Tesla, for bulls, is more than just a car company: It also sells solar roofs and battery-storage products. It has its self-driving software too. Tesla also operates the largest electric-vehicle fast charging network in the U.S.
Tesla sells EVs and the juice that powers them. It’s a little like if General Motors (GM) owned gas stations, too.
Tesla’s network has value for the company. And Goldman Sachs analyst Mark Delaney wonders if Tesla should start monetizing the charging network now, by opening it up to non-Tesla EVs.
Opening up the network could add roughly $1 billion to $3 billion annually, according to Delaney, while adding up to 75 cents to annual per-share earnings a couple of years down the road.
At Tesla’s current price-to-earnings ratio on estimated 2023 earnings, 75 cents of additional EPS adds $32 to the stock. That’s about 5% of today’s Tesla’s current stock price and is only a rough guide to the potential boost charging offers. Delaney doesn’t quantify the stock value, but runs through potential revenue scenarios in his report.
Fast charging refers to so-called level 3 DC chargers that can provide an EV with 50 or 100 miles of range in minutes. Tesla has roughly 1,700 stations active or about to be active in the U.S., according to its website. Those locations offer, very roughly, 14,000 plugs total.
There is one Tesla port for every 80 or 90 Tesla vehicles on U.S. roads, according to recent registration data. For the country, there is about one charging port for every 10 electric vehicles on the roads. There are roughly 136,000 ports in the U.S., according to Energy Department data. The vast majority of them are slower chargers, which are like plugging an EV into a 240-volt outlet.
There are about 25,000 fast charging ports, giving Tesla more than 50% market share.
(In comparison, there are about 115,00 gas stations in the U.S. and, perhaps, 1.2 million pumps. That’s about one pump for every 200 vehicles on the road.)
Given the size and growth of Tesla’s charging network, opening it could yield a few benefits for Tesla, and its investors, according to Delaney. For one, it could boost overall adoption of EVs, he writes. It could also support Tesla’s market share—perhaps Tesla could give Tesla owners better pricing than other EVs utilizing its network.
Of course, more charging infrastructure makes it easier to sell non-Tesla EVs, Delaney adds. But an open network would generate more sales and cash flow for Tesla.
There are other cons to opening up, however, such as over-utilization of the network. Tesla owners probably don’t want to pull up for a charge and wait behind a line of non-Tesla EVs. That looks like a risk still down the road, though.
Tesla’s network is utilized about 5% to 10% on average during the day, “although higher at certain sites/peak times,” the analyst wrote in his June 29 report. “Therefore, we believe that in many locations Tesla would be able to open its charging network with high incremental [profit] margins.”
What’s more, Tesla plans to add a lot more chargers. “The network has doubled in the last 18 months, and we are planning to triple it over the next two years,” said senior vice president of powertrain and energy Andrew Baglino on the company’s third-quarter 2021 earnings conference call back in October. That could mean another 25,000 ports in the U.S., and many more globally, by 2024.
Delaney rates shares Buy and has a $1,000 price target for shares. That’s about $115 higher than the average analyst price target of almost $885 a share.
Tesla stock is down about 35% year to date. The S&P 500 and Nasdaq Composite are down about 20% and 28%, respectively. Rising interest rates and inflation have investors thinking more about a recession than they are about potential from a new line of business.