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Without a doubt, Tesla (NASDAQ: TSLA) is one of the most intriguing stocks on the market. The polemical views on the company portray it as either a damaged brand with an aging lineup of vehicles on the cusp of being exposed as a hugely overvalued car company -- or a technology company about to explode by unveiling its primary value creator, robotaxis, in due course. Here's the lowdown.
Getting to a million dollars
First up, some simple math to illustrate how Tesla might make you a millionaire. For the sake of argument, let's assume that Ark Invest's "expected value" price target of $2,600 for Tesla stock in 2029 comes true. Then you would have to hold 385 Tesla shares to have $1 million worth of stock. Buying those shares at the time of this writing would cost you just shy of $105,000.
Based on just the significant initial outlay required, Tesla stock is unlikely the best candidate for most individual retail investors to become eventual millionaires. Having said that, the stock still has the potential to generate hefty returns.
Valuing Tesla
I reference Ark's valuation model because it highlights how investors perceive the stock differently. For bulls like Ark, the case for Tesla rests on its robotaxi offerings, which it attributes as being worth 88% of total company value, compared to just 9% for its electric vehicles.
That consideration goes a long way toward explaining why Tesla trades at nosebleed valuations compared with the more traditional automakers. Although Tesla is a highly successful EV company, the case for its stock lies in long-term revenue generation from profit sharing on miles driven on robotaxis, and the market knows it.
Let's put it this way: Under the Ark model, roughly $2,288 per share comes from robotaxis, and just $234 to Tesla as an EV company.
TSLA EV to Free Cash Flow data by YCharts.
What you need to believe for the bullish case
Consequently, investors need to accept the following:
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Tesla will release its robotaxi service (possibly featuring its Cybercab) in due course. CEO Elon Musk maintains it will launch "unsupervised full self-driving as a paid service in Austin in June."
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Tesla's purpose-built robotaxi, Cybercab, will begin volume production soon. Management maintains volume production will start in 2026.
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Adoption will be rapid, regulatory hurdles will be overcome, and safety concerns will be reassured.
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Tesla will be able to produce a low-cost Cybercab that can generate significantly lower cost per ride than alternatives like Waymo and traditional cab services.
Why Tesla can hit these goals
The good news is investors have reason to be positive. First, while relatively high interest rates have negatively impacted automakers' EV plans, Tesla carried on investing and reduced its cost per vehicle to below $35,000 at the end of 2024 from above $38,000 at the start of 2023. That matters because EVs need to be affordable to encourage adoption, the Cybercab needs to be affordable, and management claims it will launch a new "more affordable" model in the first half of 2025.