The billionaire stock investor Ron Baron is out with a fresh prediction regarding Tesla stock (TSLA). Specifically, he suggests that Tesla may be worth a whopping $1.5 trillion by the end of the decade. Read on for everything regarding Baron’s prediction, and what you need to know if you’re asking yourself “should I buy Tesla stock?”.
Rob Baron says Tesla’s valuation will soar to $1.5 trillion
Ron Baron is a mutual fund manager, most known as the founder of the investment management firm Baron Capital. He’s also a notorious Bitcoin bull, who has made a number of sensational statements in the past.
Back in 2017, Baron said that Tesla could be a “$1 trillion company” by the end of the 2020s. Earlier this month, he instead said that Tesla could even be making $1 trillionin revenue at the end of the decade. Now, he is also saying that Tesla could be worth $1.5 trillion at the end of the 2020s.
This statement came in a recent interview with the magazine Barron’s. In it, Baron said that the TSLA rally seen during the past months is just the beginning. Moreover, he also explains that he is a long-term investor in TSLA.
“It’s just starting. We purchased nearly all our shares from 2014 to 2016 […] We were widely criticized. Last summer, the stock was something like $230. Now it has tripled. The company went from annual revenue of $2.5 billion in 2013 to $25 billion last year. This year, it could reach $33 billion.”
ICE automakers have “$200 billion to $300 billion” in stranded assets
Additionally, Baron has a clear vision for where he believes Tesla, and consequently TSLA, will go in the coming years. This could provide a fascinating insight for anyone wonder “should I buy Tesla stock”.
“In 2024, Tesla could have $100 billion to $125 billion in revenue, and be worth $300 to $400 billion. It is now selling for $150 billion. That is only the beginning. In 2030, it could have revenue of $750 billion to $1 trillion, with operating profit of $150 billion to $200 billion. By then, Tesla could be worth $1.5 trillion […] putting it among the largest and most valuable companies in the world.”
Baron is bullish on future Tesla’s sales, and says he believes Tesla will sell “at least 10 million per year”. He also touches on the challenge legacy automakers face in the transition to electric vehicles. For example, he says legacy automakers have “$200 billion to $300 billion” in “stranded assets”, i.e. internal combustion engine plants.
TSLA Times’ Take:
Many of those wondering “should I buy Tesla stock” will likely jump at the premise of Baron’s lofty TSLA prediction. At the same time, however, bears will likely point out the prediction’s seeming absurdity.
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Before discussing the $1.5 trillion elephant in the room, one should also note something Baron didn’t discuss. Specifically, Tesla’s energy business. Musk says he foresees this as eventually being as large as Tesla’s automotive business.
At the moment of writing, Tesla’s market capitalization sits at roughly $117 billion. Moreover, the TSLA stock price is currently trading at $635, although the markets are extremely volatile due to the coronavirus.
A market capitalization of $1.5 trillion is 12.82x higher than TSLA’s current market cap. Quick back-of-the-napkin math tells us than a similar increase in the Tesla stock price would equate $8,141. Although this is an unadjusted stock price estimate, it proves the enormity of the prediction.
“Should I buy Tesla stock now or not?”
If this prediction comes true, TSLA will surge roughly 13-fold in the coming decade. Although this is not impossible – Tesla stock did something similar in the 2010s – it would be extremely notable.Moreover, one should note that Baron clearly has an interest in boosting the TSLA price.
At the same time, however, Baron has proven himself as a skillful investor. The astronomic rise of Tesla’s stock (TSLA) price is far from his only successful investment. Last year, 98.8% of Baron Capital’s assets reportedly beat the market.
With that said, the answer to the question “should I buy Tesla stock” is not an easy one. Rather, potential investors should listen to some basic financial advice that people often overlook. First and foremost, if you invest in a company that you truly believe in, you will likely have peace of mind.
Moreover, one should never invest more than one can afford to lose. The financial markets can be fickle, and nothing is a “sure thing”. Lastly, always keep cool – many people panic and sell their assets close to the bottom, and buy in at peak prices due to fear-of-missing-out (FOMO).
“A serious investor is not likely to believe that the day-to-day or even month-to-month fluctuations of the stock market make him richer or poorer.” – Benjamin Graham (Warren Buffett’s mentor)