Elon Musk: Tesla Could Be Bigger Than Apple - Here Is How
Trying to reach volume production of the Model 3 was one of the toughest challenges in Tesla’s history. During the Model 3 ramp, Tesla burned through around 3 billion dollars as the company tried to reach a weekly production rate of 5000 vehicles. Musk said at the time the Model 3 was a “bet the company” moment.
And in December 2020 Elon Musk revealed that he reached out to Apple during the most difficult part of the Model 3 ramp to talk about a possible deal. Elon said he planned to discuss the possibility of selling Tesla to Apple for one-tenth of its value, which meant at a valuation of about $60 billion. However, Apple CEO Tim Cook refused to even take the meeting.
During the darkest days of the Model 3 program, I reached out to Tim Cook to discuss the possibility of Apple acquiring Tesla (for 1/10 of our current value). He refused to take the meeting.
— Elon Musk (@elonmusk) December 22, 2020
Currently, Tesla’s market cap hovers around 650 billion dollars and if Apple had taken a significant stake in the EV maker Apple would’ve made a spectacular return on their investment.
Related news: Elon Musk In A Call With Employees Said Tesla Will Produce 1 Million Cars in 2021
However, sitting in 2021 the conversation has changed from will Apple acquire Tesla to will Tesla be bigger than Apple. And Elon Musk believes there is a chance. In a Twitter response to WholeMarsCatalog Musk said there is a “greater than 0 percent chance” Tesla will be the biggest company in the world.
I think there is a >0% chance Tesla could be the biggest company
— Elon Musk (@elonmusk) March 26, 2021
In order for Tesla to be bigger than Apple (which is the biggest company in the world by market cap) Tesla’s stock price will need to increase 3 folds. And that is considering Apple’s stock price stays stagnant in the meantime.
ARK Invest, the exchange-traded fund (ETF) run by Cathie Wood seems to believe this could happen by 2025. In the firm's latest research ARK put out a base case Tesla price target of $3000 per share. This is 4.5 times Tesla’s stock price which closed at $640 on Thursday.
Related news: Elon Musk Says Tesla Cybertruck Won’t Have A Handle, Here Is How It Might Open
Based on their analysis ARK believes by 2025 Tesla will be able to produce 5 to 10 million vehicles a year. And from those vehicles, 60% will be operated by Tesla as robotaxis and the rest will be sold to customers.
And in this scenario ARK expects Tesla to have a revenue of almost 700 billion dollars with over $200 billion being net income.
In 2020 Apple had $274 billion in revenue of which 57 billion dollars was profit. And when you compare the two it certainly looks reasonable Tesla will be valued higher than Apple. That is if ARK’s prediction becomes true.
However, one thing to consider is as Tesla will probably grow its business in the next 5 years, so will Apple. Apple has a number of exciting programs. The launch of the company’s M1 chip and the popularity of its subscription services will likely bring significant growth to the company.
Having said that, if successful in its growth plans, Tesla will still undoubtedly be the bigger company. And there is one simple reason why. Apple plays in the smartphone, PC, and software as a service world. And this market, including Apple and all its competitors, is capped at around 2 trillion dollars.
On the other hand, Tesla is in the vehicle and energy market which is worth several trillions, and if the company succeeds in releasing fully self-driving vehicles that will be another multi-trillion dollar market Tesla will be a leader in with an 80% profit margin.
One thing to consider before crowning Tesla the winner is Apple is also looking to get into the electric and autonomous vehicle markets. However, the company’s plans are at a very early stage, and if the tech giant wants to compete with Tesla in any meaningful way Apple should be investing heavily before it becomes impossible to catch up with Tesla.
So what do you think? Will Tesla overtake Apple as the world's biggest company? If so, how long do you think it will take the EV maker? Let me know your thoughts down in the comments below.
For more information check out: Here Is Why A Bullish Tesla Analyst Says Cybertruck Will Likely Be Delayed Also, see Unpacking The Slew of New Updates On The Tesla Semi
Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.