The gigafactory of Tesla Motors may be worth $50 billion when completed, according to Trip Chowdhry, an analyst at Global Equities Research.
The estimated value of the gigafactory was twice the current value of the electric manufacturer’s market capitalization at approximately $24 billion.
Chowdhry explained that Tesla’s gigafactory is a new industry creation activity, and its scenario happened many times in the past. The analysts identified several companies that experienced the same situation before such as Microsoft Corporation, and Amazon.com, which exceeded the market cap of well established companies.
Tesla’s similarities with Microsoft, Amazon.com
The analysts noted that during the early 1990’s there was a huge debate as to how a newly minted company like Microsoft Corporation can be more valuable than General Motors Company. The software giant eventually surpassed the market cap of GM. Today, nobody is questioning it.
During the late 1990s, people doubted Amazon.com’s business strategy, but the e-commerce giant succeeded and its market cap is now bigger than Borders and Barnes & Noble.
International Business Machines and Oracle Corporation also questioned Amazon.com’s ability in enterprise computing in the latter part of 2000. Chowdhry noted that the e-commerce giant is currently setting the trend in enterprise computing through Amazon Web Services (AWS), both IBM and Oracle are playing catch up.
Tesla is creating a new industry with gigafactory
According to Chowdhry, Tesla’s gigafactory could experience the same success just like Amazon.com, Microsoft and Priceline Group.
He believed that the gigafactory will valued at $50 billion when completed and its impact will have a huge impact, but many won’t see it in 2015.
Chowdhry emphasized that Tesla Motors has similarities with Microsoft Corporation and Amazon.com that created the software industry and e-commerce industry, respectively.
The analyst said the ingredients in creating a completely new industry are perfectly in place with the gigafactory. The electric car manufacturer is creating the energy storage industry with the gigafactory.
Tesla expected to complete gigafactory by 2020
Tesla Motors is expected to complete the construction of its gigafactory by 2020. The company is expected to spend around $5 billion to build it. For the foundation alone, the company is expected to spend $16 million.
The electric car manufacturer aims to produce around 500,000 battery packs every year once the gigafactory become operational
Chowdhry maintained his Overweight rating for the shares of Tesla Motors with a $385 price target. The stock closed $191.93 per share on Tuesday.