William Blair Initiates Coverage of Tesla with Outperform Rating

William Blair has initiated coverage of Tesla (NASDAQ:TSLA) with an Outperform rating, primarily due to the underappreciated potential of Tesla’s energy storage business.

According to the firm’s analysts, Tesla Energy—especially its Megapack and Powerwall products—could become a significant growth driver. This is particularly relevant as expectations for the electric vehicle (EV) segment are expected to moderate in the near term.

“We view Tesla Energy as the most underappreciated component of the Tesla story and expect the narrative will shift toward the energy storage business in light of tempered EV expectations.”

Key Factors for Investment

The analysts highlighted three key factors that make Tesla’s energy storage business an appealing investment opportunity:
1. Need for Grid Stabilization
2. Expansion of Data Centers
3. Integration of Renewable Energy Sources

These factors, together with Tesla’s broader automotive business and emerging prospects in artificial intelligence, robotaxis, and robotics, position the company as a technology leader. William Blair describes it as having an “Apple-esque ecosystem for the future of energy.”

The firm compared energy’s importance to society by stating, “Energy is the foundation for life, an abundance or lack of which determines how far society can reach on Maslow’s hierarchy of needs.”

Revolutionizing Energy

Tesla’s approach to energy—through efficient EVs, energy storage solutions, and innovative projects like robotaxis—aims to change how energy is created, stored, and utilized, with broad implications for society.

While Tesla’s current valuation may appear high based on traditional metrics, William Blair asserts that this premium is justified.

“Using traditional comparable analysis with auto or even tech, we understand the difficulty justifying the valuation, but in our opinion, this misunderstands the Tesla story.”

The firm believes the halo effect created by Musk, the company’s culture of first principles, and the technological advantages it has established justify its significant valuation premium.