Could Tesla Stock Hit $1,000 In 2020?

Tesla

APR 22 2017 BY EVANNEX 24

Tesla

Tesla Model S

GETTING TO A $1,000 PRICE TARGET FOR TESLA STOCK IN 2020

There’s a saying in stock market circles that the bursting of a bubble is imminent when the last of the bears gives up and joins the bulls.

We don’t think that’s the case for Tesla just yet (we say, as the stock powers through its all-time high and cracks the $300 mark) – there are still some bears out there. But there’s no question that a lot of market pundits have been belatedly climbing on the electric bandwagon over the last few weeks. Now Victor Dergunov has written in Seeking Alpha, usually a platform for Tesla skeptics, that TSLA stock could plausibly reach $1,000 in 2020, and that the California carmaker could be a trillion-dollar company by 2030.

*This article comes to us courtesy of Evannex (which also makes aftermarket Tesla accessories). Authored by Charles Morris.

Most of the bearish arguments rely on one of two scenarios: (1) Tesla won’t be able to reach its goals for production of Model 3; or (2) once consumers really start buying EVs, the legacy automakers will bury Tesla with their vast capital and economies of scale. Mr. Dergunov dismisses both of these canards:

“There is no justifiable reason to doubt Tesla’s production capabilities or demand for future and existing products,” he writes.

Tesla

Tesla Model 3

“The company has had several minor issues in the past with bringing enough cars to market to meet demand due to a shortage in lithium-ion batteries,” writes Dergunov. “However, Tesla chose to alleviate this problem by producing its own batteries at its new [Gigafactory]. Naturally, there are other elements not related to batteries that could hold up production…however…investors have no justifiable reason to doubt Tesla’s 2018 projections, as everything substantial Elon Musk promised in the past has come to fruition.”

That’s a very different song from the one sung in bearville, where it’s an article of faith that Tesla has “missed every deadline.” Of course, what the bears have never explained is why that’s so important. With Models S and X continuing to sell briskly and Model 3 more or less on schedule, it’s plain that the delays and SNAFUs of the past, however embarrassing they were at the time, haven’t done the company any long-term harm.

Tesla

Sure, Tesla’s production has fallen behind and the company has missed its guidance – sometimes by as much as 10% – but that doesn’t change the fact that growth has been significant. (Image: Motley Fool)

Dergunov dismisses those who are still skeptical regarding Model 3 demand, saying, “Whether people like it or not, internal combustion engines are the proverbial past and electric Tesla technology is the future. CD players gave way to iPods, Blockbuster gave way to Netflix, brick-and-mortar retailers are giving way to Amazon… and ultimately, internal combustion engines will give way to newer, better, more efficient EV technologies.”

Unlike so many other pundits, Dergunov has also grasped the fact that Tesla is now more than an automaker.

“At its core,” he writes, “it is a technology company that happens to produce cars.” He also understands how far ahead of any potential competition Tesla is on all fronts: performance, autonomy, infrastructure and yes, price: the Model S P100D is the fastest accelerating production car on the market and the safest car ever tested, and it starts at “a fraction of the price of a performance luxury vehicle.”

Tesla

In reference to this chart, Dergunov points out, “There is a whole lot of available market share for Tesla to capture.” (Source: Seeking Alpha)

“The company offers affluent consumers a product that is years beyond anything the competition has to offer. There are no other 100% electric vehicles on the market that offer anything close to Tesla in terms of a combination of performance, capability and practicality… the competitive advantages Tesla has in the EV market are enormous.”

Dergunov next does some math, most of which I will spare you, dear reader. Based on past production and a survey of analysts’ predictions, he forecasts that Tesla will produce a total of 845,000 vehicles in 2020, a bit short of the company’s own projection of one million. That will give it a mere 1% of the automobile market, but the potential for further growth will be “staggering.” Tesla is “taking market share from other companies in the luxury car segment,” Dergunov writes, “and the Model 3 will do the same, only in the mass market. [Tesla] will likely continue to capture market share, and by 2030, should attain a leading position in the market with around 7 million vehicles [per year] and revenues of around $315 billion.” This is within striking distance of the 10 million vehicles that a GM, a Toyota or a Volkswagen produces.

Tesla

Forecasting 845,000 Tesla vehicle deliveries in 2020 (Image: Seeking Alpha)

Tesla stock currently trades at around six times sales, comparable to the valuations of growing technology companies such as Google or Netflix. Assuming that by 2030, it is trading at around three times sales, typical for mature technology companies such as Apple and Amazon, Mr. D figures that Tesla will have a market cap of $1 trillion.

Naturally, this view of the future depends on most of the cards falling Tesla’s way. It assumes that the exponential growth of the company will proceed more or less smoothly, and that the Dinosaurs of Detroit will continue to drag their feet on electrification. But if you concede those points, then what we have here is a plausible path to a scenario that just a couple of years ago would have seemed inconceivable: that the mighty auto companies could eventually fall, done in by a more nimble competitor, just as former giants in other industries were overwhelmed by the internet.

“This analysis indicates that a $1,000 price target for Tesla stock in 2020-2021 is not only extremely fair, but appears highly attainable,” Dergunov concludes.

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Source: Seeking Alpha

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

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24 Comments on "Could Tesla Stock Hit $1,000 In 2020?"

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DangerHV
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DangerHV

No mention of solar products in the calculation? If the estimates are only considering auto sales, I think solar sales would be like having insurance that Tesla’s value could reach these levels. There are many wealthy people who will be clamoring to get their roofs replaced with “Tesla” solar regardless of cost.

Mikael
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Mikael

Solar is and will be very marginal compared to cars. Everything will of course help but if solar ends up at 1-2% of total revenue then it is great.

Energy storage solutions on the other hand could maybe end up at ~10% of their revenue.

Michael Will
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Michael Will

Home Solar is the logical consequence of electrical driving.

We got ours in 2015 when we got the first electric car and projected it to pay for itself in 7 years based on our yearly electricity bill from home air conditioning already, and sized it to produce enough for replacing our other car in 2016. With energy prices going up recently and us now having replaced both gas cars with electric last May, it probably amortizea even quicker.

So I would not underestimate the home energy market consisting of solar and home batteries.

And then there is the whole utility and commercial consumer solar and energy storage market.

Another big market tesla is going to penetrate is autonomously driving car sharing ride services.

sven
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sven

DangerHV said:
“I think solar sales would be like having insurance that Tesla’s value could reach these levels.”

Have you seen the financial condition and financial results of US solar manufacturers? They’re getting decimated by China dumping panels below cost onto the US market. And don’t forget that Solar City was approaching an immanent bankruptcy, before Tesla bailed them out to prevent Musk and his cousins from incurring a huge financial loss on their SolarCity stock and debt holdings.

Cuttent financial results for SunPower and First Solar in links below:
https://www.greentechmedia.com/articles/read/SunPower-CEO-Tom-Werner-A-Solar-Power-Market-in-Significant-Transition

https://www.greentechmedia.com/articles/read/First-Solar-Posts-Better-Than-Expected-Q4-Raises-2017-Guidance-Preps-New

¯\_(ツ)_/¯ sven
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¯\_(ツ)_/¯ sven

I forgot to mention that on April 17 last week, another US solar manufacturer filed for bankruptcy protection.

https://www.greentechmedia.com/articles/read/is-suniva-about-to-start-another-solar-trade-dispute

Paul Smith
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Paul Smith

Sven, you seem obsessed with attacking this. Keep in mind that the U.S. is not Tesla’s only market, and they move very fast at making their products unique and coveted.

Paul Smith
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Paul Smith

Tesla First Solar have a unique product in their solar tiles and Powerwall combo, and I’m sure will come up with a package deal for a car, roof and storage.

Travis Vallance
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Travis Vallance

The solar end of his business also produces powerpacks and panels that he sells in bulk to countries with very high cost per KWH like Hawaii and South Australia, so he gets massive contracts from governments. There is a huge niche in a lot of depleted electrical infastructure that this portion of Tesla can cash in on as well.

Omicron
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Omicron

I think this analysis is just as overly optimistic as some of the opposing pieces of pessimism. I too expect Tesla’s stock to grow further, but I also think that a lot of the growth attributed to the Model 3 is already priced into the stock today, in the form of high expectations. At some point, the sheer exuberance *has* to die down a bit, anything else would be unhealthy and not necessarily in Tesla’s favor.

I think if Tesla were to end up between $400 and $500 in 2020, that would be an acceptable level based on car production alone.

Any additional growth beyond that, I feel, would have to come out of the Tesla Energy side. And because of how young that still is, making predictions about it is difficult. Especially when the company’s own focus is clearly elsewhere right now.

ffbj
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ffbj

That’s more in line with my view too.
I think they’d made a good start, and without competitors, though there are many detractors, they are effectively a legal monopoly in the space they control.

Nix
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Nix

“a lot of the growth attributed to the Model 3 is already priced into the stock today”

I agree with this statement. The huge upside for Tesla successfully bringing the Model 3 to market is already baked into the current price.

However, what we don’t know today, is what future products will also get baked into Tesla share prices in 2020. For example, if Tesla has announced a couple of more lines of cars (or trucks), or a new line of business by 2020, those future expectations would then get baked into the 2020 TSLA share price.

This is going to continue happening until Tesla has many more existing product lines and lines of business than they have new future cars/trucks and future lines of business.

It may be a decade before TSLA share prices will be based upon the year before’s P/E. Once Tesla completes a new vehicle that is already baked into the stock price, the stock price won’t just sit at that price. It will have the next new product baked into the stock price.

F150 Brian
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F150 Brian

The thing with stock valuation is that it is factoring in what will happen in the future. Given tesla keeps adding new ventures, the sky is the limit.

The bigger a company gets the more investors expect real returns and hence the pull back to a reasonable PE ratio.

The above two are opposing forces and it’s hard to predict which will be stronger. If the latter, Telsa could grow in every way but stock valuation.

There is one thing that is guaranteed- when the large investors make switch (stop buying huge blocks), the ascent is permanently over. Look up the term “the fools are in”.

Ocean Railroader
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Ocean Railroader

I personally think Tesla’s stock is going to be between a 130 or $340 a share by 2020. This is due to Tesla getting into full production.

The only way Tesla stock is going to a $1000 dollars is is Elon Musk invented a star ship drive like in Star Wars and has a star ship parked in his back yard.

Alaa
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Alaa

I don’t think that

was taken into account.

I think that all internal combustion engines will be electric.

As for the batteries, we heard Elone say that just 100 factories like his are enough for the world. A few months later we hear that the solid state batteries are three times as dense; 33 factories will be enough.

Victor Dergunov did not take into account the OPEC GDP countries. All his work was based on cars.

Robert Weekley
Guest
As I see it, if the current stock price multiple is future performance betting, at a ratio of 6, if it drops by a single digit per year going forward, as Tesla Delivers on its Goals in a More Timely Manner, it should still be at a Multiple of 3 by 2020! Breaking it down: 50,000+ Model S & Model X expected to be produced in 1st Half of 2017, based on Company Guidance and approximately 25,000 Produced in Q1, 2017; Model 3 Production Targets of 1,000 per Week in July, 2,000 per Week in August, and 4,000 per Week in September, with 5,000 per Week before 2017 Year End; Reveal Tesla Semi in September 2017! All these points are stated or mentioned by Elon Musk, so are ‘Muskomistic’ projections, but are easy to tell if – a) The Semi is, in fact, Revealed, and b) Elon is likely to Tweet if he sees production Meeting or Exceeding the 1,000 – 2,000 – 4,000 per week targets. So much of the forward speculation, at present, will be known info by early October, 2017. I expect to hear about Model 3 Cell production has begun at the Gigafactory within as soon… Read more »
Mister G
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Mister G

If it gets to $1000 a 5 for 1 stock split would be great… $200 per share will bring in more middle class investors.

Waiting
Guest
Waiting

EXACTLY!!

Brian
Guest
Brian

Can the current factory even produce that many cars on 3-4 platforms? It had a max output around 400k before right?

If they want to hit these numbers they need to open another factory in Europe and one on the east coast probably.

Robert Weekley
Guest

Have you missed the amount of Freemont Building Expansion permits and construction?

So the first 500,000 per year look well planned, and the moves are in work for the 1 Million in production – in the 2019-2020 window.

Chris O
Guest
Chris O

845,000 vehicles in 2020? Hmmm, Model X+S seem to have plateaued at about 80K units/year and it would be unprecedented if a lower luxury price level entry like Model 3 sold enough to make up the difference, even if a “Model Y” crossover variant were part of line up.

It would be great but even Model 3 is still a pretty expensive car.

serial anti tesla troll thomas
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serial anti tesla troll thomas

Hahaha. Another Tesla pro troll who gets absolutely crazy. That’s true that “There is a whole lot of available market share for Tesla to capture.” but the valuation of Tesla is already now as high as it would make 10 Billion $ Profit per year as the top carmakers are making at the Moment.
Such Things I heard last time short before Enron got bankrupt.

ffbj
Guest
ffbj

At least try to make a valid comparison.

Robert Weekley
Guest

En-Who?

Nix
Guest
Nix

There are a lot of trolls out there who said over and over that Tesla’s sales numbers would be zero, because they would never succeed in bringing a single car to market. They said over and over that Tesla’s cars were vaporware and would never be built — that Tesla would be bankrupt.

They said zero Roadsters. 100% wrong
They said zero Model S. 100% wrong
They said zero Model X. 100% wrong
They said zero Model 3. They will soon be 100% wrong on that too.

They have been 100% wrong over and over, so Tesla being off by around 7% on their targets looks pretty good in comparison.