How High Can Tesla Motors Inc (TSLA) Fly? Part Two: Mass Market

Investors interested in a Toyota-sized Tesla must have extremely long investment horizons. But for those who do, if Tesla succeeds, they could be richly rewarded. With the current 114.5 million shares outstanding at market cap of Toyota’s size on Tesla would make shares worth about $1,600 per share. By this time, however, it is reasonable to expect share dilution from capital raises and option exercises to increase the total shares outstanding. In examining Tesla as a luxury automaker in a previous article, I used a ten percent increase in the share count but since mass market success would occur farther is the future, I will approximate a twenty percent increase in outstanding shares. With the same Toyota-sized market cap, Tesla shares would be worth about $1,400 per share under this situation. Additionally, Tesla may even begin paying a dividend like Toyota does now in an effort to return capital to shareholders.

Going this far out we do have to keep in mind that the global automotive market will be larger by this time and a company Toyota’s size will likely be worth more. Consequently, Tesla shares may exceed the estimates above on this basis. However, looking this far out investors need to factor in inflation over that same time period, another factor that remains unknown. As a result, these are only general estimates about what a fully expanded Tesla could be worth and should not be taken as set in stone.

Building an electric future

Few companies have attracted so much interest from both the long side and the short side as Tesla Motors. With longs insisting the automaker has a bright future ahead of it and shorts worried about the financials at the company, this electric car maker has become center stage for the electric car debate. While there are still challenges ahead, the sky looks clearer for Tesla than it ever has before. And by analyzing the values of comparable automakers, we can see that Tesla has the potential to not only change what we drive, but to grow our portfolios through its financial success.

The article How High Can Tesla Fly? Part Two: Mass Market originally appeared on Fool.com and is written by Alexander MacLennan.