Quick Read
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Tesla (TSLA) would need to reach an $8.5 trillion valuation by 2035 for Musk to earn his $1 trillion compensation package.
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Tesla trades at 294 times trailing earnings and nearly 16 times price-to-sales.
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Michael Burry calls Tesla ridiculously overvalued. He’s likely not wrong!
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With Tesla (NASDAQ:TSLA) CEO Elon Musk now getting the green light for his historic $1 trillion compensation plan, all eyes will be on the milestones ahead that the firm will need to hit if Musk is to rake in such a considerable sum. Undoubtedly, if Musk can pull it off, we’d be looking at Tesla sporting a valuation of $8.5 trillion by 2035.
For a $1.4 trillion company that’s seen no shortage of volatility over the years, the big question likely hinges on whether the firm can find success not only with robotaxis but with the Optimus robot opportunity.
Undoubtedly, there’s a massive total addressable market when it comes to humanoid robots. And while Tesla certainly seems like a top contender to dominate the space, there is bound to be a significant amount of competition if humanoid robots and the rise of physical AI are big themes that power multi-bagger rises over the course of the next decade.
The road to $8.5 trillion could be a bumpy one, and it might take longer than 10 years
In short, there’s a non-zero chance that Tesla can surge enough such that it hits an $8.5 trillion market cap, especially if Tesla can get all its growth drivers going at full speed. With robust AI, Optimus, Cybercab, and, of course, new models of its electric vehicle (EV) on the way, there’s no shortage of engines that can keep Tesla stock humming along. And with a very motivated Musk in the driver’s seat over at Tesla for the next 10 years, betting against the man and his firm may prove very difficult.
Even Dr. Michael Burry from The Big Short has had a tough time betting against the company in recent years. And while he still views the company as “ridiculously overvalued,” it might not be all too long before the man who’s bearish about the AI trade in general might punch his ticket to a few put options against the EV maker.
Time will tell. In any case, the stock is definitely not anything close to being cheap, in my view, with shares trading at 294 times trailing price-to-earnings (P/E) or just shy of 16 times price-to-sales (P/S).
Burry is right: Tesla stock does look quite expensive!
No matter which way you look at it, shares of Tesla certainly do seem stretched. And while a strong case could be made for the growth narrative, given the opportunity to be had in robotics and self-driving vehicles, I’d argue that some far-cheaper firms might also be able to find success in the space. Arguably, Amazon (NASDAQ:AMZN) is an autonomous driving and robotics play that’s going for a fraction of the price right now.
Of course, Amazon’s self-driving Zoox might not be as far along. However, I think it’s a mistake to count it out of the game, especially as the e-commerce and cloud titan looks to ramp up on AI going into the new year. Combined with its own warehouse robots, I think the perceived value is much stronger (and the stakes lower) with the name than the likes of a Tesla.
Of course, I could be wrong if Tesla’s Optimus dominates while its robotaxi service looks to run ahead of the competition. Either way, I think Burry’s recent comments on Tesla stock’s valuation warrant extra due diligence on the part of investors, especially as the competition ramps up from all sides.
The bottom line
For now, it appears like the “cut of Elon” is having its way. But for how long? That’s the $8.5 trillion question. Personally, I wouldn’t get my hopes up for such considerable gains over the next decade. The stakes and valuation, in my opinion, remain far too high.
And with Burry taking aim at the EV firm, I’d much rather be on the sidelines at $430 per share. Robotaxis and Optimus may very well be the future of Tesla, but that’s no guarantee of dominance or an $8.5 trillion market cap in 10 years, especially if the AI bubble ends up bursting between now and then.
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