The past couple of years have been a rollercoaster thrill ride for Tesla (TSLA 1.50%) investors. After surging to a new all-time high in late 2021, the stock went on to crater more than 70%. Factors driving some of the steep drops included outsized inflation, rising interest rates to help fight inflation, and a sizeable stock market slump focused largely on tech growth stocks. And yet, Tesla stock is ascending in 2023, up 90% so far this year.
While a general stock market rebound and a more bullish attitude on Wall Street this year were no doubt contributing factors, a number of company-specific developments have thrust the electric vehicle maker back into the spotlight. The biggest of these is the mad dash by a growing number of automakers to join the Tesla Supercharger Network and adopt its North American Charging Standard (NACS) connector, which is quickly becoming the de facto industry standard.
One Wall Street analyst believes this will add billions in annual revenue to Tesla's coffers.
Image source: Tesla.
If you can't beat 'em, join 'em
Historically speaking, automakers have been fiercely competitive when it comes to EV charging, with most players insisting on developing their own proprietary systems. In recent months, however, a long line of rival automakers have thrown in the towel and agreed to join Tesla's Supercharger network.
Ford Motor Company was the first to break with tradition back in May, and it was quickly followed by General Motors and Rivian. A number of other automakers joined the trend in rapid succession, including Volvo, Polestar, Mercedes-Benz, and Nissan.
This veritable stampede has Wall Street furiously reworking its analytical models, and Wedbush veteran technology analyst Dan Ives said he believes this trend will eventually add tens of billions of dollars in additional revenue to Tesla's results.
"Golden EV success story"
In a missive released Aug. 25, Ives calls Tesla a "golden EV success story." He highlights the growing adoption of Tesla's Supercharger network and adds, "We expect more names such as Hyundai, Honda/Acura, and other large OEMs ... to follow suit."
Tesla is also working to secure its share of $7.5 billion in U.S. government subsidies designed to accelerate the installation of as many as 500,000 high-speed chargers on the country's busiest highways. The Biden administration has been clear that Tesla would only be eligible if other automakers were granted access to its network.
Spending on Tesla's Supercharger network has been significant, with charging stations costing a hefty $42,000 per connector. The resulting financial burden aside, Tesla stations are much more cost-effective compared to the $100,000 to $250,000 per connector spent by rivals, according to a report by Bloomberg.
Ives notes that earlier this year, Tesla agreed to add 7,500 Superchargers to its network by 2024, more than doubling its current capacity of roughly 5,000. He suggests that the increasing number of deals with other automakers will "accelerate its growth."
Tesla's network is almost entirely solar-powered, so the energy generation costs are negligible. As a result, Tesla's Supercharger network will represent a "large monetization opportunity" and account for "roughly 3% to 6% of total revenues, translating to a $10 billion to $20 billion business by 2030," according to Ives.
This implies that Tesla stands to generate total revenue of more than $333 billion by the end of the decade across its sprawling business, a hefty increase from the $94 billion it reported over the trailing 12-month period.
The fine print
As a result of Tesla's stock price surge so far this year, there has been a commensurate increase in its valuation. The stock currently sells for 69 times next year's earnings estimates and nearly 6 times forward sales -- a frothy valuation, no matter how you measure it. Value investors will no doubt take a hard pass in light of the stock's hefty sticker price.
Tesla is still the dominant EV supplier in the U.S. and is expanding on a number of fronts, including its Supercharger network, battery production, energy solutions, and vehicle manufacturing. For those with an extended investing time horizon and the stomach for some volatility, there's still plenty of growth to be had.
