Few companies inspire such extreme opinions as Tesla Motors. The electric vehicle (EV) trailblazer elicits views ranging from overvalued hype machine to world-changing technological revolution. As both the promises and challenges of Tesla‘s quest to accelerate the world‘s transition to sustainable transport come into clearer focus, investors are divided on how to value this auto industry disruptor. Just how much is Tesla‘s volatile stock really worth?
Tesla‘s Mission to Electrify Transportation
To better evaluate Tesla‘s valuation, it helps to first understand the company‘s roots and the magnitude of its ambitions. Tesla was founded in 2003 by Silicon Valley engineers Martin Eberhard and Marc Tarpenning, together with current CEO Elon Musk who led the early funding rounds. Based in Palo Alto, California, Tesla‘s mission was straightforward – to prove electric cars could thrill performance enthusiasts while still being practical enough for the mainstream.
After rolling out a string of award-winning sports and luxury vehicles, the company unveiled its defining product – the Model 3 sedan – in 2016. Priced from $46,000, the Model 3 demonstrated EVs could reach broader affordability at volume production. Combined with investments in proprietary charging networks and advanced self-driving capabilities, Tesla has sought to fundamentally transform mobility for the sustainable era.
Financial Growth Fueled by Market-Bending Disruption
Fulfilling this grand vision required major capital investments, leaving Tesla far from profitability for years since its 2010 IPO. But as Model 3 sales gained traction globally, Tesla reached escape velocity financially after 2018:
| Key Financials | 2018 | 2022 | Growth |
|---|---|---|---|
| Revenue | $21.5B | $81.5B | 280% |
| Net Income | $-976M | $12.6B | 1490% |
| EPS | $-5.72 | $3.70 | 165% |
| Market Cap | $53B | $615B | 1060% |
Data Source: Tesla Financial Filings
This meteoric growth reflects Tesla establishing dominance in the early stages of a projected $5 trillion EV market. As the below delivery chart shows, Tesla expanded manufacturing capacity while legacy automakers were still dragging their feet on EV investments:
Chart Source: Tesla Filings, Evans Data Corp
Yet even as rivals like Volkswagen, GM and Ford accelerate their own EV lineups now, Tesla maintains technological leads in areas like batteries, charging, and self-driving software. Continued innovation will be vital to stay ahead of these challengers in the years ahead though.
Growth Outlook: Expanding Markets and Business Lines
Tesla has guided for vehicle deliveries to rise over 50% CAGR in the coming years. This seems achievable based on projections for surging global EV demand:
- BNEF: EV sales reaching 58% of market share in 2030
- Deloitte: EVs attaining 31% market share by 2030
- Roland Berger: EV sales hitting 65 million by 2030
In addition to its core automotive segment, Tesla has huge upside potential in:
- Energy Generation & Storage – Leveraging solar and industry-leading batteries
- Autonomous Driving – Monetizing its Full Self-Driving system across ridesharing and licensing
- Insurance – Further vertical integration and data optimization
As Tesla continues excelling operationally in these areas, its business could scale towards the trillion dollar vision bulls imagine. But risks remain as well.
Valuation Debate: What Is Tesla Really Worth?
At its recent price around $200 per share, Tesla sits far below its prior peak near $400 which briefly gave it over a $1 trillion market value. Two distinct perspectives emerge on whether shares are now a bargain or still over-inflated:
The Bull Case
- Tesla is the Apple/Amazon of transportation – undervalued like those giants were in their early boom years
- Dominates higher margin luxury EV segment while ramping mass-market scale
- Technology and brand leadership defensible against rivals
- Multiple huge addressable markets besides autos
Forecast: $500+ per share
The Bear Case
- Narrowly focused on auto manufacturing with slim margins – should trade comparable to Volkswagen/GM/Ford
- Legacy automakers catching up quickly in EVs at greater scale
- Stretched valuation disconnected from financials and economic reality
- Elon Musk antics, legal issues overhang stock
Forecast: $50-$100 per share
The future likely holds both continued growth AND increased competition for Tesla. But precisely predicting how those forces balance out is impossible. For now the best approach may be to tune out the noise and hyperbole from either side and objectively monitor Tesla‘s execution through various business cycles to come. If Tesla sustains technology leadership through the 2020s as EVs go mainstream, today‘s prices could still prove an incredible bargain.
