TSLA: The Bulls Bring Out The Craziness

I keep promising that I am going to stop posting about Tesla. However, the hottest story on Wall Street just keeps getting zanier.

When we see market manias, all the craziness comes out.

Tesla had their best quarter to date. They knocked it out of the part. On the year, the company did $24 billion in total sales.

All fine numbers.

The stock saw an incredible run the last couple months. It is mania levels this week with it up over $100 in morning trading.

Ron Baron took to the air this morning proclaiming his view that Tesla, within 10 years, could do a trillion dollars a year in revenue. This is a company did just did $24 billion in revenue and now we get the announcement of $1 trillion?

To be fair, Baron did make the same statement a couple years ago so he is not a Johnny-Come-Lately. At the same time, he is a billionaire investor and I am just some guy writing on the Internet lamenting the fact that I do not have nearly enough Tesla.

Then he had to add in this little nugget.

Baron said that his estimates don’t even factor revenue from Tesla’s battery business and other endeavors.

Now the $10 trillion is without the energy and solar businesses, two that are considered high growth markets.

Absurdity? Perhaps. Or perhaps not.

The billionaire investor explained on the business network that the vehicle maker is just getting started and could see its value balloon if it manages to sell cars at a more rapid clip.

“So basically you looking at the very start of what’s going to happen with Tesla,” Baron told CNBC.

Well yeah, that makes a lot of sense. But how many cars to get to a trillion dollars in revenue?

‘That’s assuming they do 10 million cars, and that’s without the battery business, just on the car business... ’

https://www.marketwatch.com/story/tesla-will-generate-1-trillion-in-revenue-in-a-decade-if-it-can-manage-this-feat-says-billionaire-bull-2020-02-04?mod=mw_latestnews

So 10 million cars will make a trillion dollars in revenue. That averages out to $100,000 per car. Tesla is not selling cars at this price.

Nevertheless, Baron has his own math and billions of dollars, so we will go with his projections.

The key is even if he overshoots and the total is half of that. What does that make the company worth if it can do $500 billion in car revenue? That is a 25x from where we are now. Where would the price of the stock be if that was accomplished?

One of my problems with this entire situation is that I cannot argue with much of the craziness. As insane as it seems, disruption offers an enormous opportunities. Few mentioned Amazon before 2010 in the same light as they do today. Yet, they were a little more than a decade in to laying the groundwork for causing devastation in the retail sector.

Many want to point to competition for Tesla yet it seems like the traditional automakers are years behind. Both Ford and General Motors dumped hundreds of billions into Rivian in an effort to maintain pace.

We will see how this all turns out. Tesla might be one of the household success stories that is talked about for generations. Or it could be a niche player that will be known like Yahoo.

---

If you found this article informative, please give an upvote and resteem.

Posted via Steemleo