A few weeks ago, Tesla pulled off a major surprise by surpassing the market value of Ford Motors and General Motors, one after the other. And because the Silicon Valley car maker with a market cap of more than $50 billion became the most valuable automaker in the US, thanks to a continuation of the good run its stock has been having of late, a lot of skeptics said that Tesla at $300 a share was a bit overvalued, and that maybe the ticker didn’t (yet) deserve such a valuation.
Of course, Tesla’s CEO Elon Musk begs to disagree, pointing out that Tesla’s stock price is not a reflection of its present value. Rather, it is an indication of how much the company can achieve — how much it can be worth in the future (TSLA currently trades with a forward P/E well over 165. Any time just about any stock trades with a P/E that high, the Street is suggesting that it expects long-term sustainable and rapid growth). And with Tesla’s stock price hitting an all-time high of $313.73/share and increasing by tenfold over the last five years, Musk fearlessly forecasts that it is only the beginning.
As reported by Electrek, Musk believes that over the next five to ten years, the company has the potential for another tenfold increase. Following that line of thought and based on Tesla’s current PPS which is in the $308 range, that would mean the company’s worth would climb to about $500 billion.
If that happens, it will be closing the gap between some of the world’s most valuable companies like Apple (NASDAQ:AAPL) or Google (NASDAQ:GOOGL), which are currently valued at over $700 billion and $600 billion, respectively, and it will be overtaking both Facebook (NASDAQ:FB) and Amazon (NASDAQ:AMZN) which are both valued at nearly $430 billion. And with a 22% stake in Tesla, this will likely make Musk the world’s richest man. It will also make Tesla the world’s most valuable car maker, overtaking Toyota (with a current value of about $175 billion) by more than a mile, so to speak.
In light of such promising predictions, it’s good to know that the Palo Alto, Calif.-based company wants to share its ‘forthcoming’ achievements with its employees. A letter from Musk to Tesla Grohmann employees (which was obtained by Electrek) reveals his sentiments and vision about the direction the company is heading.
As translated by Electrek, the letter says this much: “Unlike other automotive manufacturers, each Tesla employee receives Tesla shares in addition to salary. These shares can be easily sold for money, but they also open up the possibility of earning much more through stock appreciation. The tenfold increase in our share price over the past five years has made shareholding exceptionally profitable for our Tesla employees.”
If Musk’s prediction of another tenfold increase does get realized, then owning Tesla shares will prove to be even more profitable than the full salary raise the Grohmann employees were asking for as a result of growing fears about job security.
A lot can happen in the next few years, though. And the future of Tesla (NASDAQ:TSLA) as an electric car maker and its stock can go either way. Meaning, TSLA can skyrocket from current levels or nosedive. It’s certainly a tough, if not impossible call to make. That said, Musk is also well-known for his other visionary initiatives including reusable rockets, solar power, Mars colonization, the Hyperloop, and merging human brains with AI. All of these have the potential to transform the world, and it’s only natural that people would become interested in getting involved, and possibly profiting from these ventures. And the way to do it would be through Tesla, because it’s the only one among Musk’s undertakings that’s investable. If people follow this line of thinking, then Musk could have a point in terms of his TSLA prediction.
Can Tesla really turn into the $500 billion company that its CEO is envisioning it would become? Well, there’s a pretty clear timeframe given. Which means we’ll know in about five to ten years.