Tesla shares are a recurring theme in the modern economy, given their enormous stock market valuation (capitalization) and above all their volatility. In November 2021, it reached its historical maximum price, 1,243.49 dollars, and in the last 52 weeks, it fell by half, specifically in May. That drop is part of a widespread divestiture from the stock market and has far outpaced other manufacturers. Right now it is going up again and is going for $864.
In November, Tesla’s market capitalization exceeded one trillion dollars ( Anglo-Saxon trillion ), and few companies have reached that high; no other car, by the way. We are referring to Amazon, Alphabet, Saudi Aramco, Microsoft, and Apple, companies above the trillion dollar mark. Some analysts consider that it will not only return to the billion but that it will go a long way from there.
The forecast is based on several premises. One of them is that Tesla will have a sales turnover of 164,000 billion dollars in 2025, that is, compound annual growth of 25.4% compared to 2021 figures, according to S&P Market Intelligence. On the other hand, it is assumed that it will maintain an EBITDA margin of 25% -the highest in the industry-, this being 41,000 billion dollars in that year. Elon Musk said that Tesla would lower prices when inflation did, and that would lower its margin.
On the other hand, Tesla is trading at an enterprise value to EBITDA multiple of 55.6. In other words, if all of this is fulfilled, Tesla would have a capitalization in 2025 of 2.3 trillion dollars, which implies that the shares would have to trade above 2,000 dollars per share.
Between now and 2025 many things can happen, such as a drop in orders related to the economic recession that is at the door and worse access to financing to buy goods and services. If this is true, what is now invested in Tesla will increase by 175% within three years. A more conservative forecast assumes that multiple at 25 (the S&P 500 has an average of 17.1%), so the capitalization would return to one trillion, a more discreet increase over current values.
At the last shareholders’ meeting, a 3-to-1 split was approved, which means that the holders of shares will have triple the number of titles but will maintain the same combined economic value, or what is the same, that the number of shares will be multiplied by 3 and its value will be divided by 3. Therefore, after the split, to reach more than 2 billion dollars of capitalization, the shares would have to exceed 666 dollars.
There was already a 5-to-1 split in August 2020, to make individual shares more affordable for small investors. That was when Tesla was trading at over $1,500, and after the split the peak of $1,243 was reached.
Analysts already take into account the growing competition from manufacturers such as BYD, Ford, General Motors, and Volkswagen. Tesla’s production capacity is currently around 1.9 million units, according to the latest quarterly report, and they have announced their intention to have a capacity of 2 million by the end of this year. In 2023, the serial production of the Tesla Cybertruck, one of the company’s flagship projects, should begin.