Ron Baron Sees 570% Upside to $4.5 Trillion Valuation

  • Tesla stock could soar 570% over the next decade to a $4.5 trillion valuation, according to billionaire investor Ron Baron.
  • “But that’s not including robots, that’s not including autonomous vehicles, that’s not including batteries,” Baron said.
  • Baron has been an investor in Tesla since 2014 and has a combined stake of about $4 billion. 

Billionaire investor Ron Baron of Baron Capital is still bullish on Tesla despite its year-to-date decline of nearly 40%.

Baron told CNBC on Friday he expects Tesla to deliver outsized gains that ultimately propel the company to a valuation of about $4.5 trillion. Tesla, which is currently worth $670 billion, would have to surge 570% from current levels to reach Baron’s valuation target.

Baron has long been bullish on Tesla, having first acquired a stake in the company in 2014. Between Baron’s personal holdings and his clients holdings at Baron Capital, the billionaire has a combined Tesla stake worth about $4 billion.

Baron isn’t done betting on Tesla CEO Elon Musk, even as he dives headfirst into his new Twitter venture. “We have made a lot of money with him,” Baron said, adding that Tesla makes up 40% of his Baron’s Partners fund because his cost is so low at about $13 per share.

“I think in 2025 it [Tesla stock] will be $500 to $600. And in eight to ten years we ought to be somewhere around $4.5 trillion,” Baron said.

Baron agrees with Musk’s recent comments that Tesla could grow to be bigger than Apple and Saudi Aramco combined, which implies a valuation of more than $4 trillion.

The math behind Baron’s bullish valuation target is solely predicated on Tesla significantly scaling its business over the next decade, selling about 20 million cars per year. Tesla is on track to sell just over 1 million vehicles in 2022.

“In 2030, if he does 20 million cars per year, and they’re $50,000 a car, that’s $1 trillion in revenues, and he gets operating profits at somewhere around 30%,” Baron explained, adding that a 15x multiple on those $300 billion in operating profits get you to $4.5 trillion. 

But Baron emphasizes that the bull case outlined solely by the revenue contribution of Tesla vehicles doesn’t include the other areas the company is working on, providing somewhat of a margin of safety on his investment.

“But that’s not including robots, that’s not including autonomous vehicles, that’s not including batteries. He [Musk] thinks robots are going to be bigger than cars. So there’s so many things happening at Tesla” it’s hard to keep up, Baron said.

Read More: Ron Baron Sees 570% Upside to $4.5 Trillion Valuation

2022-11-04 11:08:45

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