Can Tesla reach a $2 trillion market value by 2025?

Tesla’s stock has been polarizing since the automaker first went public, but after touching a trillion-dollar market capitalization last December, the company has the attention of most investors. As the electric vehicle industry continues to emerge, Tesla’s likely to continue to grow, and some even think the automaker could double its previous highs.

Some analysts suggest that Tesla could reach a $2 trillion market value by 2025, as reported by The Motley Fool. Although the EV manufacturer is down 12.38 percent on the year at the time of writing (after being down even further for much of the year), long-term bulls are still looking to the future for answers.

The Motley Fool attributes Tesla’s fallen shares to a broader stock sell-off affecting the whole stock market, and to factory shutdowns and supply chain constraints. Despite these factors, Tesla’s Q2 earnings per share still jumped 56.6 percent year over year to $2.27, outpacing average Wall Street expectations by roughly 27 percent. Additionally, Tesla reported $16.9 billion in increased revenue, up 41.6 percent year over year.

To be sure, Tesla had its best production month yet in June although it faced a major production slump at its Gigafactory Shanghai. While the slump contributed to production and delivery drop-offs of 15.3 and 17.9 percent from the previous quarter, respectively, these figures increased by 25.3 and 26.5 percent year over year.

Tesla’s earnings report came as the U.S. reaches a tipping point for mass EV adoption. Allied Market Research expects the global EV market to grow at a compound annual growth rate (CAGR) of 18.2 percent through 2030. This could place Tesla in a good position going forward, even as competition grows.

Analyst data from the S&P Market Intelligence index predicts Tesla to generate roughly $164 billion in total sales by 2025. This figure would represent a five-year CAGR of 25.4 percent from last year’s revenue.

Currently, Tesla trades at an enterprise-value-to-EBITDA multiple of 55.6. Under the conditions that this figure remains and that Tesla holds an EBITDA margin of 25 percent, the automaker’s annual EBITDA would reach $41 billion by 2025 — increasing the company’s enterprise value to $2.3 trillion.

Above: Tesla's moves at annual stockholder meetings. Video: YouTube / Bloomberg

It’s a bit ambitious to say these conditions are likely, but they certainly aren’t beyond the realm of possibility. Some bullish analysts are confident that the automaker will eventually surpass the milestone of $2 trillion in market value. Others are more bearish, suggesting that competition could prevent this from happening.

As to whether Tesla will reach a $2 trillion market value by 2025, no one can be sure. But with new projects on the horizon like the Optimus robot, Cybertruck and self-driving robotaxis, Tesla may be well-poised to maintain its positioning in the coming years.


Source: The Motley Fool