Tesla Storms Past $100 Billion In Value, Overtaking Volkswagen To Become World’s 2nd Largest Auto Company

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Tesla market cap
Tesla [TSLA] exceeds $100B in market value.
Tesla has done it again. On January 22, 2020, Tesla’s market value exceeded $100 billion. Not only is this more than GM and Ford together, but it is enough to squeak past Volkswagen Group and become the world’s 2nd largest auto company by value. First place belongs to Toyota, with an estimated $198 billion in market value.

We have gone over many reasons here, here, and here why Tesla stock [TSLA] has gone up in recent weeks. Congrats to Elon and Tesla for shaking things up! Achievement #2 has been unlocked. (Achievement #1 was having Tesla be worth more than GM and Ford combined. Achievement #3 will be exceeding Toyota. I give that a few years at most.)

Let’s hear from some Tesla analysts, who are paid to prognosticate and anticipate Tesla’s future.

Pierre Ferragu tells us, “Tesla will sell 2 million to 3 million cars per year after 2025, like other premium brands and in line with BMW, according to the Tuesday note. That would justify a market capitalization of $230 billion to $350 billion, or roughly $1,200 to $2,000 per share.” Getting into what that means today:

“Discounted back to early 2021, we would see that fully priced with a stock in the $640-960 range. On that basis, we increase our target price to $800,” Ferragu wrote.

Count Dan Ives in the same camp, if not as bullish:

“We believe the China opportunity is worth at least $100 per share ($300 in a bull case scenario) and potentially more and remains the key fuel in the growth engine along with Europe Model 3 demand, which looks healthy from a pent up demand perspective through at least the next 3-4 quarters based on our analysis,” writes analyst Dan Ives.

This comes against a backdrop of Larry Fink and Satya Nadella committing to do more in the fight against climate change. More and more investors are drawn to environmentally and sustainable solutions. Not only is it good for the planet, but companies that invest in such solutions perform better overall than their gas-bucket-loving cousins.

“The corporation’s purpose is to find profitable solutions to the problems of people and planet,” Nadella, CEO of Microsoft, said on Jim Cramer’s show “Mad Money.” He referenced University of Oxford business professor Colin Mayer, saying, “‘Profitable’ is the key word, but ‘problems’ is the other key word for people and planet.”

“Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” according to a letter The New York Times obtained. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.” —Larry Fink, CEO and founder of BlackRock

It’s all fun and games regarding climate change, until business gets hurt. Perhaps the devastation of the Australian wildfires has brought a change of heart to some of the world’s biggest capitalists. Either way, when you look at companies that invest in sustainable, environmentally friendly solutions, Tesla is high on the list. It would make sense for investors pay up and own some Tesla in their portfolios.

What are some of the implications of Tesla hitting $100B?

Tesla reaching $100B is hugely important. The company has exceeded Volkswagen Group and is behind Toyota. The time frame for Tesla’s rise is shockingly short. CEOs notice these trends and start asking pointed questions to their executives. Shareholders notice and start asking pointed questions to the CEO and Board of Directors. Those that adapt, survive and prosper. Those that flounder, fail.

The stock market is acknowledging environmental and sustainable-focused companies have a bright future. Polluting companies and laggards are subject to market risk and political risks. Stock markets hate uncertainty. This rise for Tesla has the side benefit of encouraging more capital and entrepreneurs to pour into sustainable solutions, lifting all boats.

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If Tesla uses its market cap to buy out Mazda or a smaller auto company, it can convert that workforce to build EVs. I don’t advocate Tesla going down that route, but just having that option will give competing CEOs nightmares. That would accelerate Tesla’s mission meaningfully. A large market cap is a competitive advantage to buy value-adding technologies or extinguish competitors. Microsoft historically used its market cap to devastating effect.

Also, this proves Elon was conservative at the buyout price of $420. Thankfully, Tesla did not go private. By staying public, it added tremendous pressure to entire industries to embrace EVs, batteries, and renewable energy.

Young auto and technology execs will not want to be with dinosaur companies where they stagnate and lack growth opportunities. It’s either switch to EVs or lose their younger talent. They will force change from within or they will leave.

Shorts don’t understand the phase shift taking place in the world. Markets always look out 18 to 24 months in advance. Markets look at what is possible, not what is present. Shorts can’t accept oil and gas production will decrease every year during our lifetimes. Therefore, “Tesla is overvalued.” I say that shorts lack imagination and vision. The severity of climate change regarding food supplies, water scarcity, and disease will only get worse in the coming years. We either pull together as a species or destroy ourselves into oblivion.

Finally, every year Tesla executes, it gains 4 years on the competition. If a normal auto manufacturer takes 4 years to launch an auto factory, and it takes Tesla only one year, 4 years is a long time. Tesla will outflank and outmaneuver its slower competition. At some time in the near future, I can imagine Tesla building multiple gigafactories in the same year. Each will add more cash to Tesla, allowing the company to build even faster in the future and address more market segments. The market is acknowledging Tesla’s strength and moat.

On so many levels, crossing $100 billion is a historic achievement for Tesla, and brings with it the faith Elon and Tesla will successfully execute their vision.

Disclosure: I am currently long Tesla shares and am long on Tesla cars. Additionally, I am long a few shares of Beyond Meat and Nio. I am keeping my eyes closed regarding Tesla earnings next week and staying long. 

Use my referral link to receive 1,000 free Supercharger miles with the purchase and delivery of a new Tesla vehicle, or earn a $250 award after system activation by purchasing or subscribing to solar panels: https://ts.la/vijay59877

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