Tesla’s energy generation and storage business — conservatively, above $8 billion in revenue in 2025 with gross margins at parity or better than its battery electric vehicle business. At least 25% better.
Tesla’s Year-Over-Year Storage Deployments
Tesla touched upon its year-on-year energy storage deployments in its Q1 2021 update (shareholder deck). “Energy storage deployments grew 71% in Q1,” the company noted. This was mainly driven by the popularity of Tesla’s Powerwall. “Demand for Powerwall continues to far exceed our production rate. As a result, we recently shifted Powerwall deliveries to solar customers only. As we increase our production rate, we may make it available once again as a stand-alone product,” Tesla said in the report. Tesla also pointed out that the recent snowstorm in Texas and other blackout events continue to influence customers toward home energy storage solutions.
Update On Tesla Powerwall Mentioned In Tesla’s Q1 2021 Earnings Call
In Tesla’s Q1 2021 earning call, Zachary Kirkhorn, Chief Financial Officer, spoke of Tesla managing a backlog on Powerwall.
“We continue to manage through a multi-quarter backlog on Powerwall,” he said. He added that Tesla was working as fast as it can to increase production, which will aid in the profitability of this aspect of Tesla’s business as those volumes increase.
Elon Musk also spoke in depth about Powerwall and explained that the Powerwalls made since November of last year have a lot more peak power capability than the specification on the website.
“They have about twice the power capability roughly. It depends on how you count power, but about twice the peak power and about arguably twice the steady-state power of the specification of the website. The energy is the same, but the power is roughly double. And all the installations — so all installations will have a Powerwall.”
Elon pointed out that this would lower the difficulty of installing Powerwall and that this would be due to the ease of the power moving from either the Tesla Solar Roof or the Tesla Solarglass Roof going directly into the Powerwall.
“And the Powerwall will only ever go between the utility means — between the utility and the main power panel of the house, which means you never need to touch the main circuit breakers of the house. You never need to touch the house circuit breakers.
“Effectively, almost every house, therefore, looks the same electrically instead of being a unique work of art and requiring exceptional ability to rewire the main panel. So this is extremely important for scalability is. It’s the only way to do it, really. And this also means that every solar Powerwall installation that the house, or whatever the case may be, will be its own utility.
“And so even if all lights go out in the neighborhood, you will still have power. So that gives people energy security. And we can also, in working with the utilities, use the Powerwalls to stabilize the overall grid. So let’s say that there’s a — like there was in Texas, there was a peak power demand, and the power demand, because the grid lacked the ability to buffer the power, they had to shut down power.
“There’s no power storage. No good point on power storage. However, with a whole bunch of Powerwalls and houses, we can actually buffer the power. And so if the grid needs more power, we can actually then, with the consent, obviously, of the homeowner and in partnership with the utility, we can then actually release power onto the grid to take care of peak power demand.
“So effectively, the Powerwalls can operate as a giant distributed utility. This is profound. I’m not sure how many of you will actually understand this but this is extremely profound and necessary because we are headed toward a world where, as we were just talking about earlier, where people are moving toward electric vehicles. This will mean that the power needs in — at homes and businesses will increase significantly.
“We will — there will need to be a bunch more electricity coming somewhere. In fact, if you go to full renewable electricity, we need about 3x as much electricity as we currently have. So these are rough numbers, but roughly you need twice — roughly need twice much electricity if all transport goes electric, and they need three times much electricity if all heating goes electric. So basically, this is a prosperous future, I think, both for Tesla and for the utilities.”
Elon further elaborated on this by noting that utilities will fail to serve their customers because they won’t be able to react fast enough without this sort of solar + storage development.
“And we’re going to see more and more of what we see, say, in California and Texas of people seeing brownouts and blackouts and the utilities not being able to respond because there’s a massive change going on with the transition to electric transport.
“And we’re seeing more extreme weather events. This is a recipe for disaster. So it is very important to have solar and batteries at the local level, at the house. In addition, it is important to have large battery storage at the utility level, so that solar and wind, which are the main forms of renewable electricity, can be — that electricity can be stored because sometimes the wind doesn’t blow, sometimes it blows wide.
“Sometimes it blows too much and sometimes it didn’t blow enough. But if you have a battery, you can store the energy and provide the energy to the grid as needed. The same goes for solar because, obviously, the sun does not shine at night and sometimes it is very cloudy. And so by having battery storage paired with solar and wind, this is the long-term solution to a sustainable energy future.
“And as I said, it needs to occur both at the local level and at the utility level. If it doesn’t occur at the local level, what will actually be required is a massive increase in power lines in power plants. So they have to put long distance and local power lines all over the place. They’ll have to increase the size of the substations, is a nightmare. This must occur. There must be solar plus battery. That’s the only way.”