Pipe Dream: Elon Musk Wants a $1 Trillion Market Cap for the X Platform

It is no secret that Elon Musk wants the X social media platform to succeed. After all, he was forced to acquire the platform at a notoriously bloated valuation, earning a number of glib remarks from his detractors in the process. However, Musk's newly revealed lofty goals for X might just be too unwieldy even for the famously over-achiever CEO.

Elon thinks X could hit a $1T market cap. Do you agree? https://t.co/JBc26Ja3cq

— Sawyer Merritt (@SawyerMerritt) August 23, 2023

To wit, Elon Musk has now tweeted that a $1 trillion market cap for the X platform remains a feasible outcome.

First, Elon Musk's reference to X's market cap suggests that he eventually plans to take the platform public again.

$1T would be 40x 2023E revenue. No social media stock trades at 40x EV/Rev.
2023E EV/Rev:
- GOOG 6.3x
- META 5.6x
- SNAP 3.5x
- PINS 5.4x
- YELP 2.0x
- BIDU 1.8x
- TCEHY 4.7x
With even $5B rev (2x 2023E Rev) TWTR EV would be ~$30B at 6x Rev, less whatever debt remains.

— Gary Black (@garyblack00) August 23, 2023

But, more importantly, the question arises whether this feat commands a realistic probability. As explained by the Tesla permabull, Gary Black, in the tweet above, a $1 trillion market cap would require X to trade at a 40x 2023 Enterprise Value (EV) to Revenue multiple. However, no social media company currently trades at such lofty multiples, with even Google managing to command a mere 6.3x EV/Revenue multiple.

Of course, Elon Musk does intend to transform X into an "everything app." Here too, the odds are stacked against the desired outcome. Consider the fact that Tencent - the company behind the WeChat super app - traded at an average EV/Revenue multiple of just 6.7x between 2018 and 2022.

Elon Musk announced recently that the monthly users of X reached a new high in 2023 of over 541 million users. The CEO of Tesla appeared quite jubilant at this development, particularly as it occurred after the removal of “a vast number of bots.” For reference, X’s active monthly users in 2022 averaged just 368 million.

In a recent interview, the world’s richest person declared that he is working on a 22-year-old plan to transform X into the most valuable financial institution in the world.

Do you think Elon Musk is being pragmatic in aiming for a $1 trillion valuation for the X platform? Let us know your thoughts in the comments section below.

 

Written by Rohail Saleem