The Tesla Inc (NASDAQ: TSLA) share price has long been one of the US shares that have gripped Aussie investors with the most enthusiasm. The electric vehicle and battery manufacturer frequently tops lists of most popular US shares for Aussie investors. Its CEO, Elon Musk, is one of the most well-known CEOs in the world, even in the uber-famous tech industry. And let's not forget that stellar performance history.
Although Tesla shares have cooled off in recent months, this company is still up more than 80% over the past 12 months, and up 40% or so since just May. Not only that, Tesla shares are still up more than 1,500% over the past 2 years.
So where to now for Tesla, now that it is sitting at US$805.72 a share at the latest pricing? That's less than US$100 from its all-time high of US$900.40 a share.
Well, one ASX fund manager thinks the Tesla share price has plenty of gas in the tank (ironic pun not intended there). Sydney-based fund manager Holon Global Investments has just released a 144-page report on the future of Tesla. And you can tell by the title 'Tesla – On the road to a US$10 trillion company and beyond', what the gist might be.
So let's take a look at what Holon Global has found.
Firstly, Holon describes Tesla shares as having "remarkable upside and provide investors with a once-in-a-generation buying opportunity" at their current level.
Using a 30-year discounted cash flow model for Tesla, Holon arrives at a fair valuation today of a whopping US$3,369 per share. That implies that Tesla shares are currently undervalued by as much as 318%.
Tesla to reach a share price of US$3,369?
But that's not all, folks. Holon goes further, stating that "if Tesla can achieve our long-term financial forecasts, our DCF valuation for Tesla in 2030 increases to US$6,244 and further increases to US$9,056 in 2040".
The core of Holon's investment thesis is a ballooning of global vehicle sales over the next few decades. The fund manager is predicting that Tesla "will benefit from a doubling of global passenger vehicle sales to 206 million vehicles per year by 2050".
This will underpin demand for electric vehicles, as Holon believes the sale of traditional internal combustion-powered cars will be banned across the globe by 2040. Further, Holon believes 40% of this demand for new vehicles will come from India and China.
At the end of this model, Holon thinks Tesla will be able to capture 25% of global passenger electric vehicle sales over the next decade, and will be producing 5.5 million cars by 2025. Once it reaches this scale, Holon then reckons "very few companies will have the financial strength and product range to challenge Tesla".
Take Tesla's other developments, such as Tesla's energy and solar divisions, autonomous driving technology, as well as other leading software. We then arrive at a prediction of "annual free cash flows that we forecast will reach US$1 trillion per year from 2044 onwards".
A lot of bold predictions there, but I'm sure Tesla shareholders would be very excited about what Holon had to say about this company.
At the last Tesla share price of US$805.72, this company has a market capitalisation of US$797.67 billion.
