Elon Musk, founder of SpaceX and chief executive of Tesla Inc., will arrive at the Axel Springer Award ceremony in Berlin, Germany, on Tuesday, December 1, 2020.
Johannessen-Koppitz | Bloomberg | Getty Images
Don’t count Elon Musk among the investors who think Tesla is overvalued, even with the stock up nearly 700% in the last year and the company valued at 213 expected 2021 earnings, according to FactSet.
In a car maker’s fourth-quarter earnings call Wednesday, the Tesla CEO said there is a “roadmap to test” its market potential, which is on top of $ 800 billion, making it the fifth most valuable company in the U.S. . Musk is now the richest man in the world, with a net worth of over $ 200 billion.
Musk’s valuation math goes like this: Assume the company reaches $ 50 billion to $ 60 billion in annual car sales (the company generated $ 9.31 billion in car revenue in Q4 and said that vehicle delivery would increase by an average of 50% a year). As Tesla’s self-driving technology continues to evolve, these vehicles will become self-driving robotaxis, allowing usage to go from 12 hours per week to 60 hours per week. Tesla could charge additional fees for these robotaxis, allowing the company to generate significantly more revenue for each car. Basically, it would be like bringing software economics to an intensive car manufacturing industry.
Musk also announced that Tesla’s full self-driving package will be available on a membership basis starting in Q1, rather than as a one-time $ 10,000 add-on, which will allow Tesla to start generating next revenue. -circulation while working on improving its self-driving. technology.
Even if usage only doubles, a $ 1 trillion valuation can make sense, according to Musk.
“If you made $ 50 billion worth of cars, it would be like getting $ 50 billion in incremental profit, basically because it’s just software,” Musk said in the opening part of the call . Based on that formula, Musk says it would bring multiple earnings of 20 times to $ 1 trillion in market cap – “and the company is still in high – growth mode.”
Less than nine months ago, Musk had a very different view of the company’s valuation. In a tweet on May 1, he said “Tesla’s stock price is too high,” an opinion that sent shares down 10%. Since then, the company’s market cap has jumped more than 450%.
It is possible that investors are already assuming that Tesla cars will eventually turn into revenue-generating robotaxis. But the company is nowhere near having those capabilities yet, and Musk has a history of commitment to technological innovation.
For example, when Tesla began considering self-driving technology in 2016, Musk said the company would complete a hands-free tour across the U.S. by the end of 2017. The company has not fulfilled that mission still.
Currently, Tesla ‘s fully self – driving features include Smart Summon, which allows drivers to take their Tesla from a parking lot to where they stand, and Navigate on Autopilot, which can pilot the car from on-ramp to off-ramp, making necessary blade changes along the way.
But despite the name, the Full Self-Driving package still urges drivers to keep their hands on the steering wheel and be vigilant at all times. A Munich court ruled last year that Tesla had misled consumers about the capabilities of its automated drive systems, and barred the company from introducing “full capacity for autonomous driving ”and“ Inclusive Autopilot ”in its advertising materials.
While Tesla has missed many of its own predictions for self-driving technology, Musk still insists it is coming. “I don’t really see any obstacles here,” he told a call analyst who asked about the company’s progress.
Tesla shares fell 5.5% in extended trading on Wednesday after the company reported earnings that analysts missed, even as earnings were better than expected.
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