Tesla (TSLA) laid a lot of building blocks this year in its road to joining Apple, Microsoft, Amazon and Google in the $1 trillion market cap club in the not too distant future.
Several quarters of profits were signed, sealed and delivered to Tesla stock fanatics. A more focused-on-the-numbers Elon Musk and S&P 500 inclusion were also implemented.
But for Tesla’s valuation to ultimately join the rarified air of America’s trillion dollar club, the company will have to captivate the minds of institutional investors. To do that, Oppenheimer analyst Colin Rusch says Tesla will have to show it’s not solely an electric car maker — but the driver of the future of transportation, whether that’s with fully autonomous automobiles, a robotaxi network or autonomous semi-trucks.
“We’ve got to get a little more information from them [Tesla]. But really, at the end of the day I think elevated levels on the stock and the potential for it to go higher is going to be driven by their autonomous program. It has almost 1 million vehicles on the road collecting data. That’s a huge advantage in terms of intelligence,” Rusch told Yahoo Finance Live when asked how Tesla’s market valuation will hit $1 trillion.
Rusch rates Tesla shares at Outperform.
“As we see the disruption of the transportation and the power markets materialize, and Tesla being the leader across those markets, really that AI functionality and leadership around autonomy will be the thing that would drive the stock higher,” Rusch added.
While Tesla works towards some of Rusch’s milestones, the bulls do have a few near-term items to continue to snack on.
First, shares of Tesla officially joined the S&P 500 on Monday. The stock now represents about 1.6% of the index, and is one its largest weightings. Anticipation of Tesla’s inclusion in the S&P 500 — which triggered fund managers to buy tens of millions of stock in the company — has sent the stock up 35% over the past month. Year-to-date, Tesla shares are up 730% — bringing its market cap to $626 billion, according to Yahoo Finance Premium data.
And then, Tesla is full steam ahead with new plants in China and Texas that will help churn out more electric vehicles. That will likely help Tesla gain greater economies of scale and widen its lead versus rivals — and drive more consistent profits and cash flow.
“Heading into year-end and 2021, we are seeing a major inflection of EV demand globally with our expectations that EV vehicles ramp from ~3% of total auto sales today to 10% by 2025. We believe this demand dynamic will disproportionately benefit the clear EV category leader Tesla over the next few years especially in the key China region which we believe could represent ~40% of its EV deliveries by 2022 given the current brisk pace of sales,” says Wedbush analyst and Tesla bull Dan Ives.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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