Tesla Motors (NASDAQ:TSLA) reported fourth-quarter earnings after the market closed on Wednesday, which fell short of Wall Street's expectations. Nevertheless, it was a handful of bold comments from Tesla's chief executive, Elon Musk, that stole the show. In case you missed it, here are three standout statements from the outspoken CEO and what they mean for investors and Tesla's stock going forward.
Tesla Motors could be worth $700 billion by 2025
This is a bold proclamation for a leader whom about a year ago said Tesla's stock was overvalued . On a call with analysts last night, Musk said the electric-car maker's market cap would surpass that of Apple (NASDAQ:AAPL) in 10 years. This seems ludicrous considering Apple recently achieved a market cap north of $700 billion -- making it the most valuable company in world history .
Specifically, Musk said :
If you take this year's revenue, around $6 billion or thereabouts, and if we are able to maintain a 30% growth rate for 10 years, add to your 10% profitability number, and have a 20 P/E, our market cap would basically be the same as Apple's is today. That's going to require a bit of -- on the order of $700 billion -- obviously, getting there will requires some significant CapEx, but I am hopeful that we can do this without any significant dilution to the Company, maybe minor dilution but nothing serious.
As if the bar wasn't already high enough, this ambitious statement puts an expiration date on Tesla's volatile valuation. Tesla Motors currently boasts a market cap of $25 billion. Therefore, Tesla would need sales to climb as much as 40% a year for the next 10 years, if it hopes to even be in the ballpark of Apple's valuation by 2025. Just to be clear, it has taken Apple more than three decades to reach a valuation of $733 billion.
Tesla's got a "secret weapon"
This next over-share from the company's earnings call yesterday is a bit more vague compared to Musk's back of the envelope valuation discussed above. When asked if Tesla could avoid the dealership model down the road without significantly sacrificing demand, Musk punted the question by alluding to a "secret weapon" that the company will implement later this year .
I do have a secret weapon on the demand side that probably start to deploy this year for demand generation. We'll see how that goes. It isn't totally necessary, but it could be pretty interesting and a good weapon against the dealers,
The California-based automaker is opposed to the decades-old auto dealership model of selling cars, and instead sells its EVs directly to consumers. This has outraged auto dealer groups throughout the U.S. and led to costly state-by-state legislation battles . It also has many on Wall Street worried that demand for Tesla's cars could suffer in the years ahead without the help of franchise dealers or meaningful investments in advertising and marketing .
While Musk didn't say what the secret weapon was, investors can be sure that Tesla Motors will exhaust every possibility available to it before succumbing to the dealership model.
Tesla will hit performance metrics, regardless of China sales
As the world's largest auto market, China has long been regarded as a massive opportunity for Tesla Motors. Unfortunately, the company suffered weak initial sales in the region due to charging concerns . Nevertheless, Musk dismissed the recent weakness in China as "essentially irrelevant ."
Specifically he said , "Even if our sales in China were zero this year, zero, I am still confident we can do the 55,000 cars. They won't be zero." Tesla's management was quick to point out that their focus in China going forward is to create the best possible customer experience. As part of this plan, Tesla is currently offering free home charging to customers in China .
Despite the near-term challenges in China, Musk made it clear on the call that China-related concerns have been blown out of proportion. It's also important to remember that it has been less than a year since Tesla first entered the Chinese market. After all, building out a reliable charging infrastructure and convincing drivers to buy your gas-free cars in a new market takes time.
There was clearly no shortage of buzz-worthy remarks from Tesla's outspoken CEO during the company's latest earnings call. Still, Musk has a solid track record when it comes to delivering on his bold aspirations for the electric-car company. For that reason, investors may want to tread carefully when betting against Tesla Motors going forward.