Where Will Tesla Stock Be In 10 Years?

For years Tesla (NASDAQ:TSLA) was misunderstood and mis-characterized as “just another car manufacturer.” Tesla’s detractors would point to comparisons between it and leading manufacturers, such as Toyota, General Motors, Ford, BMW and Volkswagen. 

The most common criticism pointed to Tesla’s smaller unit volumes relative to its competitors, and how its market capitalization, which superseded all other manufacturers combined, could possibly make sense. They argued, to the contrary, that it made absolutely no sense whatsoever to value Tesla in the hundreds of billions when its peers had more sales, unit volumes, and history on their side.

But what the detractors failed to see in those early days, and which has become more clear, is that Tesla was not just another car manufacturer but instead was a software connected hardware company, meaning that it was primary led by a software expert, Elon Musk, who happened to build upon an automotive base. 

Much like Apple built an empire on a connected-hardware device, the iPhone, so too Tesla was able to lead with software. 

To understand how disruptive this was, we need only look at the challenge other automotive CEOs faced when attempting to compete with Tesla.

Famously, one spoke of how each controller unit was sourced from a different supplier and thousands of suppliers’ software was integrated into one car model, so when any change was required, the auto company would have to get permission from the supplier to make software code changes to avoid violating patent and copyright agreements. 

Contrast that with Tesla, which built its software in-house from the start, with the vision to connect all cars in the future with its full self-driving system, FSD. 

Each software iteration of Tesla led to consumers feeling like they had a new car. A markedly different experience to purchasing any traditional vehicle that essentially never changed, or at least got better, from the day of purchase.

The unique user experience differentiated Tesla from the beginning, and allowed CEO Elon Musk to charge a premium that resulted in higher margins, which ultimately turned into monstrous cash flows, justifying shareholders confidence and support of TSLA share price and valuation.

But that’s all in the past. Now the question is this.

Where Will Tesla Stock Be In 10 Years?

Of the 35 analysts who cover Tesla, the most optimistic estimates that Tesla will be worth $350 per share, which would translate to a $1.11 trillion market capitalization within the next ten years.

There are a number of reasons to support this forecast. First off, Tesla continues to grow at a rapid pace. Consider the year-over-year sales growth for the past 3 years, which has been reported at 28.3%, 70.7% and 51.4%, respectively in fiscal years 2020, 2021, and 2022.

Those revenue figures have translated into monstrous operating income gains, which increased over the same three year period from $1.95 billion to $6.5 billion to $13.6 billion, respectively.

As Tesla succeeded in dropping a huge portion of its revenue to its bottom line, cash reserves ballooned and now sit at $16.2 billion with $5.9 billion also in short-term investments.

Simply put, Tesla is in an enviable financial position. Levered free cash flows confirm this, having grown from -$221 million in 2018 to $973 million in 2019, and from $2.7 billion in 2020 to $4.9 billion in 2021. By 2022, they had grown to $7.5 billion.

Why Tesla Could Be Worth $1 Trillion

Will Tesla hit a trillion dollar market capitalization? Most likely, yes, it will not least because it has hit that level before and continues to grow its top and bottom lines at a rapid pace.

Skeptics argue that Tesla is slashing margins by cutting prices out of necessity to fend off competitors eating away at its market share. Proponents argue Tesla is employing a genius strategy of defending its market share with price cuts that stimulate demand, further reinforcing its moat.

Other reasons that support a further bump in valuation from a current market capitalization of $788 billion to over $1 trillion is the relatively low institutional ownership it has relative to other mega cap stocks. It suggests there is room for more capital investment among big money funds.

A further tailwind could stem from Tesla’s Solar unit given that battery demand could skyrocket as a result of IRA credits. Tesla supporters would argue that if Tesla can grow during a period of rising interest rates, it will really be off to the races should rates be chopped by the Federal Reserve in the future.

Tesla supporters also argue that it is the only vision-based artificial intelligence offering that works and is profitable. Like any new technology race, the odds are high that the casualty rate among AI firms will be meaningful over the coming few years. Tesla, on the other hand, has a tenured track record of building AI, testing it in perhaps the most challenging market – real-time traffic flows – and succeeding.

Famously, Elon Musk has stated his vision is to be able to “flip a switch” so that all Teslas instantly and simultaneously become autonomous driving vehicles. That vision doesn’t appear to be too far in the distant future.

So where will Tesla stock be in 10 years? The odds are high that it will have a market capitalization of over $1 trillion and be trading between $300 and $400 per share.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.