Elon Musk’s very healthy confidence in the future success of Tesla Motors was on display during a recent Tesla conference call, where he made the noteworthy comment that he expected Tesla to be worth as much as Apple by the year 2025 (just one decade from now) — based on his expectation of 50% annual growth.
Ahem. Nothing wrong with a healthy sense of confidence — and to be fair he has mostly been right to date — but I do wonder about this comment. I’m not saying that it won’t happen, but it’s a somewhat strange comment/prediction to make — definitely in keeping with Musk’s past comments, though.
As a comparison of where the two companies stand right now, Apple’s market valuation recently passed $700 billion (just within the past couple of weeks), while Tesla’s is currently around $27 billion. (For further background between the two companies, see: Tesla & Apple Escalating Poaching War — Apple Now Offering $250,000 Signing Bonuses + 60% Pay Increases)
Here’s a transcript of the full comments from Elon:
We’re going to spend staggering amounts of money on CapEx. I mean, for good reasons, and with a great ROI. And it’s important to not look at CapEx in isolation, because that CapEx obviously is being done for reason, in order to capture substantial future revenue flow. I’m just saying the sort of back-of-the-envelope — if you make certain assumptions, and I emphasize these are just certain assumptions… I’m not saying they’re true or they will occur. I bet that they do occur, personally — that’s just my personal opinion. I mean, if you take this year’s revenue around $6 billion or thereabouts, and if we are able to maintain a 30% growth rate for 10 years added to your 10% profitability number and have a 20PE, our market cap would be basically the same as Apple’s is today. Now that’s going to require a bit — on the order of $700 billion. Obviously, getting there will require some significant CapEx.
But I’m hopeful that we can do this without any significant dilution to the company — maybe minor dilution, but nothing serious.
The bottom line for me, for all the “good” and “bad” that goes with it, is that the guy is clearly the driven sort — so I’m expecting such bullish optimism likely to continue even if further issues/underperformance pop up.
We should get a very good idea of the future prospects of Tesla relatively soon, though — with the upcoming release of the Model 3, and the beginning of production at the Gigafactory, we should get a good sense of what the future holds for the pioneering company.
Image Credit: Tesla Motors
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