Taking a different course than its "Magnificent Seven" peers, Tesla (TSLA -1.11%) stock is down 20% in 2023 (as of Feb. 16). Weaker sales and margins amid macro uncertainty are causing investors to lose some confidence.
However, an electric-vehicle (EV) industry innovator and disruptor like Tesla has unsurprisingly been a major market winner if we zoom out. In the last decade, its shares have soared 1,410%, beating the Nasdaq Composite index.
Where will the stock be 10 years from now?
Things could stay the same
Tesla and its well-known founder Elon Musk deserve a ton of credit for completely changing the automotive industry by introducing a successful lineup of elegantly designed and tech-forward cars. The business has experienced tremendous growth in the past. In 2023, it raked in $97 billion of total revenue and produced more than 1.8 million cars, helping it take a commanding lead in the U.S. EV market.
Of that $97 billion, Tesla registered $6 billion of revenue in 2023, up 54% year over year, from energy storage and generation. This includes its solar panels and battery packs.
If there aren't any major changes to how this business operates, Tesla will still derive the vast majority of its revenue from electric vehicles in 2034, just like it does today. This can come from its existing cars, as well as new models like the Cybertruck; the cheaper design, codenamed "Redwood," that's expected to sell for $25,000; and the reintroduction of the Roadster.
Betting on a very different future
If there's one thing we know generally about the economy and the tech sector, more specifically, it's that change is the only constant. Consequently, there's a high likelihood that Tesla will look totally different 10 years from now.
The business is investing time and resources into its Dojo artificial intelligence (AI) supercomputers to one day introduce full-self-driving (FSD) capabilities, so passengers don't have any involvement with operating the car. This innovation has been delayed numerous times by Musk, but if it becomes a reality, Tesla's plan is to launch a global fleet of autonomous robotaxis, effectively turning its vehicles into high-margin money-making machines.
Tesla is also focused on making progress in the robotics space by developing the Optimus, a humanoid robot that can seriously boost manufacturing output by replacing humans at certain tasks. Musk wants to sell these to other companies. This a play straight from Amazon's playbook, turning a major cost center into a potential revenue generator, like the e-commerce giant did with its logistics footprint and Amazon Web Services (AWS).
Should Tesla be successful at developing FSD and deploying robotics technology while finding strong demand from customers, the company will be unrecognizable in the future.
Known unknown
Based on everything mentioned above, I don't think anyone -- not even Elon Musk -- has a clue what this business will look like 10 years from now. I think it's not unreasonable to assume that Tesla will still generate sizable revenue from the sale of EVs. But I also understand why the most bullish supporters expect the company to find outsized success in other areas.
The result is that the future of Tesla will be characterized by heightened uncertainty, especially over the very long term. There's no question that this is one of the most innovative businesses on the face of the planet, but trying to predict the trajectory of things that don't even exist or have market adoption today seems like a foolish endeavor.
Thanks to the stock currently sitting 51% below its peak price, its valuation has come down meaningfully. Shares trade at a price-to-earnings ratio of 46.4. However, I still think this is a steep price to pay, as the next 10 years for Tesla will most likely be much more difficult than the past decade. Interest rates could stay higher for longer, and industry competition will only intensify.
From where things stand today, I wouldn't be surprised if the stock performs in line with the overall Nasdaq Composite index between now and 2034.
