Tesla Motors (NASDAQ: TSLA) could be worth $1.119 trillion. To explain, Mr. Market gave Tesla (TSLA) a $1.119 trillion market capitalization on 29 October 2021.
Hence Tesla has now entered the $1 trillion market cap club. Other $1 trillion club members include Microsoft (MSFT) $2.454 trillion, Alphabet (GOOGL) $1.944 trillion, Apple (AAPL) $2.468 trillion, and Amazon (AMZN) $1.745 trillion.
In addition, Mr. Market paid $1,114 for Tesla shares on the same day. Thus Tesla is now in the $1,000 a share club and the $1 trillion market cap club.
Is Tesla worth $1 trillion?
Skeptics will wonder if Tesla (TSLA) is worth $1.119 trillion? Notably, Tesla’s auto sales grew by 7% in the third quarter of 2021. Tesla claims to have produced 237,823 vehicles and sold 241,300 electric vehicles in the third quarter of 2021.
Moreover, Tesla became the first company to sell over two million electric vehicles in the third quarter of 2021, InsideEvs estimates. Tesla sold its 500,000th vehicle in the fourth quarter of 2018 and the one millionth vehicle in the second quarter of 2020.
Additionally, InsideEvs sold 800,000 vehicles between the third quarter of 2020 and the third quarter of 2021. InsideeEvs speculates that Tesla could sell one million electric vehicles annually within a year.
InsideEvs estimates that Tesla had sold 1.505 million Model 3s, 520,000 Model S and Model X vehicles, and 2,450 Roadsters by end of the Third Quarter of 2021.
Tesla Ramps Up Production
Tesla Motors has ordered enough Lithium Iron Phosphate (LFP) batteries to build 750,000 to 818,000 electric vehicles, InsideEVs claims. They will use the LFP batteries at Tesla’s Shanghai gigafactory. The Chinese company Contemporary Amperex Technology Co., Limited (CATL) will produce the batteries.
The demand for all those Teslas could exist. Rental-car giant Hertz (NYSE: HTZ) announced plans to purchase 100,000 Tesla vehicles by the end of 2022, Reuters reports. Elon Musk is partially to blame. The CEO wants to grow Tesla sales by 50% a year and manufacture 20 million vehicles a year.
If Musk’s dreams come true, Tesla’s production be over twice the volume of Volkswagen AG (VWAGY), Reuters reports. Volkswagen is the world’s largest automaker. Statista estimates Volkswagen produced 8.9 million vehicles in 2020, 10.823 million vehicles in 2019, and 11. 018 million vehicles in 2018.
I think Musk’s claims are fantasy, but the Hertz deal is real. It could be
Are High Gas Prices Driving Tesla’s Growth?
suspect high gas prices are driving Tesla’s growth and increasing in electric vehicles. For example, pumps were charging $4.504 for a gallon of self-serve regular gasoline in San Diego County, California on 25 October 2021.
US gasoline prices rose by 50% in 2021, CNBC estimates. CNBC estimates the average retail gasoline price in the United States on 25 October 2021 was $3.38. Gas prices rose because oil prices have surged by 70%, CNBC speculates.
Fear of high gasoline prices and hysterical news stories about gas shortages is increasing interest in electrics. For example, news reports British filling stations were running out of petrol drove hysteria and interest in Tesla in September 2021.
I think some people fear being without transportation (a car) or affordable fuel. So they are looking at electrics.
How Big is the Electric Vehicle Market?
Tesla (TSLA) profits from this hysteria, because it owns the electric vehicle (EV) market. IHS Markit estimates Tesla vehicles comprised 56% of the electric auto market in 2021. However, IHS projects that Tesla’s electric market share could fall to 20% as competitors, including Ford (F) increase EV production.
Conversely, electric vehicles comprised 4.1% of US new vehicle sales in 2021, AutoForecast Solutions estimates. However, IHS Markit claims electric vehicles could account for 40% of US vehicle sales by 2030. In contrast, AutoForecast Solutions projects EVs will comprise 23% of US auto sales in 2030, CNBC notes. LMC estimates electrics will be 34.2% of US vehicle sales in 2030.
Hence, a massive market for electric vehicles is developing. However, Tesla will soon face competitors such as Volkswagen, Ford (NYSE: F), General Motors (GM), and Toyota (TM).
Is Tesla Making Money?
Tesla (NASDAQ: TSLA) makes money. For instance, Tesla reported a quarterly gross profit of $3.66 billion and a quarterly operating income of $2.004 billion on 30 September 2021.
Tesla’s growth is incredible. Stockrow estimates Tesla’s revenues grew by 98.11% in the quarter ending on 30 June 2021 and 56.85% in the quarter ending on 30 September 2021. Tesla’s quarterly revenues grew from $8.771 billion on 30 September 2020 to $13.757 billion on 30 September 2021.
Impressively, Tesla’s quarterly gross profits grew from $2.063 billion on 30 September 2020 to $3.66 billion on 30 September 2021. Plus, the quarterly operating come grew from $809 million on 30 September 2020 to $2.004 billion on 30 September 2021.
I do not think these numbers justify the $1,114 Mr. Market paid for Tesla shares on 29 October 2021. Yet Tesla’s performance is impressive.
How Much Cash Does Tesla Generate?
Tesla (TSLA) burns cash, however. Notably, Tesla reported a negative quarterly ending cash flow of -$131 million and a negative quarterly operating cash flow of -$638 million on 30 September 2021.
Conversely, Tesla can generate enormous amounts of cash. Tesla reported a quarterly ending cash flow of $17.723 billion on 31 March 2021. In addition, Tesla reported a quarterly operating cash flow of $2.124 billion on 30 June 2021.
Tesla borrows enormous amounts of money. Tesla reported a quarterly financing cash flow of $1.184 billion on 30 September 2021. However, Tesla pays off debts, it reported a quarterly financing cash flow of -$1.551 billion on 30 June 2021.
Importantly, Tesla finished the pandemic with less debt. The total debt fell from $15.477 billion on 31 March 2020 to $6.438 billion on 30 September 2021.
Tesla is accumulating more cash. Tesla’s cash and short-term investments rose from $8.818 billion on 31 March 2020 to $16.095 billion on 30 September 2021.
What Value Does Tesla (TSLA) Have?
Tesla’s value grew during the pandemic. For example, Tesla’s Total Assets rose from $37.250 billion on 31 March 2020 to $57.834 billion on 30 September 2021.
I conclude Tesla Motors (TSLA) is a splendid company that Mr. Market grossly overprices. Once again, Tesla’s growth is impressive, but it was not worth $1,114 a share.
I think Tesla (TSLA) is a great stock for speculators and people who can afford to lose money. However, I think Tesla’s growth will continue as the demand for electric vehicles, and battery storage increases.
For example, they are using Tesla Powerback batteries at the Mohammed bin Rashid Al Maktoum Solar Park battery farm in Dubai, Teslarati reports. The Solar Park could store up to one gigawatt of electricity. Teslarati calls this project the world’s largest solar farm.
In addition, Arevon plans to buy two gigawatts worth of Tesla Megapack batteries for solar farms in Nevada and California, Solar Builder reports. Plus Genex Power plans to buy 40 Tesla Megapacks for its Bouldecombe Battery Project in Queensland, Australia, PV Magazine reports. Megapacks are being used in several projects in Australia.
I think Tesla (TSLA) is a great company with a tremendous future. However, Mr. Market is grossly overpricing Tesla. As the world abandons fossil fuels, Tesla will profit.
Originally published at https://marketmadhouse.com on October 29, 2021.