Folks,
Today I want to make the case for Tesla to get to $1,000 a share (currently trading @ ~ $264).
If it got to $1,000 – that would be about a 278% run from current prices.
How is this possible? Well let’s cover the big reasons…
1.) EV sales are expected to grow by 24.5% CAGR
Tesla controls the biggest market share for EVs – and with the industry expected to grow by 24.5% (source) that means that Tesla will be the biggest benefactor. Even if Tesla loses market share – there is a massive market to go around.
2.) Tesla’s market share is actually INCREASING.
Despite what the Tesla haters & short sellers want you to think – Tesla is not being hurt by electric vehicle competition. They are just learning to be smarter. Tesla cut prices and it’s only helped their market share.
According to recent data, Tesla’s share of the EV market pool is about 59.5% and increasing…
Where is the competition for Tesla? The nearest players are no where close. The next closest is Chevrolet (which has almost 1/10 the market share).
Chevrolet the Tesla Killer? Don’t make me laugh.
3.) The Autonomous vehicle market is going to $2.3 trillion. Tesla will dominate it.
If you thought the electric vehicle market was seeing explosive growth – you won’t believe the rates the autonomous vehicle market is expected to grow at.
Tesla is expecting their supercomputer DOJO to be one of the most powerful if not THE most powerful in the world. This is why Morgan Stanley upgraded Tesla so aggressively.
How much money can this market make Tesla? A LOT!
The automonous vehicle boom will not only allow Tesla to sell a ton more cars – but more importantly will sell super high margin software to tons of companies jumping for an opportunity to make their vehicles automonous without having to spend billions and years to develop their own.
4. The Math
Tesla has always traded with a view far far into the future – and has for years been helped by trust in the brand, Elon Musk, and yes… low interest rates.
But the truth is that even if Tesla just continues to trade at the multiple it is at currently – that still suggests HUGE upside.
The Price To Sales ratio for Tesla is 9.16 (source).
In order for Tesla to justify a $1000 price based on that 9.16 multiple – the company would need to have yearly revenue at roughly $358B.
What is the current revenue? Well for 2023 we are expected to hit over $100B. In 2022 we were at $81B.
If Tesla continues to rapidly expand and gain market share in mentioned markets that are expected to balloon to trillions of dollars per year by 2030 – it is only logical to assume that Tesla’s revenue will far surpass $358B.
But honestly – I don’t even think that’s the most convincing argument here. I think the most convincing argument is what markets will be pre-factoring in once they continue to see Tesla’s success.
5.) Tesla cybertruck is going to start production this year
Whether you like the Cybertruck or not is irrelevant – the fact is that around 1.9m pre-orders are in Tesla’s books. Even if a few hundred thousand drop off – 1.6m preorders might produce around $96B in revenue alone (assuming avg price at $60k).
6.) Tesla’s Dojo Is Going To Drive Huge Revenue & Margins
As we mentioned earlier – Tesla’ Dojo supercomputer and the resulting software can result in huge revenues for the company.
Dojo essentially trains Tesla’s A.I. driving software. Why is this important? Well- as Morgan Stanley analysts wrote:
“Tesla’s ability to improve the efficacy of its full self driving (FSD) system is limited by the ability to collect, label and process real world video data from the edge and to train these robots from the experience of its fleet in service, which is 5mm units today and closer to 50mm by end of decade.” (Source)
So if the value of a FSD system is based on the ability to process – then that means that the company with the most powerful supercomputer is going to win.
Tesla is projecting they will in the top five by early 2024, and likely the king shortly after.
7.) Tesla is still heavily, heavily bet against.
While Tesla’s total float sold short is only around 3% these days, it is still one of the most shortest stocks in the world in terms of dollar volume.
This may not cause another massive squeeze – but the truth is that negative sentiment is all over financial media & firms.
Many people expect Tesla’s luck to run out and expect the brand to be killed by competition, Elon Musk’s antics, and/or just fall out of fashion. When this doesn’t happen – you’ll get a new round of FOMO buyers buying in at much much higher prices.
Anyways – I wouldn’t sleep on Tesla.
Best,
Charlie