Electric vehicle powerhouse Tesla (TSLA 0.38%) is the latest in a string of high-profile technology companies to execute a stock split this year. At the close of trading on Aug. 24, the company's 3-for-1 split went into effect.

It means the number of Tesla shares in circulation increased threefold, which has cut the price of each share by two-thirds, from $891.30 to $297.10. The move is designed to make Tesla stock more accessible to smaller investors, which could broaden the company's shareholder base.

It's important to remember the stock split is entirely cosmetic and that it doesn't add any value to the company itself. Instead, investors should remain focused on Tesla's long-term potential -- especially since there's so much of it.

A blue Tesla car driving on an open road.

Image source: Getty Images.

The road to 20 million electric vehicles

Tesla is the world's leading manufacturer of electric vehicles. Its success comes not only from the popularity of its cars but also the precision of its production processes, which has allowed the company to rapidly scale and remain dominant even while expanding into new countries. 

In 2017, Tesla delivered 101,312 electric cars. In 2021 that number was more than nine times higher, at 936,172. And thanks to two brand-new gigafactories in Austin, Texas, and Berlin, Germany, the company will have the capacity to manufacture 2 million cars per year by the end of 2022.

For investors, that growth has coincided with a more than 1,100% gain in Tesla stock over the past five years. Therefore, when Tesla CEO Elon Musk says the company aims to grow production 10-fold from here by the end of the current decade, it might be a signal that the stock is set for another long-term run as well. The recent stock split will truly be a distant memory by then -- in fact, it's possible the company will need another one!

By 2030, Tesla thinks it will be producing 20 million electric vehicles after adding another 10 to 12 gigafactories between now and then to reach that capacity. It's an ambitious goal, but history proves that sort of growth is well within the company's wheelhouse, and it has the financial performance to deliver it. 

Tesla could cross $100 billion in revenue next year

Naturally, Tesla's revenue growth has been just as impressive as its growth in production and deliveries. Between 2017 and 2021, the metric expanded at a compound annual rate of 46% and based on analysts' estimates of $83.9 billion in 2022 sales, that growth rate will accelerate to 56% this year.

A chart of Tesla's annual revenue.

In 2023, the company is expected to generate over $100 billion in annual revenue for the very first time, but there's an even more exciting story beneath the surface of that number. 

For the 2021 full year, Tesla had a gross profit margin of 29.3% on its electric vehicles. It was a big jump from 25.6% in 2020 and 21.2% in 2019. The figure has increased even further to 30.4% in the first half of 2022. Why does that matter? The company's gross margin has steadily climbed alongside the number of cars it has produced, which means as Tesla grows larger and makes more cars, it's also becoming even more profitable. 

A higher gross margin typically gives the company more money to invest in initiatives like new gigafactories, or it could simply result in more money flowing to its bottom line, which would add to the $18.3 billion cash pile Tesla is currently sitting on. 

Buy Tesla stock for the company, not the stock split

For all of the reasons mentioned above, investors should focus on Tesla as a company rather than inconsequential factors like its stock split. But there is one caveat to buying the stock for investors who have shorter-term goals.

Over the past four quarters, Tesla has generated non-GAAP (adjusted) net income (profit) of $11.3 billion, which translates to $9.89 in earnings per share. That places the stock at a price-to-earnings multiple of 90, which is three-times higher than the Nasdaq 100 technology index's multiple of 27.2, for example. In other words, Tesla is relatively expensive right now. 

But if the company manages to add a dozen gigafactories and can produce 20 million cars each year by 2030, then it should be worth well beyond its presently lofty valuation, so there will likely be gains on the table for long-term investors in that scenario. 

For smaller investors, the stock split does offer an opportunity to buy Tesla stock now for significantly less outlay than was previously required.