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Tesla Market Cap 2025
- Thread starter jhm
- Start date
I've left this poll open so that at any time in future you can change your vote. I hope that over time this poll can capture changes in sentiment.
A year ago, many would have thought that $1T by 2025 was pretty fantastic. My impression is that now it feels much more likely, maybe even a tad conservative. I'm curious about how recent trading influences are perception of long-term value.
A year ago, many would have thought that $1T by 2025 was pretty fantastic. My impression is that now it feels much more likely, maybe even a tad conservative. I'm curious about how recent trading influences are perception of long-term value.
adiggs
Well-Known Member
TheTalkingMule
Distributed Energy Enthusiast
2025 is a big Energy year, much like "2018" was always spoken of as a big looming turning point in Tesla car production.
With SP headed north of $1500 on 2Q earnings and associated implications, I think a massive cash raise will be universally welcomed. Much like the Feb raise, it'll look like freakin genius when the macro crash hits at some point after the election.
Tesla will be flush with cash and ready to build out even more Gigafactories in 2021. All that will be truely up to speed and spraying all global markets with absurd Energy profucts by 2025. Then people will understand. Then they'll buy in to making the leap over $1T.
Why it will take so long? Who the hell knows, it's nearly a certainty today. Guess that's why we're at $1400 for no reason. Some big guys have already figured it out.
With SP headed north of $1500 on 2Q earnings and associated implications, I think a massive cash raise will be universally welcomed. Much like the Feb raise, it'll look like freakin genius when the macro crash hits at some point after the election.
Tesla will be flush with cash and ready to build out even more Gigafactories in 2021. All that will be truely up to speed and spraying all global markets with absurd Energy profucts by 2025. Then people will understand. Then they'll buy in to making the leap over $1T.
Why it will take so long? Who the hell knows, it's nearly a certainty today. Guess that's why we're at $1400 for no reason. Some big guys have already figured it out.
adiggs
Well-Known Member
For what it's worth, I voted 1.25T, being 5x todays valuation. I figure that with dilution, that'll be something like a $6k share price (vs $6800 or so implied by 5*1365).
It's really a thumb in the wind, but I consider it to be on the conservative side rather than the aggressive side. $10k (1.75T ish) doesn't seem out of range to me.
And as we can see in the poll results forming so far, a nice looking normal distribution is arising
It's really a thumb in the wind, but I consider it to be on the conservative side rather than the aggressive side. $10k (1.75T ish) doesn't seem out of range to me.
And as we can see in the poll results forming so far, a nice looking normal distribution is arising
@jhm @adiggs or any of the other super bulls here voting for $1T+ in valuation by 2025... Can you walk me through how you get to that number?
I feel like the only way I can justify $1T in 4 years is if we continue on this crazy tech-bubble we've been on, where valuations go out the window, and people put obscene multiples to justify buying more and more of a company that's already 2x or 3x larger than it deserves to be. Any sort of macro-risk or black-swan event ends up having a super low probability for such valuations to be justified.
I feel like the only way I can justify $1T in 4 years is if we continue on this crazy tech-bubble we've been on, where valuations go out the window, and people put obscene multiples to justify buying more and more of a company that's already 2x or 3x larger than it deserves to be. Any sort of macro-risk or black-swan event ends up having a super low probability for such valuations to be justified.
Thanks for grabbing that.As context, it would be helpful to have some info here in the thread about share price / market cap kind of #s.
I know - I'll look up some of that
I show market cap at $250B (253.1B) today with a share price at $1365. Shares outstanding are 185M (185.371M).
Note that without dilution $1T maps to $5,395/sh.
But if shares increase to 200M, up from 185M, this would provide more than $20B in capital over the next 5 years. We can debate whether Tesla will need to raise that much capital, but I think 200M shares is nice round number that gives Tesla some wiggle room to raise capital.
So if the number of shares increase to 200M, $1T market cap maps to $5000/sh.
ARK's base case, $7000/sh in 2025, maps roughly to $1.4T market cap.
adiggs
Well-Known Member
My valuation targets are way more pulled out of .. somewhere, than they are based on deep and thorough financial, objective, and mathematical evaluation.
The stuff I look at:
1) the total number of shares outstanding for the company are just trivial. 185M. If we round up to 200M for ease (and account for some minor dilution), then each $1B in profit is $5 EPS. I believe the company is going to generating multiple billion profit per year (and probably per quarter) by 2025. So if we were at $10B profit / year, that's $50 EPS. A 100 PE for a company growing 40% plus per year doesn't seem out of line, and lets the folks that look strictly at a company's financial to get to a $5000 share price.
2) I see the early glimmer this year, of the kind of expansion we'll be seeing from Tesla coming. This year, amidst the worst worldwide catastrophe(?) of our generation, the company is currently expanding an existing site, and starting a new manufacturing site. Either is a big project; Tesla is doing 2, and might be starting #3 in Q3. That implies to me that we might see 4-6 of these construction projects next year, then 6-8, and somewhere in there it's just Ludicrous.
3) So I see units ramping way faster than Wall Street at minimum. 1M capacity next year sounds like falling off a log easy (I think Freemont plus Shangai by themselves clears that hurdle; so Berlin + Austin are gravy next year if either contributes). I think that leads to 2M capacity at end of 2022, 3-4M 2023. Capacity to build 10M / year in 2025 sounds a little high to me, but the thing about exponential growth is that it's always slower than we think in the short term, and faster than we think in the longer term.
4) The strategy has plenty of products and markets / addressable market to support this kind of growth, and beyond 2025. So the valuation will continue supporting ongoing growth beyond 2025 (rather than falling back to strictly financial metrics that might support a PE of 20).
5) Along the way, it'll become apparent that Tesla is taking ~the whole auto market. We've talked about maybe Tesla can hang onto 15-20% of the global market. I'm starting to wonder if they can be held back to 50% (nothing objective I can point to - just exuberance and disappointment at how bad the competition is).
I don't consider robotaxis as an important revenue source in this timeframe, and maybe not even by 2030. I also don't think it'll be an important longer term revenue source (say 10 years after it comes into existence) due to low margins in transportation, so there will be a golden window for revenue / profits, but it'll also come to an end.
Anyway, that's how I think about it.
I share your concerns that the share price may be getting ahead of itself by a few years. But here is a little back of napkin.
Bull case: 2019 revenue was $24.6B. Optimistically 2020 revenue could be about $30B. Beyond that assuming 5 years of growth at 50%/y gets to $228B revenue in 2025. Assuming 10% net profit and 40 P/E ratio (still very high growth), i.e. 4 P/S, gets to $911 market cap.
This should be simple enough to see just how optimistic this scenario. Suppose growth is just 40%/y and 30 P/E. This gets to just $161B revenue in 2025 and a market cap of $484B. Even this is not truly a bear case, just mildly less bullish.
Indeed this mildly bullish case implies pretty solid growth. What sucks is that the stock price is already around $1400. Getting to about $2500 in five years is annualized return of just 13%, which is not spectacular. By contrast getting to $5000 in five years is 29% annual return.
So personally I'd feed much more comfortable accumulating more Tesla shares if the current price were below $1000. At $1000, you're looking at annual returns of 20% to 38% between going to $500B and $1T in market cap.
Now the key thing missing on the back of my napkin is what happens if robotaxi service scales up within the next 5 years. That could accelerated revenue growth in an unprecedented way for this company. But personally I'm not ready to throw $1500 down for share on a bet that the robotaxi will pan out. Maybe it will, but not enough is known just yet for it to be bankable.
I remain a solid long-term bull, even if robotaxi never comes to fruition.
EV Market Share
Last week, I posted on the market cap of the top 25 automakers. The total market cap was $968B, of which Tesla was $224B. If Tesla were merely of near monopoly of typical automakers, even a $1T cap today would be hard to justify. Of course, many automakers have outsourced the bulk of the vehicles they assemble, so capturing a bigger share of the whole auto supply chain could open up more market cap.
Last week, I posted on the market cap of the top 25 automakers. The total market cap was $968B, of which Tesla was $224B. If Tesla were merely of near monopoly of typical automakers, even a $1T cap today would be hard to justify. Of course, many automakers have outsourced the bulk of the vehicles they assemble, so capturing a bigger share of the whole auto supply chain could open up more market cap.
Regarding 3). I think you are modeling production growth at almost 100% YoY... We've seen in the past what happens when we assume 50% YoY growth, and $TSLA delivers 30% or 40%... The channel of 2014-2016, and 2018/2019... range bound prices. When you project things out significantly over the course of a decade, and your growth rate drops by even 5%, you have some serious changes to your current price. Even if we assume perfect execution, I find more than 50% YoY growth hard to swollow. No matter gow amazing Elon + Team are, macro events can and will cause things to slow down.
A @jhm I can always rely on you to be a voice of reason. My personal model puts us at $1T around 2029, and $500B in the 2024-2025 timeframe. I would like an anualized return of 25%, but given that my current exposure to $TSLA is simply 10 delta (10 shares). I'm happy to add back at a rate which gives me 20% returns, and start accumulating there...
I see lots of people playing the S&P inclusion game, but I feel like that's riding a wave, and trying to cash out before it comes crumbling down. If I'm going to ride waves, I'd rather do it on penny stocks at a lower upfront investment, and/or via options (which are extremely expensive for today's stock price).
I don't believe robotaxis will exist, at least not at scale till 2030+. Elon's been calling on them for nearly 4 years now, I still remember the "cost-to-cost driverless trip" that was suppose to happen in 2018.... He severely underestimates the tail-end of that distribution. I've worked on Perception and Prediction systems at Uber ATG, so I feel like I'm somewhat qualified to assess this topic.
adiggs
Well-Known Member
I appreciate your generous description of some of my estimates as something so sophisticated as a model
. It's more like a directional idea, and I generally agree with the larger point that Tesla growth is going to be more like 40% yoy and is more likely to be at that level than 50% yoy. This is a good reason to go with the larger point I think you're making that I'm overestimating.My long term investment thesis isn't bound up with something so specific as a share price or market cap at some point in the future - it's about strategy, opportunity, and execution. All of which I consider to be approximately best in class for the world. (Service could use some work - it's the one significant shortcoming I see in the company today, but it's not in danger of chasing me out of my 10+ year investment horizon today).
Part of the reason for my choice of 1.25T market cap is to try and fudge some for that idea of "exponential growth is faster in the long term than we think it'll be today"; human brains aren't great with exponentials.
This one is easy for me - I totally agree! I see the market as something akin to what we have today - increasingly sophisticated driver assistance that might even achieve hands free / attention free driving between start and stop. But the driver is going to take over at most destinations, and drivers will take over for funky stuff (like positioning a pickup in just the right spot to unload it).
I think that I'd like to be wrong, but I think that robotaxis are harder, there are more corner cases that are really hard to handle, and that even if all that is solved - that the opportunity will be smaller than some of the projections put them at. I see private ownership of vehicles that can drive themselves to be a big opportunity as well. Examples of why include families with children (maybe only need 1 bigger car, with other trips handle via the taxi - I think that'd be common); the overnight / medium length trip where the car handles the details and you wake up 600 miles away from where you started (rather do that in my own car, but maybe the taxis will be able to handle starting in Oregon, and then continuing their work in San Fran after making the trip - sorta like U-Haul.. H'mm...)
Oh - and culturally, I don't see a fast shift to being ok with empty vehicles driving around to their next use, or to go charge, or whatever. Empty vehicles doing stuff - I think that'll also take some time.
And either way, I don't include taxis in my own calc of future market cap / value.
I guess it's worth noting that this is an interesting intellectual exercise, but I'm also sort of indifferent to how right or wrong I am. I don't see any way the stock is flat for the next 5 years, unless it's a steadily compressing spring sort of deal. A reasonable outcome for me personally is an approximately $2500 share price (so only a $500B market cap - I'm starting to think that exuberance could make that happen this year). That by itself puts my family into a better retirement position than we've really planned (and maybe means I'm close enough to retire this year). So whether the future is $2500, $5000, or $50,000 - I'll have the ability to sit back, eat my popcorn, and enjoy the show! It's been a marvelous show for the last 8 years.
Thank you for your kind words.
I find that when you're investing for long-term growth, it doesn't matter so much what your long-term target is, you simply want to accumulate when it is cheap. A target of say $2500 in 2025 and desired return of 20%/y implies a buying line of
$1005 in 2020, i.e. $2500/1.2^5
$1206 in 2021
$1447 in 2022
$1736 in 2023
$2083 in 2024
So if you accumulate below that line, and the price in 2025 is $2500 or better, then you realize a better than 20% return on your investment.
The trouble with Tesla hitting $1400 now is that you either wait for a substantial pullback or you convince yourself that a higher long-term price target is believable or lower expected return is acceptable. I've noticed in the BFPT thread that when the stock is trading poorly, people are inclined to disbelieve low long-term targets that are too conservative, and when trading well, they are overconfident in long-term targets that are too optimistic. So people generally miss out on the best bargain prices and pay too much for recent exuberance. For example, the curve above also suggests buying below $837 in 2019. So with incredible hindsight, we now see that any price for TSLA in 2019 was a bargain. But it didn't really feel that way when we were in the middle of it. I think it is virtually impossible to rise above prevailing sentiment in the midst of it. We are social creatures. But it does help to try to keep the long view in sight.
I agree with you 100%... I've made this mistake many times over the past 7 years... Losing out close to $5m-$10m in stock gains (not counting the countless options trades which I let go of too early). I made the same mistake in 2011/2012 with my investments in $AAPL and $GOOG.
I say no more, I will stick to these rules, and do so not by executing the trades myself, but getting someone else to do it for me.
The recent 50% runup has been absolutely crazy, and in the 25% chance that $TSLA does not have a profitable Q2, we will give it up, and a lot more.... I, for one, will be ready with cash in hand.
Who was it that said the universe aims to maximize irony? Tesla leaps to $1545/sh, $286.5B market cap.
The difficulty with waiting for a pullback is not knowing from what level it will pull back. Will it pull back to $1120 from $1600 or perhaps to $1540 from $2200? Both are consistent with the market cap reaching $1T in 2025. Indeed both could happen.
The one thing I have learned in investing in Tesla for many years is that it is best to accumulate small investments over time. I got particularly good at catching falling knives. The key is that it is best just a portion of you cash so that as the price continues to fall, you can keep buying more. It may not seem all that sophisticated, but it is consistent with understanding that one knows that one cannot predict near term price movements. One simply stands at the ready to take advantage of buying opportunities.
It seems that trading Tesla may have fundamentally changed. In the past I learned to expect that shorts would eventually drive the price down. It was never clear just how far they'd be able to suppress the price, but you could count on their reliable attemps, and the way gain advantage was to accumulate more shares at beat up bargain prices.
Perhaps the shorts will come back. It is also possible that shorts will become ineffective in keeping price below a reasonable valuation. If this becomes the case, prices could rise very high. The risk could simply be paying too much for shares. Perhaps the way to play is to make occasional small trades.
For some of us the envious challenge is how to adjust our portfolios when Tesla share price appreciation has grown into an out sized position. Perhaps Tesla was one 50% of our portfolio, but has grown to 80%. A drastic rebalancing could be a big mistake, if the price appreciation continues. On the other hand, no triming of position could miss out, if other opportunities perform better than Tesla for the next year or two. For example, along the way to $5000 in 2025, the price could stay in orbit of $1500 for several years before its next big run up $3000. Granted Tesla will be becoming more valuable each quarter, but its history of stock price movements suggest that the market often has a hard time tracking with that and that real stock price appreciation occurs in short bursts. I am certainly not claiming to know how Tesla will trade going forward. It is enough to be adaptive.
Best of luck learning how to adapt to what comes next.
The difficulty with waiting for a pullback is not knowing from what level it will pull back. Will it pull back to $1120 from $1600 or perhaps to $1540 from $2200? Both are consistent with the market cap reaching $1T in 2025. Indeed both could happen.
The one thing I have learned in investing in Tesla for many years is that it is best to accumulate small investments over time. I got particularly good at catching falling knives. The key is that it is best just a portion of you cash so that as the price continues to fall, you can keep buying more. It may not seem all that sophisticated, but it is consistent with understanding that one knows that one cannot predict near term price movements. One simply stands at the ready to take advantage of buying opportunities.
It seems that trading Tesla may have fundamentally changed. In the past I learned to expect that shorts would eventually drive the price down. It was never clear just how far they'd be able to suppress the price, but you could count on their reliable attemps, and the way gain advantage was to accumulate more shares at beat up bargain prices.
Perhaps the shorts will come back. It is also possible that shorts will become ineffective in keeping price below a reasonable valuation. If this becomes the case, prices could rise very high. The risk could simply be paying too much for shares. Perhaps the way to play is to make occasional small trades.
For some of us the envious challenge is how to adjust our portfolios when Tesla share price appreciation has grown into an out sized position. Perhaps Tesla was one 50% of our portfolio, but has grown to 80%. A drastic rebalancing could be a big mistake, if the price appreciation continues. On the other hand, no triming of position could miss out, if other opportunities perform better than Tesla for the next year or two. For example, along the way to $5000 in 2025, the price could stay in orbit of $1500 for several years before its next big run up $3000. Granted Tesla will be becoming more valuable each quarter, but its history of stock price movements suggest that the market often has a hard time tracking with that and that real stock price appreciation occurs in short bursts. I am certainly not claiming to know how Tesla will trade going forward. It is enough to be adaptive.
Best of luck learning how to adapt to what comes next.
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