Tesla Inc (TSLA)

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Tesla Is Already a Trillion-Dollar Company. Here’s Why.

Tesla 10X to 10,000 per share by 2021 !


Tesla Is Already a Trillion-Dollar Company. Here’s Why.

By Al Root
Updated Jan. 8, 2021 5:00 pm ET / Original Jan. 8, 2021 10:56 am ET
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Tesla electric vehicles at the company's supercharger station in Hawthorne, Calif.
Patrick T. Fallon / AFP via Getty Images
Friday morning, electric-vehicle pioneer Tesla hit $800 billion in market cap—and only four days after passing the $700 billion mark. But if you include its executive stock options, Tesla is the fifth trillion-dollar company in the U.S.

Tesla (ticker: TSLA) shares closed 7.8% higher on Friday at more than $880. That gives the company a market value of more than $830 billion, based on 950 million shares outstanding. The S&P 500 and Dow Jones Industrial Average rose 0.6% and 0.2%, respectively.

But Tesla’s fully diluted share count—including stock options and warrants and convertible debt, which are all deep in the money—is about 1.2 billion, according to data provider FactSet. (”Deep in the money” means the price paid to get that stock is far below where shares trade. It is highly likely the options and warrants will become stock in the future.) That gives Tesla a market value north of $1 trillion for the first time. Tesla now joins Microsoft (MSFT), Apple (AAPL), Amazon.com (AMZN), and Alphabet (GOOGL).

That’s the how of Tesla’s $1 trillion valuation. The why seems to be because former bearish investors are coming around. RBC analyst Joseph Spak wrote earlier this week that he got Tesla stock “completely wrong” and upgraded shares to Hold from Sell. He doubled his price target to $700 from $339.

Friday, Evercore ISI analyst Chris McNally also upgraded Tesla to Hold from Sell. His target went to $650 from $225. Like Spak, he acknowledged being on the wrong side of the Tesla trade for a while.

Those are bears becoming slightly less bearish. The bulls are still bullish. Morgan Stanley analyst Adam Jonas rates Telsa stock Buy and raised his price target earlier this week to $810 from $540. It took about a day for Tesla stock to eclipse what was the new highest price target on the Street.

Analysts are raising their price targets because they now project faster adoption of EVs for the next few years. Spak, for instance, used to model 1.3 million in vehicle sales for Tesla in 2025. He raised that to 1.7 million this week. What’s more, he expects Tesla’s electric-battery market share to be about 16% in 2025, down from more than 20% today. More EVs are coming from other auto makers, but he expects Tesla to remain No. 1 for the next few years at least.

It also doesn’t hurt Tesla’s share price that EV deliveries in the fourth quarter exceeded analyst expectations.