Can Tesla Become The World’s Most Valuable Company?Jan 12, 2022
Why people keep doubting Tesla is honestly beyond us at this point. At every step of the way, Tesla has been able to prove the naysayers wrong.
When we first recommended them in 2020, Tesla was still on the cusp of legitimacy and its stock price reflected it. When we wrote them up again last year ( see it here ), their price exploded but still paled in comparison relative to our most recent analysis when Tesla’s stock price was still at $950 ( see it here ).
But now up over 800% since we first recommended them, we're updating our analysis yet again as the gap between Tesla and the rest of the EV industry is just insanely wide at this point.
Tesla is in the middle of mastering vertical integration and becoming a powerhouse in building and shipping cars -- leaving the rest of the industry in the dust.
Sitting at over $1 trillion in market cap, the upside for Tesla is "relatively limited at this point" compared to companies like Rivian and Lucid who are still so young with so much more room for growth, but Tesla is one of the best risk/reward picks within the stock market.
Even in an environment favoring value, defensiveness, & fundamentals overgrowth, Tesla is one of the shinier names available who still has the ability to do very well in 2022.
So with that context let's get into our newest analysis, how much is tesla stock worth, where we see the stock price going this year and everything you need to know about why we absolutely have and continue to love this individual stock 👇
Why We Loved Tesla Last Year:
So before we jump into our new analysis, what we said about Tesla during our last analysis is the cornerstone for why we still love them today.
The last time we wrote them up, we said we loved 3 things: Vertical integration, profitability, and access.
Without recapping the entire last analysis, the TLDR on each were:
Vertical Integration: While not all of their parts are made and created in-house, they outsource a lot less of the manufacturing process relative to their competition. Not only does this help drastically increase margins but during times of supply chain restraints, their business model also shines.
Profitability: Tesla is leading almost every single automaker in terms of profitability per car. The most impressive of these metrics is their 23% EBITDA margin. This margin means that Tesla is making over $10K of EBITDA per car whereas most manufacturers are in the low single digits!
Access: Tesla's goal is still to release an EV in the mid-teens price point! This is a prime example of how their mastery of vertical integration, scale, and profitability will allow them to do something no one else is even close to doing. This should push EV's in the mainstream and allow Tesla to finally rapidly scale their operations!
Why We Love Tesla Even More This Year:
So now that you're up to speed, this was very important to grasp because Tesla is making significant progress on all three.
And not only is profitability increasing, as well as their steps towards vertically integrating and creating an accessible car for the masses, but growth is still as present as ever. Growth of the company, will just make these more achievable as they get more dollars in the door to re-invest back in the business -- thereby making it more efficient. This growth translates to:
Tesla's 4th quarter car deliveries being 25% above the consensus estimates. This is insane. If Tesla can keep up this growth in 2022, it will blow past expectation targets of 1.1 million cars delivered.
Deliveries are key here and not purchases because in the world of automobiles, supply chain issues are always present and the goal is to get the cars not only purchased but delivered as well!
Our expectations for Tesla though are actually to exceed 1.5M cars delivered in 2022 and at least 2.25M cars delivered next year (signaling 50%+ growth). If Tesla is able to hit these metrics, while keeping the above constant, we believe our base case will be easily achievable for their stock price.
EBITDA is continuing to grow like crazy as well. If Tesla can continue growing EBITDA, it'll be able to have a higher EBITDA than almost any other American car manufacturer out there. Think about that for a second. Tesla has been around for less than 20 years and is going to have more earnings than companies that've been around for over a century. The significance of this cannot be understated.
The combination of higher than expected deliveries while increasing profitability speaks to the testament of their vertically integrated supply chain, brand value, demand for their cars and a handful of other factors. As we said years ago and as we'll say for years to come, Tesla is a no-brainer pick to hold.
Tesla has unique access to talent and capital, which allows for innovation at a pace that no other company in their vertical can keep up with. Their innovation far outpaces 99% of other companies and Tesla isn't slowing down any time soon.
With the rollout of Giga Factories in Berlin & Austin + new models and other products, Tesla's 2022 will likely be more exciting than their 2021.
But as investors there are two main things to be aware of when considering where to invest in stocks:
We're continuing to transition to a risk-off environment. What this means is that investors are taking capital from high-risk growth stocks and putting it in safe assets like defensives as the Fed changes its policies that have been so accommodative over the past decade.
Secondly, while the Tesla car has shown a high aptitude for enhancing battery technology, the real test for them this year and next will be in how quickly they can innovate on their core battery technology. Batteries are the number 1 complaint from combustion engine-based drivers. And the ability to have a high range and the infrastructure needed to support EVs will be a key theme for them and the rest of the industry in 2022.
At the end of the day though, even if our investment advice is wrong in the short term, in the long term Tesla is as sure-fire as a pick compared to other stock options we've ever recommended.
Tesla is innovating at a pace rarely seen and they're doing it profitably. We're therefore increasing Tesla’s stock price target and will likely increase it again before the end of the year!
Price Target: $1,325 (26% upside)
Current Price: $1,050
Target Date: Q3 2022
Risk/Reward: Low-Medium/ Medium-High
Dividend Yield: 0%
Market Cap: $1.07T