Tesla is a technology enterprise that makes cars, and investors must redefine it as such if they expect to accurately judge the stock, CNBC's Jim Cramer declared Wednesday.
"Tesla's not really a car company, it's a tech company on wheels. That's what keeps confusing people," the "Mad Money" host said. "Almost every major automaker now has an electric car, yet almost none of these cars have any demand to speak of at all, except for Tesla."
Earlier in the day, Tesla shares extended their hot streak — more than tripling in value since mid 2019 — as the company crossed the $100 billion plateau for the first time in its 16-year history. Shares accelerated 4% to more than $569 with the help of a bullish note from Wedbush analyst Dan Ives, who increased his price target to $550 from $370 per share and foresaw strong potential in China.
The China prospect is one that Cramer agreed with, but that's not the only leg he thinks Tesla will have to stand on in foreign markets for more growth.
"I think there's a widespread recognition that 2020 is Tesla's breakout year, and their breakout is coming from China, thanks to the new factory they built over there in record time," the host said. "Oh, and the company's building another plant in Germany next year to meet the European demand, so there's a roadmap for even bigger numbers in the outyears."
Tesla's valuation is one that shareholders of traditional automakers, who once dominated the car industry, may envy. The electric-car manufacturer's $103 billion market cap is now tens of billions more than that of Big Three members General Motors and Ford combined.
However, Cramer called that comparison "fatuous," given the proprietary and commodity characteristics that separate the entities.
"Ford and GM are in the commodity auto business; stop comparing their market capitalizations to Tesla, which is a thousand times more proprietary," he said. "Instead, I think it makes more sense to think of them as a tech company ... along the lines of Nvidia or AMD."
The debate, whether Tesla is a car or technology company, dates back to 2013. The location of the company's headquarters reflects Tesla's intention to both disrupt and separate itself in the auto market. Tesla is based in Silicon Valley, a technology center, thousands of miles west of Detroit, the automotive center of the world.
While Tesla still relies on the capital-intensive production system that car makers like Ford and GM have mastered over more than century, the company is viewed as a disruptor — focused on direct-to-consumer sales — and the market has given it a high valuation as that of a technology stock, despite its inability to consistently turn a profit. Investors in unprofitable tech stocks are betting on the underlying companies' chances of growing fast and returning future profits.
Tesla has also made an impression on the energy sector with its battery packs business. Cramer noted that the lithium-ion batteries could serve as a profit stream for the company as businesses place more value in cutting carbon output.
After the company reported a surprise profit of $1.86 per share in its latest quarterly report, Wall Street is estimating that Tesla's 2019 fiscal year could be the last it loses money. Analysts are forecasting Tesla to earn more than $6 per share in the current fiscal year and more than $12 per share the year after, according to FactSet.
"If [Nvidia and AMD] have become the relevant comparisons, it makes total sense that the stock would be moving relentlessly higher here. And while I hate to recommend anything that's run this much, you know what, I think Tesla's got more upside."
Tesla is set to report fourth-quarter and full-year results Jan. 29.
Disclosure: Cramer's charitable trust owns shares of Nvidia.
Questions for Cramer?
Call Cramer: 1-800-743-CNBC
Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram
Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com