Elon Musk Says Tesla Valuation Justified If Utility Of Robotaxis Is Factored

Tesla Inc TSLA CEO Elon Musk said the company’s more than $800 billion valuation is justified as there is a “roadmap” to it.

What Happened: Musk’s back of the envelope math revolves around an assumed shipment of $50 or $60 billion worth of vehicles and those vehicles becoming Full Self-Driving and get deployed as robotaxis.

The usage of those cars would then jump from 12 hours a week to 60 hours a week, according to Musk.
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The automaker would be able to garner additional fees for the use of these robotaxis, thus bringing in a new stream of revenue.

The executive said that he suspects that some investors are taking that approach to valuing the company.

Why It Matters: Musk’s mathematics assumes a fivefold increase in the utility of the vehicles due to FSD, but even if there is a 2x increase, the $1 trillion valuation is still a probability. 

See Also: Every Time Elon Musk Has Warned Investors About Tesla's High Share Price

“It would be like if you made $50 million -- $50 billion worth of cars, it will be like having $50 million of incremental profit basically from that because it's just software. So -- and the pace you get 20 PE on that, it's like $1 trillion and the company is still in high-growth mode,” said Musk.

This month Virgin Galactic Holdings Inc SPCE Chairman and SPAC King Chamath Palihapitiya warned investors against selling Tesla stock and said that Tesla is a disruptive company and not just an automaker.

Palihapitiya said last year that Tesla was “misvalued.” The former Facebook Inc FB executive said that Tesla could reach the scale of Apple Inc AAPL, which has a market cap of over $2.3 trillion. 

Tesla reported Q4 2020 and full-year results on Wednesday. Revenue rose 46% year-over-year to $10.74 billion for Q4. Revenue for the full fiscal 2020 was $31.54 billion — a rise of 28% year-over-year.

Price Action: Tesla shares fell nearly 5% in the after-hours trading on Wednesday to $820.39 after closing 2.14% lower at $864.16.

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