How High Can Tesla Motors Inc (TSLA) Fly? Part One: Luxury Automaker

To use BMW as a predictor, one needs to remember the diverse company BMW has become in the luxury segment. Building everything from sedans, to sports cars, to motorcycles, to SUVs and roadsters, it would take Tesla several years to reach BMW’s size, even with everything going according to plan. But this article is about getting a feel for Tesla’s potential value should it survive and fully expand.

Looking at BMW, we see a company in total worth about US$55 billion (43 billion euros) based on the last price during trading on Apr. 8, 2013. Based on the current 114.5 million shares outstanding, a market cap of BMW’s size would mean a share price of $480 per share for Tesla. But in reality, even if Tesla grows to BMW’s size there will likely be additional share dilution from option exercises or additional capital raises. With a share count ten percent greater than the current amount, shares would still be worth around $440 per share.

Tesla of the future

Clearly, Tesla Motors wants to be more than it is today. Just a few years ago many said the company could never mass produce a car. With the beginning of Model S production, Tesla is in expansion mode but still faces the headwinds associated with any start-up. But looking at Tesla as what it could become shows that, even as only a luxury automaker; Tesla shares could have significant upside. While the estimates here would satisfy most Tesla shareholders now, Tesla plans to expand beyond the luxury segment and into the affordable mass market. This will take a longer time than securing a role in the luxury market and could possibly take more than a decade. With this article primarily addressing Tesla as a luxury automaker, the second part of the series will address Tesla’s potential should it survive and move into the sub $30,000 range

The article How High Can Tesla Fly? Part One: Luxury Automaker originally appeared on Fool.com and is written by Alexander MacLennan.