Tesla Inc

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7:59:59 PM EDT: $248.75 +0.52 (+0.21%)
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Tesla Just Started a New Multi-Billion Dollar Business


The was originally published to news.cmlviz.com.

Tesla has earnings due out today after the market closes and it's easily one of the most anticipated earnings calls we have ever seen.

While the focus will be on deliveries for the Model S and Model X, which together are supposed to hit between 80,000 and 90,000 units for the full year, Elon Musk slipped in a new opportunity and it's quite shrewd.

Tesla (NASDAQ:TSLA) is expected to be profitable and cash flow positive by the end of this year. That's the line towed by Elon Musk and his CFO. Perhaps even more attention grabbing has been the firm's incredible demand for its Model 3 -- the mass market vehicle that it hopes will push the firm to 500,000 deliveries in total by the year 2020, a 10-fold increase from 2015.

But other news broke today which reminds us that the Gigafactory is not an auto-plant, it's a battery plant, and that means a lot of opportunity for Tesla.

Tesla has long been discussing a home power storage product called Powerwall and today Bloomberg reported that the first wave of residential installations has started in the U.S.

Residential customers that have solar power have long been pumping their extra power back into the grid and they have been paid handsomely for it. It has pushed the solar home boom forward. But, as SolarCity (NASDAQ:SCTY) and others will tell you, the great benefit and selling point to consumers has been slashed by several states and it has crushed the stock.

While that's bad news for many, it has opened the market up for storage. According to a Tesla job opening for the Powerwall group:

"The business unit will be a multi-billion dollar per year one in the near term."

But we don't have to take Tesla's word for it. This is what Bloomberg published back in March of 2015:

By 2020, the annual global investment for stationary-grid energy storage is expected to be $5.1 billion, more than 17 times higher than investments in 2013.

Source: Bloomberg New Energy Finance.

It's a little known fact that the Gigafactory itself is actually built to be replicated.

That is, the entire facility was built to be "copy and pasted" in other areas. So, while Tesla has its opportunity in the electric vehicle and self-driving featured car markets, it also has a facility to carry forward another multi billion business, and this time, no new capital is required to manufacture it.

Tesla is going to compete with Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) as well as Detroit and Japan's auto makers for the EV market -- it will likely not face competition from these same companies in the power storage world.

That's not to say that the field isn't jam packed with a host of competitors. In fact, many bears believe the Powerwall is in a business that will be a "race to zero." Of course, similar arguments were made for Amazon's (NASDAQ:AMZN) cloud computing business (AWS). AWS accounted for more than 60% of Amazon's operating income last quarter and has thrust the firm forward into a $300 billion juggernaut.

That's just a reminder, the "race to zero" businesses are often times not. Wall Street gets this wrong pretty often. In fact, those same bearish tones echo now in the smartphone market.

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Thanks for reading, friends.

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