The valuation of Tesla Inc (TSLA, Financial), the world-renowned electric vehicle manufacturer, may be set for a significant boost thanks to its Dojo supercomputer, according to a recent analysis by Morgan Stanley (MS, Financial). Analysts led by Adam Jonas have expressed optimism that the artificial intelligence technological network developed by Tesla Inc (TSLA, Financial) could add up to $500 billion to the company's enterprise value.
The development and implementation of the Dojo supercomputer are crucial for Tesla Inc (TSLA, Financial). Although the company faces challenges in aligning its growth with its current valuation metrics, the potential for Dojo to unlock new markets and revenue streams is substantial.
Investor Perspective and Valuation Metrics
At the same time, the valuation of Tesla Inc (TSLA, Financial) is likely to remain unattractive for value-oriented investors, making them want to look away. We will examine the company's valuation metrics and compare them to the growth metrics of the electric vehicle giant using GuruFocus' All-in-one Screener, a powerful tool that offers comprehensive financial information. With the latest information, these metrics will give us a clear understanding of where the company is heading next.
So, without further ado, let’s dissect the latest news surrounding Tesla Inc (TSLA, Financial).
Dojo's Potential Impact on Tesla's Market Value
The Dojo supercomputer, primarily designed to train Tesla Inc (TSLA, Financial)'s self-driving vehicles using video data, may extend the company's capabilities beyond selling vehicles at a fixed price. According to Jonas, this could transform Tesla Inc (TSLA) into a power player in the lucrative software-as-a-service (SaaS) market. This sentiment was echoed by other analysts, who noted that the Dojo supercomputer could expedite the adoption of robotaxis and network services, opening up new addressable markets similar to how Amazon Web Services (AWS) did for Amazon.com Inc.
Morgan Stanley (MS, Financial)'s analysis suggests that the Dojo supercomputer may increase Tesla Inc (TSLA, Financial)'s market value by nearly $600 billion, helping accelerate its entry into robotaxis and software services. This could ultimately lead to a market capitalization of about $1.39 trillion, a 76% increase from its current market value of approximately $789 billion.
Tesla's Financial Performance and Future Prospects
As of the latest information, Tesla Inc (TSLA, Financial) has a year-to-date return of 153.62%. However, its PE ratio (TTM) of 77.56 and forward PE ratio of 86.61 rank worse than 91.01% and 98.27% of companies in the Vehicles & Parts industry, respectively. Nevertheless, Tesla Inc (TSLA)'s future 3-5 year EPS without NRI growth rate of 26% and total revenue growth rate of 24.94% rank better than 82.69% and 92.50% of companies in the same industry. This indicates that substantial growth is necessary to align with the company's valuation metrics.
Elon Musk, Tesla Inc (TSLA, Financial)'s CEO and largest individual shareholder, has a net worth of $261 billion, making him the world's richest person. Musk has announced that Tesla Inc (TSLA) will invest "well over" $1 billion in developing the Dojo supercomputer over the next year. This investment underscores the company's commitment to leveraging artificial intelligence and machine learning to revolutionize the automotive and software services industries.
Comparative Analysis in the EV Market
Analysts often prefer to analyze companies with zero sales or earnings, as it allows them to construct narratives about the total addressable market sizes and maintain a positive outlook about the future potential. This trend is especially prominent in the electric vehicle (EV) market.
Several players in the EV space, including Rivian Automotive Inc (RIVN, Financial) and Lucid Group Inc (LCID, Financial), are brimming with potential despite their current lack of profitability. Although one may not be particularly bullish on Lucid Group Inc (LCID, Financial), there is still room for optimism regarding the potential licensing of Lucid Group Inc (LCID)'s EV technology to other car manufacturers, a move that could be worth billions. Unfortunately, both Rivian Automotive Inc (RIVN, Financial) and Lucid Group Inc (LCID) have yet to reach a profitable status.
Tesla's Success and Future Predictions
It is important to acknowledge the success of Tesla Inc (TSLA, Financial) in this context, as it has managed to outperform these companies by generating profits. It holds a strong position among major Chinese EV brands and has established a strategic relationship in China. In the second quarter of 2023, Tesla Inc (TSLA) delivered over 466,100 units, which translates to a roughly 10.23% increase in quarterly deliveries. As a result, analysts are predicting that Tesla Inc (TSLA)'s earnings will grow at an average rate of 25% per year for the upcoming three years.
In conclusion, while companies like Rivian Automotive Inc (RIVN, Financial) and Lucid Group Inc (LCID, Financial) exhibit immense potential, they also carry significant risks due to their current lack of profitability. The success story of Tesla Inc (TSLA, Financial) underscores the crucial role of earnings in shaping a company's narrative and determining its valuation. As the EV market continues to evolve, it is imperative for investors to exercise caution and regard earnings as a critical factor when assessing investment opportunities.
Final Takeaway
The development and implementation of the Dojo supercomputer are crucial for Tesla Inc (TSLA, Financial). Although the company faces challenges in aligning its growth with its current valuation metrics, the potential for Dojo to unlock new markets and revenue streams is substantial. With a committed investment and a strategic focus on artificial intelligence and machine learning, Tesla Inc (TSLA) is well-positioned to capitalize on the opportunities presented by the Dojo supercomputer and continue to demand a premium due to the nature of the company and its prospects.
