Tesla CEO Elon Musk says a lot of bold things

April 30, 2015 – 07:27 am

People go crazy over Tesla's 'insane mode'Musk told investors on the company's earnings conference call Wednesday evening that Tesla could be worth $700 billion by 2025.

In other words, Tesla could eventually be as valuable as Apple (, Tech30) is right now. Never mind that Apple just became the first U.S. company worth that whopping valuation.

Musk made the prediction in response to a question about capital spending plans. Tesla is currently worth about $25 billion.

Musk's math. So why does Musk think the stock could surge 2, 700% in the next decade?

He bases his $700 billion valuation estimate on a couple of assumptions.

First, he thinks that the company can continue to report sales increases of 50% a year for the next decade.

Analysts are expecting Tesla to report $6 billion in revenue this year. Do the math and 50% a year would get Tesla to annual revenue of $346 billion by 2025.

Musk added that he thinks Tesla's profit margins could be 10%. That works out to .6 billion.

elon musk market capHe then said that Tesla could merit a valuation of 20 times its annual profits. That gets you to a 2 billion market value.

Musk conceded that these are "back of the envelope" calculations. But he's confident that he'll be right.

"I'm not saying they're true or that they will occur, but I bet that they do occur, " he said.

But is Musk's math realistic? Can Tesla really report 50% revenue growth a year for ten years? That seems like a stretch.

Too many risks. The growth rates of all companies eventually begin to slow over time, especially as they grow larger. It happened at Apple and is happening at Google (, Tech30) and Facebook (, Tech30). That's not a bad thing. It's just reality.

It's also unclear why Musk chose a multiple of 20 times earnings for his calculations.

Of course, that's a lot lower than the current Tesla valuation of more than 110 times 2015 profit forecasts, but 20 times earnings is significantly higher than the price for traditional auto companies GM, Ford, Fiat Chrysler, Toyota and Honda. It's also more expensive than Apple, which is valued at 15 times estimates.

For Tesla to get to nearly $350 billion in annual sales, it would need to sell millions of cars a year - not tens of thousands.

To do that, everything has to go right for Tesla. The new Model X crossover will need to be a hit.

It will have to get its big gigafactory running on schedule so it can make more batteries for its upcoming Model III vehicle.

Tesla also has to figure out China. A stumble there was one of the reasons the fourth quarter numbers were considered a disappointment. And it's not as if GM and others are going to throw in the towel on electric cars.

Finally, Tesla has to hope that gas prices don't remain this low for a long stretch.

Tesla's stock price has slid along with oil prices, and some analysts believe that demand for electric vehicles will never move beyond niche level unless consumers start to feel more pain at the pump again.

Now I'm not trying to suggest that Tesla's stock is doomed. Betting against Musk has so far been unwise. The stock has gained more than 10, 000% since going public in 2010.

Source: money.cnn.com

You might also like:

mclaren f1 elon musk
mclaren f1 elon musk
Elon Musk lecture about making life multi planetary, 2010
Elon Musk lecture about making life multi planetary, 2010
Elon Musk announces plan for Internet Satellite Network 2015
Elon Musk announces plan for Internet Satellite Network 2015
Elon Musk: 46 Fascinating Facts About The Mastermind Real Life 'Iron Man', CEO, Billionaire, Entrepreneur, Visionary & Renaissance Man (Investing, Entrepreneurship, ... Men, Success Principles, Business Advice)
eBooks ()
Elon Musk: Biography of a Self-Made Visionary, Entrepreneur and Billionaire (Investing, Entrepreneurship, Success, Innovators, Great Men, Success Principles, Business Advice)
eBooks ()
Catherineclick Chenxstore iPhone 5C case Hyperloep Elon Musk Hyperloep Good Galleries Sustainable Transport 92Qwx clean cover
Wireless (Catherineclick)
  • Precise form fitting case grips your iPhone 5C
  • Special pattern on the case makes your iPhone 5C different and eyes catching
  • Precisely manufactured to fit perfectly on the Iphone 5C
  • Protects your mobile phone against daily damages
  • No tools needed to put your iPhone on the case

Related posts:

  1. Elon Musk VS BBC
  2. Elon Musk - Wiki
  3. Elon Musk Battery
  4. Elon Musk Youth
  5. Elon Musk net Worth 2014
  • avatar When will there be a IRON MAN 3?
    • Ironman 3 comes out May 13, 2013 as of about 8 hours ago the release date was set. It will be featuring battles against the Mandarin as well as heavy influence of the Extremis serum. If you haven't seen anything about the Extremis serum it's a very interesting aspect of the Iron Man series. Check out the Iron Man: Extremis , motion comic for the quickest summary.

  • avatar Where are they filming Iron Man 3?
    • It has not been confirmed where Iron Man 3 will be filmed because they are not going to start until 2012, however some scenes could be shot in upstate New York.