Hi there! With Tesla‘s stock down over 50% from its highs, you may be wondering if now is a good time to invest in the electric vehicle maker. Or maybe you want to know if Tesla still has strong growth prospects over the next decade.
In this comprehensive guide, I‘ll walk you through a detailed analysis of the key factors that could impact Tesla‘s stock price between now and 2032. Using historical trends, growth projections and valuation models, we‘ll come up with a forecast range for where Tesla‘s stock could realistically trade 10 years from now.
Let‘s dive in!
Tesla‘s Current Stock Price and Valuation Multiples
As of November 2022, Tesla‘s stock price sits around $190 per share. This is down over 50% from the highs of $400+ reached in late 2021.
Here are some key valuation metrics to give us a baseline:
- P/E ratio: 48x forward earnings
- P/S ratio: 9x trailing revenue
- P/B ratio: 14x
Tesla trades at lofty valuation multiples that imply massive growth is priced in. However, these multiples have compressed over 50% from 2021 highs showing sentiment has cooled.
For reference, traditional automakers like GM and Ford trade at P/E ratios under 10x, so Tesla commands a large premium.
Let‘s see if this premium will still be justified in a decade.
Tesla‘s Revenue and Delivery Growth Trajectory
First, let‘s examine Tesla‘s historical growth trajectory for context:
Tesla Annual Revenue and Deliveries
| Year | Revenue | YoY Growth | Total Deliveries |
|---|---|---|---|
| 2019 | $24.6B | 15% | 367K |
| 2020 | $31.5B | 28% | 499K |
| 2021 | $53.8B | 71% | 936K |
| 2022E | $81.5B | 51% | 1.4M |
Revenue has grown at a 28-71% compound annual rate over the past 3 years. Deliveries are also rapidly scaling up and expected to surpass 1.4 million vehicles in 2022.
This table from ARK Invest provides forecasts for Tesla‘s delivery volume through 2026:
Data source: ARK Invest
ARK sees deliveries rising to 3.2 million by 2025 and over 4 million by 2026. This would give Tesla around 5% global EV market share by 2025, up from 3% currently.
For 2030, analyst Adam Jones at Morgan Stanley predicts Tesla deliveries could reach 20 million EVs per year. This is aligned with Tesla capturing over 20% of the projected 100 million annual EV sales by 2030.
Capturing this level of market share would make Tesla one of the largest auto manufacturers globally.
Projecting Tesla‘s 2032 Revenue
For a 10 year projection to 2032, let‘s assume two bookend scenarios for Tesla‘s delivery volume and annual revenue growth:
Tesla Delivery Volume Scenarios:
- Bull case: 40 million units (25% market share of 160M projected EV sales)
- Base case: 15 million units (15% market share of 100M projected EV sales)
- Bear case: 5 million units (5% market share)
Tesla Annual Revenue Growth Scenarios:
- Bull case: 25% annual growth
- Base case: 20% annual growth
- Bear case: 10% annual growth
Plugging these assumptions into a financial model, here‘s how Tesla‘s revenue could look in 2032 under the three scenarios:
Projected 2032 Tesla Revenue
| Scenario | 2032 Revenue |
|---|---|
| Bull case | $785 billion |
| Base case | $385 billion |
| Bear case | $135 billion |
Under the bull case, Tesla could generate over $785 billion in annual revenue by 2032. The base case is around $385 billion, while the bear case is $135 billion of revenue.
For comparison, Toyota generated $279 billion in revenue over the last year. So under the base and bull cases, Tesla would be bigger than Toyota is today.
Factors That Could Increase Tesla‘s Future Revenue Growth
What could allow Tesla to achieve such massive revenue growth over the next decade? Here are some of the key factors:
Surging EV Adoption
EVs only accounted for about 6% of new car sales globally last year. But declines in battery prices along with government incentives and regulations supporting EVs will drive adoption.
BNEF projects EV sales rising to 28% of new car sales by 2030 and over 50% by 2040.
As the undisputed leader today, Tesla is poised to ride this wave better than legacy automakers playing catchup.
Expanded Product Portfolio
While Tesla is best known for its vehicles currently, its energy generation and storage business will become a larger portion of the pie going forward.
In Q3 2022, Tesla‘s energy generation and storage revenue grew 55% to $889 million – accounting for 6% of total revenue.
As solar and battery adoption increases for sustainable energy, Tesla Energy will drive a fresh growth vector along with Tesla‘s core auto business.
Further Geographic Expansion
Tesla is expanding production for Europe with its German Gigafactory and recently started Model Y production in Austin, Texas to bolster U.S. output.
It still has massive room for growth in Asia, including key markets like India where EVs are just getting started.
More localized production will support Tesla‘s global growth ambitions over the next decade.
Higher Margins and Profits from Manufacturing Improvements
As Tesla scales, it can spread fixed costs over a greater number of vehicles, reducing per unit costs. Improvements in manufacturing efficiency, automation and process innovation will also enhance productivity and margins over time.
Higher production volume and improved cost structures will drive operating leverage, leading to exponential growth in profits.
Software and AI Opportunities
Unlike other automakers, Tesla builds all its software in-house, including its self-driving and AI capabilities.
Once Tesla can roll out autonomous robotaxis at scale, it would open up a huge new TAM and revenue stream beyond personal vehicle ownership.
Goldman Sachs estimates robotaxis could contribute $20,000 of incremental revenue per car for Tesla by 2030. This software and autonomy upside is not yet priced into today‘s valuation.
Factors That Could Restrict Tesla‘s Growth
While Tesla has a lot of runway ahead, there are also risks that could restrict its growth:
Execution Setbacks
Ramping production and deliveries smoothly across Tesla‘s global factories will be key. Any major execution stumbles or delays would shake investor confidence.
For example, Tesla has delayed the Cybertruck launch to 2023 due to production problems. More delays like this could slow revenue growth.
Growing Competition
All major automakers are prioritizing EV investments now – VW, GM, BMW, Hyundai etc. There are also young startups like Lucid and Rivian introducing compelling models.
While the market is rapidly expanding, more competition will likely erode some of Tesla‘s dominant market share over time.
Macroeconomic Issues
A global recession would hurt consumer discretionary spending across the auto industry. Tesla sales and growth would not be immune, especially since its vehicles are still considered luxury-priced for many buyers.
Valuation Concerns
If growth stalls in the near term, Tesla‘s premium valuation could contract quickly. It will need to execute flawlessly to maintain such a lofty valuation. Any major setbacks could result in an ugly de-rating.
Forecasting Tesla‘s Future Stock Price
Now that we‘ve explored Tesla‘s growth trajectory along with potential upside and risk factors, let‘s synthesize this analysis into a forecast for where Tesla‘s stock price could reach by 2032:
Assumptions
- Current share count of 3.15 billion
- No additional dilution from new share issuances
Tesla Potential Stock Price in 2032
| Scenario | 2032 Revenue | EPS Estimate | P/E Multiple | Potential Stock Price |
|---|---|---|---|---|
| Bull case | $785 billion | $100 | 50x | $5,000 per share |
| Base case | $385 billion | $50 | 35x | $1,750 per share |
| Bear case | $135 billion | $15 | 20x | $300 per share |
Key Takeaways
-
Under the bull case, Tesla could be trading around $5,000 per share by 2032 driven by 25%+ annual growth. This would make it one of the world‘s most valuable companies.
-
The base case of $1,750 per share implies modest but solid growth in the 20% range annually. Profitability expands but competitive pressures weigh on upside.
-
Bear case results in the stock languishing around $300 as growth and margins disappoint. Sentiment sours in light of execution issues.
The most likely outcome for Tesla in 2032 probably lies somewhere between the base and bull cases – roughly in the range of $2,000 to $4,000 per share.
The Bottom Line
Predicting stock prices a decade out involves making many assumptions about competitive dynamics, market growth, margins, and investor sentiment. There is inherent uncertainty.
However, Tesla remains the dominant electric vehicle firm today and is positioned to gain market share over the next 10 years as EVs become mainstream.
If Tesla can fulfill its growth potential, maintain product and technology leadership, and expand profitably, its stock could reward investors handsomely within the next decade.
But there are risks to its growth story that present downside if not properly managed. Ultimately, realizing the bull case will require flawless execution from Tesla’s leaders – especially Elon Musk.
So while we can’t know for sure, I hope this comprehensive analysis has provided some insights into how Tesla’s stock price could evolve through 2032 based on different plausible scenarios.
Let me know if you have any other questions! I‘m happy to discuss more.
