Tesla Motors Ventures into Energy Storage but Analysts Question Profitability Goals

Tesla Motors Ventures into Energy Storage but Analysts Question Profitability Goals

Elon Musk recently announced Tesla Energy’s energy storage solutions for home and business users. However, the analysts remained unimpressed about Tesla’s prospects of profitability with its battery product.

For the current year, the consensus adjusted EPS estimate for Tesla has followed a downward trend. The analysts’ adjusted the earnings per share (EPS) estimate for Tesla, and it has been revised down from as much as $3.38 in November to currently just 29 cents a share.

In February, when Tesla missed its annual sales target, CEO Musk, on an optimistic note, announced that the design of Tesla’s new battery product was complete and production would begin later in the year.

Finally, Tesla unveiled its battery products at the end of April. The deliveries of the Tesla batteries, named Powerwall and the Powerpack would begin this year. Tesla is also working on its projected battery plant named Gigafactory.

But all this does not seem to provide any respite, as the analysts are continually trimming their annual adjusted earnings estimates for Tesla for the current and the next year.

A critical analyst, John Harty, Head Trader at Aegis Capital said, “They are spending more money on infrastructure and building out new businesses. What that does is it delays earnings further down the road”.

Quite evidently, the analysts are not considering in their calculations, the future revenues that this new battery venture would bestow, as a Bloomberg report has already valued pre-orders for Tesla’s business and home battery products at $800 million. So, even if Tesla was to convert only 25% of the pre-orders into actual deliveries during the launch quarter, sales revenue from the company’s battery products would dispel all doubts of the analysts.

The Wall Street consensus estimates suggest Tesla revenues this year could grow 79% to $5.74 billion and subsequently another 56% to $8.97 billion in 2016.

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