What Tesla's Sales Could Look Like in 2014 and Beyond

Valuing Tesla (NASDAQ: TSLA  ) often stops investors dead in their tracks as soon as they run a few popular valuation ratios like price-to-earnings and price-to-sales. But a quick glance at Tesla's growth trajectory and its audacious goals may convince investors to take a closer look at where the company is headed and possibly even reconsider the merit of its seemingly pricey valuation. For a company like Tesla, investors have to look forward, not backward.

Tesla Model S. Photo by Levi Sim, used with permission.

The 1,000-foot view
For investors who follow Tesla closely, they understand that Tesla vice president of China operations Veronica Wu's prediction that Tesla will double global sales in 2014 isn't a far-fetched goal. A rapid international expansion of both deliveries and its Superhcarger network basically hedge robust demand for the supply limited company. And given Wu's forecast, Tesla obviously believes it will make big improvements in supply bottlenecks that are currently limiting production.

If Wu's forecast plays out, the scenario would look something like this:

* indicates quarterly estimate based on a scenario that doubles global sales in 2014. Source: Tesla press releases

The 10,000-foot view
Zooming out even further, Tesla's sales trajectory based on comments from management could look even more startling.

Source: Tesla press releases and comments from management, particularly those of Tesla CEO Elon Musk in a recent interview with Automotive News.

While the chart above is derived on the basis of comments and aspirations expressed by Tesla's management team and not from any formal guidance, the illustrated potential for such monstrous growth gives better perspective to Tesla's pricey valuation today.

Importantly, investors shouldn't consider this 10,000-foot view as the probable scenario for Telsa in the future. Instead, investors should always heavily discount audacious aspirations to more realistic levels since many things can go wrong in growth stories like Tesla's.

But the potential of such growth highlights the key factor many investors overlook regarding Tesla stock. The company is not purely a manufacturer of luxury vehicles. While this may be the case today, the company has promised a more affordable car by 2016 or 2017. And with demonstrated demand for the company's Model S at a price point that begins at about $70,000, it's definitely possible global demand for a lower-cost Tesla vehicle could reach hundreds of thousands of units per year.

Challenges
Tesla's audacious goals won't be achieved easily. Rapid expansion in service centers, retail outlets, Supercharger stations, and factory production capacity will be required, among other feats.

But big outcomes for the electric-car maker are definitely possible. Investors shouldn't let popular valuation metrics stop them from taking a closer look at disruptive stocks like Tesla.

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Read/Post Comments (8) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On February 02, 2014, at 12:45 PM, coll1951 wrote:

    Only time will tell, but don't hold your breath waiting. Remember federal rebates run out after a model reaches 25,000 unit sales, so that advantage will be gone, plus even Audi, BMW,Lexus and Mercedes combined don't sell 600,000 vehicles priced over $55,000 per vehicle per year.

  • Report this Comment On February 02, 2014, at 12:46 PM, SteveTG3 wrote:

    Dan,

    The Gen III car and suv would be enough to lift Tesla to 500K global sales.

    I see this as a probable event. Of course, I don't know if it will happen by 2019 as I see it or 2020 as you see it... but I see it as a a probable event. This is precisely how I model valuation for any company, and have done so for Tesla. I looked at future earnings outcomes (in the case of Tesla based on 2019) and assign probabilities to each outcome. I then take a weighted average of the valuation each scenario results in, doing the weighting based on the probability of each scenario occurring.

    Please share what odds you give Tesla of achieving 500K in annual sales volume by the end of the decade, and why you see it as less than 50% (not probable as you wrote).

    Of course, if this exercise leads you to re-evaluate your thinking, there's nothing wrong with that... that's just what good dialog is for!

  • Report this Comment On February 02, 2014, at 12:48 PM, SteveTG3 wrote:

    coli, the tax benefits phase out over the year following 200,000 vehicles.

    Tesla has explicitly stated that when they say a $35K Gen III car, they are not assuming a tax credit benefit.

  • Report this Comment On February 02, 2014, at 2:18 PM, eanmdphd1 wrote:

    In time, cars will become single occupant living spaces as getting our bodies to places will still be a requirement. They will be self-navigating and well able to keep occupant engaged during transport --- hence, how soon before Tesla and Apple unite to make an iCAR? Or perhaps, iCARt to get the Tesla in there.

  • Report this Comment On February 03, 2014, at 8:08 AM, drax7 wrote:

    A car in every living room was Jobs goal.

  • Report this Comment On February 03, 2014, at 8:08 AM, drax7 wrote:

    Electric cars can be brought indoors. No oil leakage and fumes to dirty up living room.

  • Report this Comment On February 03, 2014, at 4:02 PM, JIMMYLIMO wrote:

    My motto- "An electric car IN every garage, and a PV array ON every garage." The days of Big Oil's stranglehold on America are numbered ! Don't forget that by 2020, BATTERY technology will have advanced to the point that the Tesla's battery pack will be half the weight, half the size and have a range of 500-1000 miles. It will be a quantum leap game changer.

  • Report this Comment On February 03, 2014, at 7:36 PM, Ustauber wrote:

    THX TSLA

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