Elon Musk, SpaceX founder and CEO of Tesla Inc. , To the Axel Springer Awards ceremony in Berlin, Germany, on Tuesday, December 1, 2020.
Johansen Kubitz | Bloomberg | Getty Images
Do not count Elon Musk Among the investors who believe Tesla is overrated, even as the stock rose nearly 700% in the past year and valued the company 213 times its projected 2021 earnings, according to FactSet.
In the car maker Fourth-quarter earnings On Wednesday, Tesla’s CEO said there is a “road map to justify” its market capitalization, which has exceeded $ 800 billion, making it the fifth US company by value. Musk now The richest person in the world, With a net worth of over $ 200 billion.
Musk’s valuation calculations go as follows: Assume that the company will soon reach $ 50 billion to $ 60 billion in annual auto sales (the company generates $ 9.31 billion in auto revenue) In Q4 He said vehicle deliveries will increase at a rate of 50% annually from now on.) As Tesla’s autonomous driving technology continues to improve, these vehicles will become an automated autonomous driving hub, allowing use from 12 hours per week to 60 hours per week. Tesla could charge additional fees for these robot cars, allowing the company to generate more revenue per vehicle. Basically, it will be more like bringing software economics to the manufacturing-intensive auto industry.
Musk also announced that Tesla’s full autonomous driving package will be available on a subscription basis starting in the first quarter, rather than being made available as a one-time addition of $ 10,000, which will allow Tesla to start adding recurring revenue as it improves its autonomous driving technology.
Even if use only doubles, the trillion dollar valuation could make sense, according to Musk.
“If you win cars worth $ 50 billion, it will be like getting $ 50 billion in additional profits, because it’s basically just software,” Musk said in the introductory part of the call. Based on this formula, Musk says that a 20-fold increase in profits would result in $ 1 trillion in market value – “the company is still in a high growth position”.
Less than nine months ago, I had a mask A very different perspective On the evaluation of the company. In a tweet on May 1, he said “Tesla’s stock price is too high,” a comment that sent shares down 10%. Since then, the company’s market value has jumped by more than 450%.
It’s possible that investors are already assuming that Tesla cars will eventually turn into revenue-generating robots. But the company has not come close to having these capabilities yet, and Musk has a history of extravagant promises when it comes to technological innovation.
For example, when Tesla began discussing autonomous driving technology in 2016, Musk said the company would complete a hands-free journey across the US by late 2017. The company has yet to complete that task.
Currently, Tesla’s fully autonomous driving features include the Smart Summon, which allows the driver to call his Tesla car to go from parking spot to where he is standing, and navigation on Autopilot, which can drive the car from a highway on a ramp to outside – getting involved, making necessary lane changes Along the way.
But despite its name, the fully autonomous driving package still requires drivers to keep their hands on the steering wheel and stay awake at all times. Court in Munich She ruled last year That Tesla misled consumers about the capabilities of its autopilot systems, preventing the company from including “the full potential of autonomous driving” and “full autopilot” in its advertising material.
While Tesla misses many of its own predictions for the autonomous technology, Musk continues to insist it is coming. “I really don’t see any hurdles here,” he told an analyst on the call who asked about the company’s progress.
Tesla shares fell 5.5% in extended trade on Wednesday after the company reported earnings that fell below analysts’ estimates, even as earnings were better than expected.
Watch: Tesla misses out on earnings