Shocking valuation! Musk claims Tesla is worth $30 trillion USD

If you think Cathie Wood's $2600 target price for Tesla (TSLA.US) stock is already aggressive enough, then listening to Tesla CEO Elon Musk's valuation of Tesla's future will surprise you.

Wood's 2029 target stock price calculation released on Wednesday estimates Tesla's market value to be around $80 trillion, with the automotive company accounting for over $10 trillion, autonomous driving technology for $50 trillion or more, and the rest distributed among Tesla's other businesses, including stationary energy storage.

According to the Securities Times app, Musk expressed agreement with her views on autonomous driving at the company's annual shareholder meeting on Thursday, adding that the humanoid robot business could be even bigger. Tesla is manufacturing an AI-trained, labor-saving humanoid robot called Optimus, which can be used for round-the-clock factory assembly and also for homes, making life easier.

He said, "I think that when we reach large-scale production, Tesla can basically generate about $1 trillion in profit annually from Optimus. If the P/E ratio is around 20 to 25 times, this means that the market value of Optimus' single business will reach $20 trillion to $25 trillion."

Building on Wood's valuation of autonomous driving technology, Musk believes Tesla could become a $30 trillion company. This would make his personal net worth approximately $6 trillion.

This number sounds like a fairy tale. However, Gary Black, co-founder of the Future Fund Active ETF, did the math. He estimates global demand for robots to be around 100 million units per year, with each unit priced at $20,000 (this price is roughly between a smartphone and a car). To achieve the $1 trillion profit mentioned by Musk, a 50% operating profit margin is needed. If Musk is referring to net profit margin, then the operating profit margin needs to be even higher.

This is indeed quite aggressive. In 2024, Apple's (AAPL.US) operating profit margin is expected to be 31%, while Tesla's operating profit margin is estimated to be around 8%.

Musk may be better off focusing on a more direct target - reaching a $1 trillion market value again. At the end of 2021, when Tesla's stock price reached around $340, the company achieved this milestone for the first time. With more outstanding shares now, to reach a $1 trillion market value again, according to FactSet data, the stock price needs to be around $313.

Achieving this goal may be a profit story rather than a P/E story. Currently, Tesla's stock is trading at 55 times the expected earnings for 2025, lower than the 100 times the expected earnings at the end of 2021 and 2022; investors may not expect the P/E ratio to return to triple digits.

To reach a $1 trillion market value while maintaining a 55 times P/E ratio, Tesla needs to have earnings per share of around $5.6 in 2025. In 2022, Wall Street's consensus estimate for 2025 earnings per share is close to $8 Now this estimate has dropped to about $3.3.

As of Friday's close, Tesla fell 2.44% to $178.01. Increasing sales and improving profit margins can be said to be as important as manufacturing robots, which is crucial for Tesla's stock.

Since the approval of the compensation plan, Tesla's stock has only risen by a few dollars, which is somewhat unexpected.

Investors may be concerned that the new vote is not enough to overturn the January invalid ruling by the Delaware court. This concern seems to be exaggerated. Delaware's decision implies that if there is proper disclosure, Tesla shareholders will vote to reject this plan, said Natela Shenon, a partner at the Los Angeles law firm Grant | Shenon. Shenon said, "Now, with shareholders supporting this plan for the second time under all facts being disclosed, the core of the judge's argument becomes invalid. Whether Judge McCormick considers this shareholder vote and overturns this decision depends on whether she applies the law neutrally and fairly... She should have no reason not to overturn this decision."