Tesla (NASDAQ: TSLA) has likely already made more than a few millionaires in its 15-year history considering it's up more than 950% in the last five years alone. Most of the gains it has made can be primarily attributed to the success it found in the electric vehicle (EV) market. Today, it is the leading manufacturer in the world and has become synonymous with EVs itself.
But is it possible that Tesla's best days are in the rearview? Based on a handful of factors, nothing could be further from the truth. Here's how an investment today could put you on the path to millionaire status.
Image source: Tesla.
The undisputed EV champ
By 2030, analysts expect that two out of every three vehicles sold will be an EV. With such significant growth, start-ups and legacy automakers alike are attempting to make their foray into the market.
However, many of these new competitors are discovering that manufacturing EVs is no easy job. High costs and intricate supply chains make profitability a rare occurrence. The fact of the matter is that even though more companies are joining the EV race, Tesla still holds the crown in terms of total production and market share. It is worth noting that Chinese automaker BYD (OTC: BYDDY) is gaining market share, but there is considerable distance separating the next closest challenger.
The main reason Tesla has enjoyed such success is primarily due to its handling of the EV supply chain, its ability to keep costs low while scaling production, and its expanding global presence. As EV adoption continues to grow at an exponential rate, Tesla is well-positioned to command the market for the foreseeable future.
More than just an EV manufacturer
While Tesla's EV prosperity isn't going anywhere anytime soon, it isn't the reason it could be a millionaire maker. Rather, Tesla's pursuit of developing technologies that sound like they belong in a sci-fi movie is how the company will transform portfolios for the better.
Using income from its EVs, Tesla funds research and development of artificial intelligence, autonomous driving, and robotics. As these technologies become more refined, they hold the potential to generate more income than EVs ever have. Admittedly, these technologies are nascent and their true potential unknown, so projections can be ambiguous. As of now, the endeavor with the best-known impact is likely Tesla's autonomous driving.
While there is still work to be done, Tesla is on the right path to achieve full autonomous driving thanks to a recent breakthrough. Once the highly coveted Level 4 or 5 of autonomy is reached, the goal is to create a robotaxi business where riders can hail self-driving vehicles.
Achievement of autonomous driving and a successful rollout of robotaxis are achievements CEO Elon Musk believes will be talked about 100 years from now. More importantly, though, he believes they hold the potential to send Tesla to a $10 trillion valuation. Here lies the future millionaire-making opportunity.
To reach these lofty goals, Tesla would need to grow by more than 1,300%. That means each share would eventually be worth $3,000, a far cry from their current price of $210.
These numbers might sound absurd, but he isn't far off nor alone in his thinking. A recent analysis by investment firm Ark Invest attempted to quantify the real impact a robotaxi fleet would have on Tesla's bottom line, and the results were astonishingly similar to Musk's projection.
By utilizing a Monte Carlo simulation, Ark Invest produced three different scenarios: bear, expected, and bull. In the expected outcome, Ark Invest foresees robotaxis producing more than $1 trillion in annual revenue, pushing Tesla's stock to a price of $2,000 per share. While EV sales would still account for most of Tesla's total revenue at 47%, results suggest that robotaxis would make up around 44%. In the bear scenario, share prices could grow to $1,400, while the most bullish outcome could lead prices surging 1,000% and reach $2,500.
The simulation conducted by Ark Invest is nothing more than just that -- a simulation. It doesn't mean this is exactly what Tesla's future will look like, but it exemplifies the transformative power of robotaxis and serves as a microcosm of the type of impact Tesla's other technological endeavors could have on society and the company's future earnings.
The opportunity at hand
Based on the simulation, Tesla could become the most valuable company in the world. But does that mean it could make you a millionaire? Assuming the expected scenario unfolds, which would be just shy of 10 times today's prices, investors would need to allocate roughly $100,000 to reach a seven-figure portfolio.
Admittedly, that's a serious chunk of change. Unless you have large reserves of capital at your disposal, it's unlikely that Tesla will be a millionaire-maker except for a small percentage of investors. But even for those without these type of funds, Tesla's current valuation relative to its long-term potential still presents a lucrative opportunity.
An investment in Tesla is an investment in the exciting technologies of tomorrow. While only time will tell what the future holds, investors can be sure Tesla will have a role in shaping it.
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RJ Fulton has positions in Tesla. The Motley Fool has positions in and recommends BYD and Tesla. The Motley Fool has a disclosure policy.
