Tesla (NASDAQ:TSLA) stock found itself in the headlines yet again on Friday, after Wedbush Securities said that the EV maker will top one million deliveries by 2022 and approach 5 million deliveries by 2030. In the note to investors, Wedbush hiked its base price target on TSLA stock to $950 from $715.

At first glance, that may seem like an overly rosy assessment of Tesla’s future growth prospects.

Five million deliveries by 2030? Really? The company barely cracked 500,000 deliveries in 2020. Could Tesla really 10X that number over the next decade?

Absolutely.

Electric vehicles are taking over the world. They sit at just 4% global new vehicle sales penetration today. That number will roar to 30% or higher by 2030. Tesla controls about 17% of that market today, and has been significantly expanding its market share for several years now. Certain technology, branding and production advantages will allow Tesla to — at the very least — maintain that 17% market share.

When you sit down and work through the math on those numbers, it becomes crystal clear that Tesla will indeed sell 5 million EVs in 2030. More than that, in 2030, Tesla will sell hundreds of thousands of self-driving software packages, millions of solar panels and millions of energy storage packs.

When you add all of that up, the ostensibly crazy valuation on TSLA stock starts to feel a lot less crazy, and more just “forward-looking.”

So, if you’re a forward-looking investor with time on your side, there’s no reason to give up on the big rally in TSLA stock just yet.

Here’s a deeper look.

The Math Behind 5 Million EVs

Here’s the quick back-of-the-envelope math on how Tesla gets to 5 million EV deliveries in 2030.

Around 64 million new passenger cars were sold in 2019. That number has been steadily growing thanks to population growth and urbanization trends. At historically average growth rates, it should come in around 80 million new car sales by 2030.

Total EV unit sales measured about 2.9 million cars in 2020, or between 4% and 5% of total new car sales. This penetration rate will soar over the next 10 years, thanks to improving technology, falling costs, shifting auto supply, and robust legislative support. By 2030, I think EV penetration will run towards 35%, which is roughly consistent with estimates from Morgan Stanley (30%), BCG (50%), Deloitte (40%), and Bloomberg New Energy Finance (30%).

A 35% penetration rate in an 80 million new car sales market implies about 30 million new EV sales in 2030.

Tesla delivered over 500,000 cars in 2020, giving the company ~17% EV market share. That is up substantially from 2017, when its market share stood around 8%. Yes, competition is coming. But new car launches (like the Model Y and Cybertruck), increased production capacity (Berlin gigafactory), battery technology advantages (Tesla cars drive far longer than any other EVs, save maybe those from NIO (NYSE:NIO)), and second-to-none branding (Tesla is the coolest car brand in the world, by a mile) should help offset that rising competition.

Net net, Tesla should be able to sustain its 17% market share. In a 30 million EV market, that implies over 5 million Tesla deliveries in 2030.

In other words, the math behind Tesla getting to 5 million deliveries is actually very straightforward and reasonable. So is the math behind TSLA stock fetching a trillion-dollar valuation.

Lots More of Tesla Than Just Cars

What bears seem to consistently miss about TSLA stock is that the growth narrative here encompasses so much more than cars.

Yes. Tesla is taking over the EV world. They will sell 5 million EVs in 2030. At an average price of probably around $35,000. For total auto revenues of $175 billion. With operating margins likely in the 20% range. For net profits somewhere north of $30 billion, on which a 20X multiple implies a potential future valuation for Tesla’s auto business of $600 billion.

That’s the auto hardware business alone.

Tesla is also building out an auto software business, wherein the company will sell self-driving software packages to consumers. Not everyone will buy that package. But some people will. That will add tens of billions of dollars of high-margin revenue to the company’s overall auto business.

Meanwhile — more importantly — Tesla is building out a robust energy business centered on energy generation (selling and installing solar panels) and energy storage (selling and installing energy battery packs). Tesla should be able to leverage its strong branding in autos to instill consumer trust when it comes to installing high-quality solar panels, and therefore projects as one of the largest solar panel companies in the world, too. At that point, Tesla will be able to leverage all-in-one energy ecosystem advantages to cross-sell a Tesla battery pack to solar panel owners, too.

In other words, there are going to be millions of consumers worldwide who — by 2030 — drive a Tesla electric car, have Tesla solar panels, and store all their excess energy with a Tesla battery pack.

That’s why bulls see Tesla as a trillion-dollar company in the making. And they’re right.

Bottom Line on TSLA Stock

At some point, valuation will kill this meteoric rally in TSLA stock. But not yet. One, because the market remains foaming-at-the-mouth bullish. Two, because TSLA stock isn’t overvalued yet. Between its disruptive auto business and disruptive energy business, Tesla deserves a trillion-dollar valuation.

TSLA stock won’t stop marching higher until it gets there.