Tesla Stock vs. the S&P 500: Which Investment Wins Through 2030?

Whether you're a bull or a bear on Tesla (NASDAQ: TSLA), it's probably one of the most interesting and hotly debated stocks on the market. The electric vehicle (EV) leader is fresh off the unveiling of its long-awaited Roadster -- with the added twist that the car has rocket thrusters that allow it to fly and hover for short periods of time.

The Roadster's debut has generated plenty of excitement and once again highlighted the company's impressive penchant for innovation. On the other hand, some big questions remain about Tesla stock's performance outlook in the coming years. With that in mind, how likely is it that the stock outperforms the S&P 500 through 2030?

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Tesla is an undeniable innovator

While CEO Elon Musk is undeniably a controversial figure, there's also no denying that he's been at the forefront of some of the most significant trends and technology breakthroughs over the last couple of decades. That's not an accident, even if the CEO may have a penchant for overpromising or exaggeration on project details and timelines. I think that Tesla deserves some level of valuation premium due to his visionary approach to leadership and commendable track record of execution given the difficulty inherent in many of the projects he and his teams have taken on.

Is Tesla's flying Roadster likely to be a meaningful sales and net income contributor anytime between now and 2030? Probably not. While Tesla has said that the vehicle is set for production in 2028, it wouldn't be surprising to see the company miss that release window.

Given early reservation details for the Roadster that suggest a massive sticker price and regulatory issues that could prevent the car from being street (and air) legal, the vehicle's prospects in the consumer market are probably pretty limited. If the vehicle does wind up being available for consumer purchase by the end of the decade, Tesla could take a sizable loss on each unit sold.

While the Roadster's unveiling and potential commercial viability have inevitably attracted criticism and skepticism, the event foregrounded the characteristics that make Tesla so interesting and "cool" as a company.

With the Roadster's flying capabilities being enabled by Space Exploration Technologies' thruster technology and the vehicle at the unveiling featuring one of Tesla's Optimus humanoid robots in the driver's seat, the event highlighted the tech ecosystem that Musk's companies are building and pointed to growth opportunities that help explain why Tesla deserves a substantial valuation premium compared to other automakers. That doesn't necessarily mean that Tesla stock will beat the S&P 500 through 2030.

Tesla is richly valued, but there's a big SpaceX question

Trading at roughly 203 times this year's expected earnings and 13 times this year's expected sales, Tesla stock looks very expensive in the context of recent business performance. Despite encouraging momentum in vehicle deliveries, the company's gross margins have been under pressure -- and the core EV business is unlikely to be a strong earnings growth driver over the next few years.

Meanwhile, the rollout for the company's robotaxi business is proceeding at a much slower-than-expected pace and continues to face meaningful regulatory hurdles. Betting on Optimus to emerge as a major driver of sales and earnings over the next few years is risky, and Tesla could see massive capital expenditures and surging operating expenses connected to its Terafab semiconductor manufacturing plant. With that in mind, I think a rough outlook on spending, earnings, and highly growth-dependent valuation could set the stage for stock moves that roughly track or underperform the S&P 500 through 2030.

On the other hand, I think there's another factor that will play an even bigger role in shaping how an investment in Tesla fares through the end of that period. Given the synergies between Tesla and SpaceX, Musk's focus on building a comprehensive tech ecosystem, and potential compensation incentives for the CEO, I think it's more likely than not that the two companies will merge by the end of the decade.

Given that SpaceX is currently the larger of the two companies and the underlying financial profiles of each business, a potential merger would likely see Tesla being acquired by SpaceX in an all-stock deal. That would set up the valuation premium for Tesla, the market's reaction to stock dilution from SpaceX needed to facilitate the acquisition, and subsequent business performance of the combined entity as the key factors likely to shape how Tesla stock performs through 2030.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.