Revenue growth could triple and propel Tesla stock higher

Although volatility is the norm when tracking the dizzying fluctuations of Tesla [NASDAQ: TSLA], a bright future could be coming for stockholders. According to Investopedia, "Tesla Inc. shares appear to have broken out and could continue to rise from current levels... On September 11, the stock rose roughly 6 percent, signaling a potential technical breakout. Meanwhile, the options market signaled expectations of elevated levels of volatility to come, paving the way for a possible rise toward $400."


Above: Tesla Model X (Instagram: henrik_nor)

While a $400 stock price would be an impressive short-term milestone, Barron's ran a headline yesterday proclaiming: "Tesla: Even the Bears Know $600 Is Possible!" Meanwhile, some Wall Street heavyweights, like Ron Baron, are predicting more significant long-term growth ahead. Guru Focus reports: "Tesla has been called a trillion-dollar business several times. Ron Baron, billionaire investor and CEO of Baron Capital, recently reiterated his view that Tesla's shares will hit $500 to $600 by 2018 and $1,000 by 2020... So is Tesla on track to become a trillion-dollar company?"


Above: Looking at Tesla shares outstanding coupled with revenue growth from 2010 to present (Image: Guru Focus)

Hard to say. But one contributing factor should be carefully considered — Tesla's projected revenue growth. Daniel Sparks at Motley Fool assumes, "Tesla's 500,000-unit build plan for 2018 could be made up of around 150,000 combined Model S and X units and 350,000 Model 3 units. However, given that some of these units won't be delivered until the beginning of 2019, this build plan could mean about 140,000 combined Model S and X deliveries and 320,000 Model 3 deliveries during 2018." So what could this mean for Tesla's revenue growth ahead? 


Above: Model S vehicles lining up at a Tesla Supercharger station (Instagram: earlygrabs)

Sparks notes, "With this planned production ramp in mind, it's possible to estimate what 2018 revenue could look like if Tesla pulls off its aggressive plan." Sparks forecasts revenue growth for Tesla's premium (Model S and X) and lower-cost (Model 3) vehicles. Keep in mind — the company could also benefit from potential growth via Tesla's solar and battery storage business and it's forthcoming Tesla Semi truck. In any event, here's Sparks' revenue estimates for Tesla's auto business in 2018...

  • 2018 Model S and X revenue: In Tesla's most recent quarter, the average selling price of the electric-car company's Model S and X was just over $100,000. Assuming this figure comes down to about $90,000 next year as the market for the high-priced vehicles matures, 140,000 combined Model S and X deliveries could contribute about $12.6 billion in annual revenue.
  • 2018 Model 3 revenue: Tesla CEO Elon Musk has said he expects the Model 3 to sport an average selling price of about $50,000 when the Model 3 is at full production. Therefore, 320,000 Model 3 deliveries in 2018 could contribute about $16 billion of revenue.

Above: Tesla vehicles lining up for customer deliveries (Image: Electrek via Redditor /u/BatteryParking)

Sparks synthesizes these estimates and notes, "Adding these two figures together, Tesla's automotive revenue next year could be around $28.6 billion. Then add in expected revenue from Tesla's energy and services segments — two facets of the automaker's business expected to continue growing rapidly — and Tesla's revenue next year could surpass $30 billion, tripling Tesla's $10.07 billion in trailing-12-month revenue."


Above: Tesla Model 3 (Instagram: jshih_potato)

Of course, some caveats are critical here as Sparks concludes: "there's significant risk to Tesla's aggressive production plans, namely production and supplier execution and Tesla's rapidly rising capital expenditures. Further, it's worth emphasizing that these estimates are only ballpark forecasts. So, even if Tesla did achieve a 500,000-unit build rate in 2018, actual revenue figures could be higher or lower. But this exercise makes one thing unmistakably clear: Tesla's growth plans are absolutely massive."