Do not rely Elon Musk among the many traders who suppose Tesla is overvalued, even with the fill up nearly 700% up to now 12 months and the corporate valued at 213 occasions projected 2021 earnings, in keeping with FactSet.

Within the automotive maker’s fourth-quarter earnings name on Wednesday, Tesla’s CEO stated there’s a “roadmap to doubtlessly justify” its market cap, which has topped $800 billion, making it the fifth-most helpful U.S. firm. Musk is now the world’s wealthiest person, with a web price over $200 billion.

Musk’s valuation math goes like this: Assume the corporate quickly reaches $50 billion to $60 billion in annual automotive gross sales (the corporate generated $9.31 billion in automotive income in Q4 and stated that car deliveries would improve a mean of fifty% a 12 months going ahead). As Tesla’s self-driving expertise continues to enhance, these autos will turn out to be self-driving robotaxis, permitting utilization to go from 12 hours per week to 60 hours per week. Tesla might cost extra charges for these robotaxis, permitting the corporate to generate rather more income per automotive. Principally, it might be like bringing software program economics to the manufacturing-intensive automotive enterprise.

Musk additionally introduced that Tesla’s Full Self Driving package deal might be accessible on a subscription foundation beginning in Q1, slightly than as a one-time $10,000 add-on, which can permit Tesla to start including recurring income as it really works on bettering its self-driving expertise.

Even when utilization solely doubles, a $1 trillion valuation could make sense, in keeping with Musk.

“In the event you made $50 billion price of vehicles, it might be like having $50 billion of incremental revenue, principally as a result of it is simply software program,” Musk stated within the introductory a part of the decision. Primarily based on that system, Musk says a a number of of 20 occasions earnings would result in $1 trillion in market cap — “and the corporate’s nonetheless in high-growth mode.”

Lower than 9 months in the past, Musk had a very different perspective on the corporate’s valuation. In a tweet on Might 1, he stated “Tesla inventory value is just too excessive,” a remark that despatched the shares down 10%. Since then, the corporate’s market cap has jumped by greater than 450%.

It is attainable that traders are already presuming Tesla’s vehicles will finally flip into revenue-generating robotaxis. However the firm is not near having these capabilities but, and Musk has a historical past of over-promising in relation to technological innovation.

As an illustration, when Tesla started to debate self-driving expertise in 2016, Musk stated the corporate would full a hands-free journey throughout the U.S. by late 2017. The corporate has but to finish that mission.

At the moment, Tesla’s Full Self Driving options embody Sensible Summon, which lets a driver name their Tesla to roll out from a parking spot to the place they’re standing, and Navigate on Autopilot, which might pilot the automotive from a freeway on-ramp to an off-ramp, making vital lane adjustments alongside the best way.

However regardless of its identify, the Full Self Driving package deal nonetheless requires drivers to maintain their arms on the steering wheel and stay attentive always. A Munich court docket ruled last year that Tesla misled customers on the skills of its automated driving programs, and banned the corporate from together with “full potential for autonomous driving” and “Autopilot inclusive” in its promoting supplies.

Whereas Tesla has missed lots of its personal projections for self-driving expertise, Musk continues to insist that it is coming. “I actually don’t see any obstacles right here,” he instructed an analyst on the decision who requested concerning the firm’s progress.

Tesla shares fell 5.5% in prolonged buying and selling on Wednesday after the corporate reported earnings that missed analysts’ estimates, whilst income was higher than anticipated.

WATCH: Tesla misses on earnings

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