Tesla still has Wall Street confused about what it is, but it’s not that hard

2024.09.13 3 min read

Tesla (NASDAQ: TSLA) still has analysts confused about what exactly it is in terms of a business, but it’s really not that hard to figure out.

Analysts on Wall Street have routinely recognized Tesla as an automotive stock play, but over the past few years, debate about what exactly the company should be characterized as has heightened.

Tesla is probably most known for its cars, but investors and those who follow the company closely know that it also operates an Energy division. It also has skin in the artificial intelligence game and in software.

Despite its prowess in a number of sectors, analysts are still debating on whether to categorize Tesla stock as strictly an automotive play or whether it should be characterized as a tech company across multiple disciplines.

D.A. Davidson analyst Gil Luria said that Tesla should be looked at, for the time being, as an automotive company due to its revenue. Tesla makes most of its revenue, more than 90 percent, he mentioned in a note he wrote to investors and should be looked at as an automotive company (via Yahoo Finance):

“If it looks like a duck (>90% of revenue from cars) and quacks like a duck (>90% of profits from cars) it might just be a duck (a car company),” Luria wrote in his note. He added, “Don’t @ me.”

Other analysts disagree. Deutsche Bank’s Edison Yu says Tesla is more than an automotive company, and believes the long-term outlook should be focused on the fact that it is involved heavily in various sectors.

Looking at Tesla as an automotive company is viable in the short term, but Yu believes there is a long-term synopsis of Tesla that needs to include its other ventures:

“At the core, we do not see Tesla as an automaker but rather a technology platform attempting to reshape multiple industries, deserving of a unique type of valuation framework.”

In July, Baird analyst Ben Kallo said that Tesla Energy will start to have more impact on the stock and the company’s makeup overall. Tesla reported a record energy storage deployment in Q2, marking the potential start of a new narrative moving forward.

Tesla bears officially have their next big threat: Tesla Energy

Even Elon Musk himself advised investors to look at Tesla past the automotive division. Despite the company’s reputation with cars, which is undoubtedly strong and disruptive, Musk knows that in the long term, the company will have more opportunities than just building EVs.

He said in 2019 that the energy side, along with solar, would outpace the automotive side regarding value:

“I think both over time will grow faster than automotive. They’re starting from a smaller base…I think, especially, if you look at…year-over-year growth, it will be absolutely incredible…over the course of, say, a year, gigantic increase.”

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