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$Tesla Motors(TSLA)$ is one of the most popular stocks in the United States. Thanks to its great success and future potential, the stock's share price has risen to incredible level. Even though the stock price has come down significantly from its highs, some investors find the stock still too expensive to buy.
Recently, as Tesla has continued to expand into other areas, some analysts have tried to take a quantitative analysis on the company's potential beyond the electric car business, which helps investors get a clearer picture of Tesla's future potential and simplifies stock-buying decisions.
Electric Vehicles, an Established High-Growth Market
Before the stock pulled back last year, investors went on a buying spree of Tesla stock in anticipation of the massive market potential in electric vehicle industry, driving the stock's share price skyrocket, with the stock's market capitalization even reaching a high of $1.2 trillion by the end of 2021 (current market capitalization is $865 billion).
It's also true that electric vehicle (EV) sales have really taken off and are expected to maintain this high growth trend in the coming years. Tesla has maintained its market-leading position and is extremely profitable, despite facing a double-whammy of EV startups as well as traditional car companies. The company spent more than $2 billion on capital expenditures in the second quarter, but still generated more than $1 billion in free cash flow. The only downside is that the stock remains expensive based on current company fundamentals, with a price-to-earnings ratio of nearly 80.
Tesla's high valuation needs imagination to support it
Simply speaking, a profitable electric car business can't support Tesla stock's high valuation. wedbush analyst Dan Ives recently pointed out that Tesla's network of Superchargers signed multiple partnership deals and that he believes the business will generate $10 billion to $20 billion in annual revenue for the company by 2030.
Additionally, Adam Jonas, Morgan Stanley automotive analyst, was bullish on the company's artificial intelligence (AI) technology, saying the company enjoys an asymmetric advantage in the $10 trillion market, which has led Jonas to raise his price target on the stock significantly from $250 to $400. Musk noted in his second-quarter results that the company plans to spend well over $1 billion over the next year on Dojo, a supercomputing system, to train its fully-autonomous driving (FSD) model and collect data.
Believe It or Not
Whether Tesla stock is worth buying or adding to depends on the potential opportunities for the company's driverless cars, software, charging stations and AI.
For now, Musk is being overly optimistic about the prospects for driverless cabs, but AI technology is still spreading fast enough that driverless cars have a promising future. And in terms of the electric car business, which is now visible, Tesla has strongly thwarted its competitors' attacks and is expected to grow its electric car production by about 50% this year, even in the highly competitive Chinese market, where car deliveries grew by 9.3% in Augusts. But even so, it won't support Tesla's current valuation.
To summary, investing in Tesla stock requires investors to hold the belief that the company is accomplishing its target .
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