Elon Musk Says Tesla Valuation Justified If Utility Of Robotaxis Is Factored

Tesla Inc (NASDAQ: TSLA) CEO Elon Musk said the company’s more than $800 billion valuation is justified as there is a “roadmap” to it.

What Happened: Musk’s back of the envelope math revolves around an assumed shipment of $50 or $60 billion worth of vehicles and those vehicles becoming Full Self-Driving and get deployed as robotaxis.

The usage of those cars would then jump from 12 hours a week to 60 hours a week, according to Musk.
See also: How to Invest in Tesla Stock

The automaker would be able to garner additional fees for the use of these robotaxis, thus bringing in a new stream of revenue.

The executive said that he suspects that some investors are taking that approach to valuing the company.

Why It Matters: Musk’s mathematics assumes a fivefold increase in the utility of the vehicles due to FSD, but even if there is a 2x increase, the $1 trillion valuation is still a probability. 

See Also: Every Time Elon Musk Has Warned Investors About Tesla's High Share Price

“It would be like if you made $50 million -- $50 billion worth of cars, it will be like having $50 million of incremental profit basically from that because it's just software. So -- and the pace you get 20 PE on that, it's like $1 trillion and the company is still in high-growth mode,” said Musk.

This month Virgin Galactic Holdings Inc (NYSE: SPCE) Chairman and SPAC King Chamath Palihapitiya warned investors against selling Tesla stock and said that Tesla is a disruptive company and not just an automaker.

Palihapitiya said last year that Tesla was “misvalued.” The former Facebook Inc (NASDAQ: FB) executive said that Tesla could reach the scale of Apple Inc (NASDAQ: AAPL), which has a market cap of over $2.3 trillion. 

Tesla reported Q4 2020 and full-year results on Wednesday. Revenue rose 46% year-over-year to $10.74 billion for Q4. Revenue for the full fiscal 2020 was $31.54 billion — a rise of 28% year-over-year.

Price Action: Tesla shares fell nearly 5% in the after-hours trading on Wednesday to $820.39 after closing 2.14% lower at $864.16.

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