As a major disruptor to the worldwide auto industry, Tesla (TSLA +7.62%) has certainly gotten its fair share of attention. CEO Elon Musk seems to always have the spotlight on him. And he's viewed by many as a great visionary.
It's not surprising that if a business has this type of introduction, its shares have performed well. Since June 2014, this top electric vehicle (EV) stock has skyrocketed 1,050%, crushing the gain of the Nasdaq Composite Index. But it's been a difficult ride more recently, with shares trading 56% off their all-time high.
Bullish investors are probably thinking about buying the dip today. Before doing so, let's consider where Tesla could be in 10 years.
It's all about cars
In 2023, the company generated $97 billion in revenue, of which 85% came from selling automobiles. Right now, Tesla has five models in its lineup of vehicles, and there is talk of expanding that selection.
Throughout its history, this has been a car company. And I think there's a very good chance that a decade from now, Tesla will still be designing, manufacturing, and selling passenger vehicles to consumers across the world -- exactly what it does today.
Don't be surprised if the vast majority of its revenue is derived from EVs in 2034. The issue, though, is that growth is undoubtedly going to slow, as has already happened. Intense competition and macro headwinds have forced Tesla to lower prices in order to drive demand. This situation tells me that growth over the next decade isn't going to come anywhere near the gains posted in the past 10 years.
NASDAQ: TSLA
Key Data Points
A different enterprise
But there are some Tesla supporters, like Cathie Wood, who believe the company is going to completely transform itself in the years ahead. ARK Invest, the asset management firm that Wood heads up, puts out thoughtful research. But its projections can make you scratch your head. They are incredibly ambition targets.
For example, one of Wood's well-publicized predictions is that by 2030, there will be a global robotaxi industry that generates $8 trillion to $10 trillion in annual revenue. Think of the rides that Uber or Lyft offer, but without a driver.
Given Tesla's huge focus on artificial intelligence, Wood and her team think fully autonomous driving is going to become a reality. And they estimate half of that industry's multitrillion-dollar opportunity will go to platforms like Tesla's.
Now, I have absolutely no clue whether or not Tesla can introduce a global fleet of robotaxis one day. Furthermore, the timeline is anyone's guess.
I do believe it's valuable to assess the facts in front of us. We know that Musk has pushed back the introduction of this revolutionary technology on numerous occasions. This can cause investors to question if it's even possible, given the technical challenges and the roadblocks in gaining regulatory approvals and human trust.
Should this end up happening, though, I can see Tesla's stock price soaring. But in my opinion, the probability is low.
Should you buy Tesla stock?
A convincing argument can be made that this business, which carries a market cap of $572 billion, is still overvalued. And this is even with the shares undergoing a major downswing in recent years.
This leads us back to the original question of where Tesla will be 10 years from now. Based on the stock's expensive valuation -- a price-to-earnings ratio of 46.5 -- I believe investors who buy shares today will likely be disappointed with their returns over the next decade.
