In this video I cover what needs to happen for Tesla stock to reach a $1 Trillion Market Cap. At that point, the Tesla Market Cap would join the ranks of Apple, Microsoft, Alphabet, Amazon, Saudi Aramco, and Petro China.
Bear Position Summary
People that believe Tesla stock is already overpriced see the company primarily as an electric vehicle manufacturer competing against the largest auto manufacturers in the world for market share. This is the bear argument against the current Tesla stock price.
Despite Tesla stock having a market cap greater than all other auto manufacturers, Tesla has yet to make a profit in the same universe as the largest auto manufacturers. As a business they’ve accumulated over $6 billion USD in net income losses over the past 12 years.
In their best year to date Tesla has made just a small fraction of the number of vehicles produced by the likes of Toyota, VW, Honda, GM, and Ford. Tesla expects to deliver over 500,000 electric vehicles in 2020.
Bears believe that Tesla has yet to prove they can produce EVs at the scale that their peers have demonstrated. Bears also worry that the little profit Tesla has shown recently comes from the sale of regulatory credits that will inherently lose value if or when the rest of the market catches up to their EV production.
Bull Position Summary
People that believe Tesla stock is undervalued and can rise to $1 Trillion market cap or higher envision Tesla as more than just an electric vehicle manufacturer. They believe the transportation and energy sectors are on the precipice of an imminent paradigm shift. The world as we know it will transition from fossil fuel powered vehicles to electric. And the source of the world’s energy will transition from fossil fuels to renewables. The bull position is Tesla is best positioned to capitalize on this imminent paradigm shift, in not only multiple areas of transportation, software technology, energy generation and storage, and even auto insurance. At the helm, bull believe Elon Musk is best suited to lead this company into that future.
Bulls see Tesla as having already succeeded in the manufacturing of electric vehicles at scale. With 5 factories in their domain and 2 more giga factories on the way in by 2021, bulls see Tesla on the other side of a mountain of electric vehicle production challenges that the world’s largest vehicle manufacturers have yet to surmount. You don’t have to look very hard to find Tesla’s enthusiastic customer base galvanizing around their products and the company’s future (check out Tesla Daily for the best bull arguments).
Telsa’s production of solar panels, solar roofs, powerwall, and batteries can cut into the market caps of the worlds largest oil, gas, and energy companies who have hundreds of billions of dollars in market cap on their own.
Telsa operates a network of over 16,000 global superchargers and collects unparalleled data on the users in their network. With the in house development of autonomous driving Tesla leads the way with the largest tangible integration of future self-driving technology. Bulls see this as a way for Tesla to displace personal transportation options like Uber, and even shipping and logistics businesses like UPS, and J.B. Hunt. As this develops, Tesla’s proprietary software might be the competitive advantage that proves to be the most lucrative.
What needs to happen to get Tesla stock market cap to $1 Trillion?
I don’t think many bears or bulls see the Tesla Market Cap reaching $1 Trillion solely in the auto sector. Telsa would have to effectively out produce several of the world’s largest auto manufacturer’s combined by the end of the decade.
I think the simplest path for Tesla to reach $1 trillion market cap is to continue to hold their own and operate with a positive net profit. The growing base of Tesla customers, investors, and supporters have galvanized around the company and what they believe to be an imminent future. When Tesla stock holders refuse to sell, the price goes up. And when the price goes up, more and more people feel like they’re missing out.
Since January, Tesla has added $300B in market cap. Is another $500B really that far out of reach? I think it’s fair to say this is a manic period in Tesla stock history. And the story grows increasingly complex by the day. Bulls believe Tesla is poised to take over the auto industry, disrupt the energy sector, disrupt transportation and logistics, as well as auto insurance, all in the near future. Why stop there? I think the simplest path to $1T is for the complexity of the Tesla story to increase in the near future, and for the Tesla stock price to go along for the ride with it.
