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Tesla Projected Stock Price and Growth For 2021

A Tesla’s store in Netherlands. Source: Flickr.

It’s without a doubt that Tesla is a growth stock.

In the past 1 and a half year, Tesla’s stock has surged more than 1000%.

If you had invested in Tesla’s stock prior to 2020, your investment would be worth more than 10X now.

The question is will Tesla’s stock go up again in 2022 or thereafter?

If yes, what will be the expected stock price?

Or, how much growth is there for Tesla in the future?

What are the projected car sales for Tesla?

In this article, we will try to answer these questions as best as we can.

That said, we will estimate the projected values and the growth rates for a number of key metrics, including Tesla’s vehicle deliveries, revenue or sales, gross profit, operating profit and finally the range of the company’s stock price in 2021, 2022 and 2023.

Therefore, let’s get started!

How The Projections Are Done

Before we dive straight into the topics of Tesla’s projected growth rates and stock price, we need to understand a few things about the company.

Keep in mind that we are using a top-down approach during the process of estimating Tesla’s growth and stock price.

As Tesla is an auto manufacturer, its vehicle delivery figure is the primary driver of its stock price.

Therefore, we will first figure out Tesla’s projected vehicle deliveries in the next 3 years from 2021 to 2023.

When we have Tesla’s project car sales numbers, we can proceed to estimate its automotive sales and leasing revenue.

From the automotive revenue or sales, we can get Tesla’s projected automotive gross profit.

However, for Tesla’s other business units, including its energy and services unit, a few assumptions are made about their respective sales growth rates.

Therefore, once we obtain the projected gross profits for each of Tesla’s business units, we can proceed to estimate its total operating income.

Finally, with Tesla’s projected revenue, gross profit and operating income figures available, we can then estimate the range of Tesla’s stock price by referring to its historical valuation ratios.

In short, the following is a summary of steps that detail the projection of Tesla’s stock price.

1. Vehicle delivery figure
2. Automotive sales and leasing revenue
3. Energy and services segment revenue
4. Gross profit for each of Tesla’s business units
5. Operating profit
6. Stock price range

Let’s soldier on!

Key Assumptions

There are a few assumptions in the process.

For example, a 50% annual growth rate is used for Tesla’s vehicle delivery in 2021, 2022 and 2023.

This figure is slightly conservative compared to its historical average growth rate of 66%.

Also, Tesla’s average selling price (ASP) and average leasing price (ALP) per vehicle are assumed to decline at an annual rate of 5% from 2021 to 2023.

In addition, Tesla’s regulatory credits sales are assumed to increase at a 20% growth rate from 2021 to 2023 per year.

Again, this figure is also highly conservative compared to its historical average growth rate of more than 80%.

From a fundamental perspective, different gross margins are used for different Tesla’s business sectors based on their respective historical data.

It’s the same practice when it comes to estimating Tesla’s operating expenses.

For example, Tesla’s R&D and SGA expenses will consume 5% and 10%, respectively, of its total sales based on historical data.

In terms of valuation, we will use a range of 30% above and 30% below its median valuation to estimate Tesla’s stock price by the end of 2021, 2022 and 2023.

Finally, why are we projecting only 3 years of Tesla’s stock price?

Why not 5 years or even 10 years down the road?

The reason is that Tesla’s valuation will change from year to year based on investors’ sentiments towards the company.

In later years, Tesla may not command the same valuation as that in 2021 and its valuation will most likely reduce as it grows bigger.

More importantly, Tesla’s valuation will be vastly different after 3 years and the results will not make sense if we project too far into the future.

Therefore, we will just stick to the 3-year period which is from 2021 to 2023.

Thereafter, we will adjust and update the projected stock price again in 2022 and in subsequent years based on its nearest valuation data at that time.

Without further ado, let’s get started!

Tesla’s Average Selling Price (ASP) Per Vehicle

Tesla average selling price per vehicle 2020

Tesla average selling price per vehicle 2020

Let’s first figure out Tesla’s average selling price per vehicle or ASP based on the fiscal 2020 data.

The table above shows how the ASP is calculated.

In 2020, Tesla made about $26 billion in automotive sales, of which $1.6 billion was regulatory credits revenue.

Therefore, Tesla’s automotive sales net of regulatory credits came to about $24.6 billion in fiscal 2020.

Tesla’s regulatory credits sales need to be excluded when calculating the ASP as they do not contribute to the sale price of the vehicles.

In terms of vehicle sold, Tesla delivered nearly half a million or 500,000 vehicles in 2020.

However, of that 500,000 vehicles, 7% were leased vehicles.

Therefore, that leaves about 465,000 vehicles that contribute to automotive sales revenue.

Dividing the automotive sales revenue with the number of vehicles delivered, we arrived at Tesla’s average selling price per vehicle or ASP of about $53,000.

In short, Tesla’s ASP came to about $53,000 per vehicle in 2020.

Tesla’s Average Leasing Price (ALP) Per Vehicle

Tesla average leasing price per vehicle 2020

Tesla average leasing price per vehicle 2020

Similarly, to determine Tesla’s average leasing revenue for each leased vehicle, we use the same approach as shown in the table above.

Keep in mind that Tesla’s regulatory credits revenue does not fall under the leasing revenue portion.

Therefore, regulatory credits’ effect on Tesla’s leasing revenue does not exist here.

As mentioned, Tesla’s leased vehicle came to about 7% of its total deliveries in 2020.

With the total leasing figure available, Tesla’s average leasing price per vehicle or ALP came to about $31,000.

Tesla’s Projected Automotive Sales Revenue and Gross Profit

Tesla projected automotive sales revenue and gross profit

Tesla projected automotive sales revenue and gross profit

With the average selling price per vehicle available, we can estimate Tesla’s revenue and the respective gross profit in fiscal 2021, fiscal 2022 and fiscal 2023.

As shown in the table above, we assume that Tesla will grow its vehicle sales at a 50% growth rate on an annual basis from 2021 to 2023.

The 50% growth rate assumption is based on Tesla’s historical vehicle delivery growth rate which averages around 66%.

Therefore, the 50% growth rate assumption is slightly conservative compared to its historical data.

Additionally, Tesla’s ASP is assumed to decline at about 5% per year from 2021 to 2023.

Tesla’s ASP will most likely decline as its delivery volume grows in the future.

Also, we assume that Tesla’s leasing vehicle volumes to slightly increase to 8%, 9% and 10% of its total volume in fiscal 2021, fiscal 2022 and fiscal 2023, respectively.

As such, Tesla’s projected automotive sales revenues come to about $35 billion, $49 billion, and $69 billion in fiscal 2021, fiscal 2022, and fiscal 2023, respectively.

At a gross margin of about 25%, Tesla’s projected gross profits will be $9 billion, $12 billion, and $17 billion in fiscal 2021, fiscal 2022, and fiscal 2023, respectively.

Tesla’s Projected Automotive Leasing Revenue and Gross Profit

Tesla projected automotive leasing revenue and gross profit

Tesla projected automotive leasing revenue and gross profit

For Tesla’s projected leasing revenue and gross profit, the same calculation approach applies.

Also, the same assumptions are also applied here.

The only difference is that Tesla’s leasing revenue has a much higher gross margin.

In this case, a gross margin of 46% is assumed for Tesla’s leasing revenue for the next 3 years.

As such, Tesla’s projected automotive leasing revenues come to about $1.7 billion, $2.8 billion and $4.4 billion in fiscal 2021, fiscal 2022 and fiscal 2023, respectively.

Similarly, Tesla’s projected automotive leasing gross profits total $0.8 billion, $1.3 billion and $2 billion in fiscal 2021, fiscal 2022 and fiscal 2023, respectively.

Tesla’s Projected Regulatory Credits Revenue

Tesla projected regulatory credits revenue

Tesla projected regulatory credits revenue

Tesla’s regulatory credits revenue needs to be projected separately from its automotive revenue.

The reason is that Tesla earns its regulatory credits sales irrespective of its automotive sector.

Besides, Tesla’s regulatory credits sales can fluctuate massively from year to year.

To best estimate Tesla’s regulatory credits revenue, an assumption of a 20% growth rate per annum is applied to this segment of revenue.

As mentioned, this figure is slightly conservative compared to its historical average growth rate of over 80%.

Therefore, Tesla’s projected regulatory credits sales total about $1.9 billion, $2.3 billion and $2.7 billion in fiscal 2021, fiscal 2022, and fiscal 2023, respectively.

Also, keep in mind that there is no gross profit associated with Tesla’s regulatory credits as they are not a product being produced at one of the company’s Gigafactory.

As such, there is no cost of sales associated with Tesla’s regulatory credits revenue.

Tesla’s Projected Energy Revenue and Gross Profit

Tesla projected energy revenue and gross profit

Tesla projected energy revenue and gross profit

In terms of Tesla’s energy and storage revenue, a 50% growth rate per annum is applied from fiscal 2021 to fiscal 2023.

Also, Tesla has a very low gross margin for its energy sector, at only 1% in 2020.

I assume that Tesla will be able to improve its energy gross margin slightly to 2% and 3% in 2022 and 2023, respectively.

Tesla’s projected margin expansion in the energy segment from 2021 to 2023 can be attributed to the volume expansion in the future.

As Tesla grows its energy generation and storage volumes, its gross margin will most likely expand.

All told, Tesla’s projected energy sales total $3 billion, $4.5 billion and $6.7 billion in fiscal 2021, fiscal 2022 and fiscal 2023, respectively.

Similarly, Tesla’s projected energy gross profit will be $30 million, $90 million and $202 million in fiscal 2021, fiscal 2022 and fiscal 2023, respectively.

Tesla’s Projected Services Revenue and Gross Profit

Tesla projected service revenue and gross profit

Tesla projected service revenue and gross profit

For Tesla’s services sector, a 40% growth per year is assumed for this business segment in the next 3 years.

The 40% growth rate assumption is quite conservative compared to its historical growth rate that averages 60%.

Also, Tesla’s services sector is assumed to have a gross margin of -13%, -12% and -11% in 2021, 2022, and 2023, respectively.

This assumption is based on Tesla’s 1Q 2021 TTM gross margin which hovered around the -13% level.

Additionally, I also assumed that Tesla will be able to narrow its losses in the services sector in the coming future.

As such, Tesla’s services sector gross margin will slightly improve to -12% and -11% in 2022 and 2023, respectively.

All told, Tesla will earn a projected services revenue of $3.2 billion, $4.5 billion and $6.3 billion in fiscal 2021, fiscal 2022 and fiscal 2023, respectively.

Similarly, Tesla’s gross losses in the services sector will be -$420 million, -$542 million and -$696 million in fiscal 2021, fiscal 2022, and fiscal 2023, respectively.

Tesla’s Projected Total Revenue and Growth Rates

Tesla projected total revenue and growth rates

Tesla projected total revenue and growth rates

After projecting all of Tesla’s segment revenue, we can now come to estimate its total revenue which is shown in the table above.

Keep in mind that the 2020 data shown in the table is for reference purposes as they are real figures reported by Tesla.

As seen, Tesla’s projected total revenue came to about $44 billion, $63 billion and $89 billion in fiscal 2021, fiscal 2022 and fiscal 2023, respectively.

These estimated figures represent a compounded annual growth rate of about 40% between fiscal 2021 and fiscal 2023.

For example, Tesla’s total sales are projected to grow by 40% to $44.5 billion by the end of fiscal 2021.

Similarly, Tesla is projected to grow its total revenue to $63 billion by the end of fiscal 2022, representing a year-on-year growth rate of over 40%.

These projected growth rates are actually slightly conservative compared to Tesla’s historical growth rates which average more than 50%.

Tesla’s Projected Gross Profit and Growth Rates

Tesla projected gross profit and growth rates

Tesla projected gross profit and growth rates

Tesla’s projected gross profits come to about $11 billion, $15 billion and $21 billion, in fiscal 2021, fiscal 2022 and fiscal 2023, respectively.

The respective projected YoY growth rates of 66% and subsequently 40% for Tesla’s gross profits are slightly optimistic.

Nevertheless, we will stick with these estimated figures for now.

Tesla’s Projected Operating Profit and Growth Rates

Tesla projected operating profit and growth rates

Tesla projected operating profit and growth rates

For Tesla’s operating income, the projected figures are $4.3 billion, $5.8 billion and $8.1 billion in fiscal 2021, fiscal 2022 and fiscal 2023, respectively.

These figures represent a YoY growth rate of over 100% for fiscal 2021 which is a bit optimistic.

In subsequent years, Tesla’s operating income is projected to grow at 37% and 38% in fiscal 2022 and 2023, respectively.

Keep in mind that Tesla’s R&D and SG&A expenses will grow as the company’s sales increase in the future.

Therefore, the assumption here is that these expenses, R&D and SG&A, will consume about 5% and 10%, respectively, of Tesla’s total sales going forward.

The assumption is in line with Tesla’s 2020 result.

Tesla’s Projected Stock Price Based On Revenue

Tesla projected stock price based on revenue

Tesla projected stock price based on revenue

Since Tesla is projected to earn about $44.5 billion in total sales in FY2021, the projected stock price will be between $838 per share and $451 per share based on a price to sales ratio of 19.5X and 10.5X, respectively.

Tesla’s price to sales valuation averaged around 15X from 2020 to mid of 2021.

The 19.5X and 10.5X price to sales valuation represents a range of 30% above and 30% below its median valuation.

At the time this article was published, Tesla’s stock was traded at $670 per share which was slightly above the median price of $644.

Going into 2022 and 2023, Tesla’s projected market capitalization will be more than $1 trillion at the upper range of the valuation.

By 2023, Tesla is projected to reach a market capitalization of $1.7 trillion based on its projected total revenue of $89 billion.

At that time, Tesla’s stock price will be worth $1,400 at the upper range of the valuation which is more than twice the value of its stock today.

Tesla’s Projected Stock Price Based On Gross Profit

Tesla projected stock price based on gross profit

Tesla projected stock price based on gross profit

Tesla’s projected stock prices based on gross profits are slightly higher compared to the projected stock prices based on revenue.

For your information, Tesla’s price to gross profit ratio averages 68X from 2020 to mid of 2021.

Therefore, by the end of 2021, Tesla is projected to reach nearly $1 trillion in market capitalization based on the higher end of the price to gross profit valuation ratio.

At a market cap of $1 trillion, Tesla’s estimated stock price will be between $932 per share and $508 per share by the end of 2021 using a price to gross profit ratio 30% above and 30% below its median value.

By the end of 2023, Tesla’s stock price will be worth between $1,564 per share and $853 per share on the back of a $1.9 trillion market cap using the same price to gross profit ratio.

Tesla’s Projected Stock Price Based On Operating Profit

Tesla projected stock price based on operating income

Tesla projected stock price based on operating income

Tesla commands a much higher valuation based on the price to operating profit ratio compared to other ratios, including the price to sales and price to gross profit.

As such, Tesla is projected to reach $1.3 trillion in market cap by the end of 2021 on the back of a price to operating profit ratio of 308X.

At the lower range of the valuation ratio, Tesla’s market cap is projected to reach only $700 billion.

Between the higher and lower range of the valuation ratio, Tesla’s stock price will be $1,276 per share and $688 per share, respectively, in 2021.

Similarly, Tesla’s market capitalization is projected to reach higher by 2023 between $2.5 trillion and $1.3 trillion using the same price to operating profit ratio.

This market cap figure is a bit optimistic and I think the 2021 projected figure is more reasonable.

Nevertheless, Tesla’s projected stock price is expected to reach $2,000 by the end of 2023 based on the higher range of the price to operating profit valuation.

Conclusion

If we take into account Tesla’s projected stock prices based on all valuation rations, including the price to sales, price to gross profit and price to operating income, the lowest end of the stock price will be at $451 per share in 2021 whereas the highest end will be at $1,276 per share in 2021.

By the end of 2023, Tesla’s projected stock price will be $2,070 per share at the upper range of the projection and $774 per share at the lower range of the projection.

Using the same valuation ratio, Tesla will be close to a $1 trillion company by 2023 with a projected share price of $774 at the lowest end of the projection.

On a worst-case scenario, if you had bought into Tesla’s stock at $670 per share at the time this article was published, your return on investment would still be about 5.3% per annum according to the projected stock price, giving you a total return of 15% between 2021 and 2023.

References and Credits

1. Financial figures in all tables on this webpage were obtained and referenced from Tesla’s quarterly and annual filings which are available in Tesla Investor Relations.

2. Featured images in this article are used under the creative commons license and sourced from the following websites: Thomas Hawk and jbdodane.

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