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Amazon (NASDAQ:AMZN), an online retailer that has reported a loss every quarter for the past year, is being given a forward PE of 75.71, and a market cap of $122 billion. In theory, the market is supposed to "price in" the future earnings potential of a company, and investors seem to feel that Amazon CEO Jeff Bezos is going to pull off some magic in the years to come. In my article, Amazon: Primed to Undercut Walmart, I posited the idea that, under the right circumstances, Amazon could be as valuable as Wal-Mart (NYSE:WMT) due to the unique factors that make up Amazon's business model.

The same could be said about Tesla Motors (NASDAQ:TSLA). Due to its unique business model and prospects for future growth, it is possible the market is willing to apply "long-term" fundamentals to Tesla, and grant it a valuation comparable to other auto-manufactures such as GM (NYSE:GM) with a $41 billion market cap, or Ford (NYSE:F), with a $52 billion market cap. Tesla Motors' approach to selling cars is different from other auto manufacturers in that it doesn't rely on the "dealership model," where manufacturers rely on dealers to sell their cars, who receive "special prices" on the cars, and who are incentivized to sell said cars with commissions. This antiquated approach to selling cars bites into the profitability of manufacturers and hurts consumers. If Investors see Tesla's approach to sales as being valuable long term, it is possible investors may be "pricing in" the long-term value of the company.

Are Tesla investors willing to price in the future?

If investors are willing to use 2016 sales for their "near-term" valuation, Tesla could easily be worth 5-10 times what it is today. If Tesla sells 60,000 Model S and 60,000 Model X in 2016, with an ASP of $75,000 and achieves Gross Margins of 25 percent, Tesla will earn $2.25 billion in profit. If we subtract $400 million from CAPEX and assume a 26 percent tax rate, Tesla will earn $1.265 billion. If we include $300 million from the sale of Tesla's power train components, this number easily becomes $1.565 billion. I'm not including ZEV credits to account for the possibility that the ZEV credits will disappear by 2016. If we grant Tesla a PE of 40 -- the number I used in my analysis in my article, Tesla Motors: A Perfect Hedge, which I feel is reasonable for a company growing this quickly -- and account for profit of $1.565 billion, Tesla becomes worth $62.6 billion. Tesla's factory has a maximum capacity of 500,000. Further, Tesla has stated that for every Model S delivered, it has received two reservations. Additionally, Tesla has also stated that initial demand for the Model X is about 30 percent higher than initial demand for the Model S. If Tesla sells 30,000 Model S in 2013, as Elon Musk has mentioned he suspects it could, and as I suspect it will, it will be very easy for demand to reach 60,000 units by 2016.

Conclusion

If Tesla investors are willing to price in 2016 earnings, and are willing to assume that Tesla will sell 60,000 Model X and Model S annually in the future, the stock appears very cheap at $50. In my article, Tesla Motors is Ready for Prime Time, I posited that a $144.00 Tesla Motors could be achievable by the end of 2013, if Tesla can sell 30,000 Model S, with an ASP of $75,000 and Margins of 25 percent by the end of 2013. If investors are willing to look ahead to 2016 and beyond for their valuation, a $300-500 Tesla Motors -- approximately a $40-50 billion market cap, in line with GM and Ford -- becomes a real possibility. While I'm not saying this will happen anytime soon, I wouldn't discount it as impossible. If investors are willing to "price in" an optimistic future for Tesla, I have no doubts the stock will have significant upside over the next year. If the short squeeze scenario I described in my article, Tesla Motors Short Squeeze May Be Imminent, happens, and investors are willing to "price in" an optimistic future earnings scenario in the near term, I believe the stock could achieve a valuation based on "long-term" fundamentals in the "near term," say 6-12 months.

Source: Tesla Motors' Amazing Future Earnings Potential