For the last several months, financial headlines have been dominated by the rising popularity of artificial intelligence (AI). Wall Street's new obsession with AI makes it easy to miss things that should otherwise be on your radar.
Luckily, or perhaps controversially, serial entrepreneur Elon Musk always seems to have a way of getting his name and his companies into the headlines, regardless of what the new trending topics are.
For Musk's electric vehicle (EV) company, Tesla (TSLA 0.54%), there have been several notable events. The stock has been on a roll lately, and I think there is a legitimate case for the company to reach the trillion-dollar market-cap club (again). Let's dig in.
If you can't beat 'em, join 'em
While Tesla's vehicles are often the focal point of the company, another core part of its business is its supercharger network. Tesla currently operates over 45,000 superchargers, primarily in the United States and Europe, where drivers can top up their car batteries.
The convenience of the supercharger network has proven to be a big deal as it's a major differentiator from the growing number of rival EV companies. Competitors include industry giants like General Motors, Ford, BMW, and Volkswagen, in addition to newer players like Rivian, NIO, and Lucid.
But just over the last few weeks, Ford, General Motors, and Rivian have all announced partnerships with Tesla for access to its supercharger network. Starting in 2025, all three auto manufacturers will adopt Tesla's North American Charging Standard (NACS) for their own EVs too, allowing for seamless integration at Supercharger locations.
Tesla shareholders should be thrilled to read this news. Although Tesla still has plenty of competition overseas and domestically, seeing some of the largest vehicle manufacturers in the world agree to adopt its charging design for the North American market speaks volumes about how far ahead of the competition it is. Furthermore, as EV adoption continues to rise, Tesla's business is poised to continue thriving as its supercharger networks will now attract an entirely new cohort of drivers.
Image source: Getty Images.
The early bird gets the worm
In addition to investing heavily in its technology, another thing Musk has done well as Chief Executive of Tesla is making sure the company strikes partnerships with other countries around the globe. Some of its biggest factories are outside of the United States -- namely in Germany and China, with another planned for Mexico.
India's Prime Minister Narendra Modi recently visited the United States and met with several high-profile individuals, primarily politicians and business executives. Modi and Musk met on June 20, and following the meeting, Musk spoke to a flock of journalists and stated that Tesla will be in India "as soon as humanly possible," before adding that it is "quite likely that there will be a significant investment and relationship with India in the future."
India has the sixth-largest economy in the world with annual gross domestic product (GDP) growth of nearly 9%. Of the world's 10 largest economies, India's GDP is growing the fastest. As a developing nation with a large population and fast-growing economy, India looks poised to become a major player on a global scale in the future. In that light, it's easy to see why Musk sees India as a lucrative growth opportunity, even if the timing of Tesla's ambitions in that market remain uncertain.
Is a $1 trillion valuation in sight?
With these positive developments, Tesla stock has rocketed about 40% higher over the last month. This increase in the stock price has pushed the company's market capitalization up by over $200 billion.
After hitting a peak of over $1.2 trillion in early 2022, Tesla currently sits at a market cap of just over $800 billion, making $1 trillion seem like a stone's throw away. One of Tesla's biggest bulls is a mutual fund manager named Ron Baron, who thinks a trillion could be right around the corner.
During a recent interview with CNBC, Baron said he predicts Tesla stock will reach $500 by 2025 and $1,500 by 2030. Per Tesla's latest 10-Q filing, the company had 3.2 billion shares outstanding. Assuming Tesla reaches these share prices, this implies the company could be worth roughly $1.6 trillion by 2025 and nearly $4.8 trillion by 2030. Of course, this is just illustrative as it is likely Tesla's outstanding shares will change quarter to quarter, let alone over the next several years.
Given the stock has rallied and the company has added nearly $200 billion in market cap in a relatively short period of time, investors should be wary of a corresponding sell-off from any momentum traders. However, long-term investors should see the company has a number of opportunities that should fuel its future growth. A prudent action for new investors is to dollar-cost average into the stock over time, and current investors have a lot of reasons to hold onto their shares.
