Have you ever pondered over Tesla's real worth? Its staggering $859-billion price tag can only make sense if you anticipate a radical shift in the automobile sector.
Key Points
Tesla's $859-billion valuation hints at a significant transformation in the automotive sector.
With its shares being among the most traded, Tesla remains an intriguing discussion in stock market circles.
Elon Musk's ambition for Tesla involves producing a monumental 20 million cars annually by 2030.
Morgan Stanley predicts that Tesla's supercomputer, Dojo, could have a staggering value of up to $500 billion.
Tesla's Valuation: A Tech or Car Company?
Undeniably, Tesla's value doesn't strictly correlate with its vehicle production. The raging debate about its worth is evident, especially when considering its prominence in the strategies of those building investing portfolios. Given that its shares are among the most traded in the U.S stock market, Vanda Research data reveals that on 92% of this year's trading days, private investors favored Tesla over other U.S. firms. However, data shows that it's also the leading U.S. short, with a substantial $21 billion backing the possibility of a price dip.
As Tesla prepares to unveil its third-quarter deliveries, discussions about its valuation, which has surged this year despite slashed prices and decreased profit projections, will inevitably intensify.
Tesla's Valuation: A Tech or Car Company?
While settling this debate might be elusive, one fact stands out: Tesla's valuation mirrors that of a tech entity rather than a traditional car manufacturer. Although its market cap of $859 billion is over triple that of Toyota's, the world's premier car producer, this comparison might be misleading. Oddly, Tesla, a car manufacturer, accrues value from other avenues.
To delve deeper, you can employ a discounted cash flow analysis. Key factors include Tesla's expected vehicle sales by 2030, projected selling prices, anticipated profit margins, and potential new auto-related ventures.
It's conceivable to estimate Tesla's core car business worth at $1 trillion or even more. However, such predictions require both optimistic sales and profit margin projections, which might not be realistic. Elon Musk's ambition to produce 20 million cars annually by 2030 is monumental, especially when compared to Toyota's 10.5 million vehicles and Ford's 4.2 million in the previous year. Using Toyota as a benchmark, even optimistic estimates only justify a $445 billion enterprise value for Tesla by 2030.
One note of caution: these valuations are deeply influenced by discount rates. For this analysis, it rounded down to a straightforward 10%, as recommended by NYU's Stern School of Business professor, Aswath Damodaran.
Dojo: The Game Changer for Tesla?
Tesla has long been at the forefront of the electric vehicle (EV) revolution, but as you delve into its staggering valuation, it's evident that there's more to the story than just car sales. The current market dynamics suggest that Tesla's car sales may only account for half of its valuation. This leads to wonder: what else is contributing to this mammoth evaluation?
The answer might lie in technology and innovation. There's been a buzzing debate about this, and one focal point of this conversation has been Tesla's supercomputer, Dojo. Morgan Stanley's recent report throws a spotlight on Dojo, suggesting its potential valuation could skyrocket to a whopping $500 billion. The reason? Its promise to significantly expedite the profitability from self-driving cars. It's intriguing to note that Morgan Stanley's new valuation for Tesla doesn't heavily lean on its automobile production; in fact, the core car business only represents about a quarter of it.
However, placing such immense trust and value on technologies still in their infancy comes with its set of challenges. These innovative ventures bring uncertainties. As industry expert Damodaran pointed out, while the introduction of new business models can be groundbreaking, they might simultaneously undermine and outpace the older models.
Consider the rise of robotaxis: if they become mainstream and widely accepted, the traditional model of personal car ownership might take a backseat, potentially denting Tesla's foundational business.
It's also crucial to recognize that while Tesla is a significant force, it's not alone in its ambitions. The EV industry is brimming with competitors and innovators, each striving for the next big breakthrough. Yet, Tesla stands out, not just for its products but also for the investor confidence it commands, reflected in its unparalleled valuation.
Conclusion
Tesla's valuation journey is about more than cars-it's a fusion of its core vehicle business and potential tech innovations. While the company's worth may be debated today, it's evident that Tesla is pioneering a shift in the automotive landscape. Whether viewed as an auto giant or a tech innovator, Tesla's influence is undeniable. As the industry evolves, only time will truly reveal the depth of Tesla's impact and its lasting imprint on our world.
