The primary goal of investing is to raise one's purchasing power over time. Beyond that, there are companies that can produce monster wealth for investors. With its shares soaring almost 21,000% since their initial public offering 15 years ago (as of June 11), Tesla (TSLA +2.71%) has done just that.
If you're a new investor, or just a seasoned veteran, then maybe you're looking at this EV stock for the first time as a possible addition to your portfolio. If you bought shares now, could Tesla set you up for life?
Image source: Tesla.
Taking an optimistic perspective
Tesla generated 72% of its revenue in the first quarter (ended March 31) from the sale of automobiles. The business is known for offering some of the most in-demand, tech-advanced, and well-designed EVs on the market. This is precisely what has supported its success.
However, visionary founder and CEO Elon Musk believes Tesla's future will look different. There are two important projects that the company continues to work on that could, in theory, change the financial picture.
The first, of course, is full self-driving (FSD) technology. Tesla is finally launching a robotaxi service in Austin this month, with plans to enter more U.S. cities before year-end. The goal is to get this service running on a worldwide scale one day.
Tesla has also been working on Optimus, its humanoid robot. The goal here is not only to outfit Tesla factories, but to sell this machine to other businesses to perform various tasks that humans currently handle.
In an optimistic scenario, Tesla's revenue could be astronomically higher than it is today. This is what Ark Invest's Cathie Wood believes. Her firm's research suggests that the global robotaxi total addressable market is $11 trillion. When it comes to robots, Musk sees this project alone being able to generate $10 trillion in revenue. These are truly colossal figures that can make anyone's head spin.
Looking at Tesla's business today
While Tesla has huge ambitions for the future, investors can't get distracted from what the company looks like today. This is still an EV manufacturer. The business has posted impressive growth in the past, but this is no longer the case. And it might suggest that Tesla's novelty effect is fading, as the company starts to resemble its industry peers.
After years of strong double-digit revenue growth, Tesla's top line dipped 9% in the first quarter. Demand is under pressure, which has been due to higher interest rates. Consumers will think twice before buying a new vehicle, as the cost of financing is more prohibitive.
The industry has also now become much more competitive. Tesla stood out historically as it disrupted the car market. Nowadays, there are many rivals trying to benefit from the EV trend. Competitors range from legacy automakers to foreign start-ups. This makes it more difficult for Tesla to stand out.
NASDAQ: TSLA
Key Data Points
Expectations and uncertainty
It's so difficult to predict what Tesla will look like 10 or 20 years from now. Bullish investors appreciate the upside potential from FSD tech and humanoid robots. However, it's anyone's guess when, or if, this will become a reality on a global scale. There are hurdles Tesla needs to overcome, which are related to technical, regulatory, and human aspects.
It's even hard to figure out the financial implications for Tesla. If things work out, the business could have tremendous earnings power far into the future. If things don't go as planned, maybe Tesla continues to operate like a traditional mass-market automaker.
Making matters worse is the current valuation. The stock trades at a forward P/E ratio of 173. That's obviously not cheap by any stretch of the imagination, and it demonstrates the high hopes investors have.
Tesla has probably minted some millionaires thanks to the stock's incredible ride higher in the past. But I'm not ready to say that the company will set new shareholders up for life. It's extremely rare to find a single company that can achieve this for your portfolio.
