In the long and heated battle between Tesla (NASDAQ:TSLA) bulls and Tesla bears, bulls for Tesla stock are taking a victory lap after the electric vehicle maker reported solid second quarter numbers that eased production ramp and cash burn concerns, while reaffirming confidence about profitability in the back-half of 2018.

CEO Elon Musk also changed his tone on the conference call from brash and dismissive to humble and apologetic, a transition which Tesla investors are happy to see.

All together, the solid second quarter report and call have sent Tesla stock up 10% to $330. Considering Tesla was languishing around $300 before the report, this is a big step forward for bulls.

But, in the big picture, this is just a small step in what could transform into one of the biggest secular growth narratives over the next 10 years.

From where I sit, Tesla hitting the numbers quarter-to-quarter isn’t all that important. What is important, however, is that the company is making progress towards the big picture goal of being the number one player in what promises to be a massive electric vehicle market.

The second quarter report affirmed that Tesla is indeed taking steps closer towards realizing that goal. That is a good thing, because if Tesla does grow in sync with the electric vehicle market, I think Tesla stock could be worth $800 in 10 years.

Here’s a deeper look.

Tesla’s Second Quarter Report Silences Bears

The Tesla second quarter report was great for bulls because it re-affirmed the bullish arguments while temporarily silencing the bearish arguments.

Model 3 production ramp issues? That has been one of the biggest bear arguments on Tesla stock. But, Tesla is consistently hitting production rates of 5,000 Model 3 vehicles per week, and is looking towards 6,000 per week quite soon. By the end of the year, management is targeting a production rate of 10,000 per week.

Will Tesla get there? No one knows. And it doesn’t really matter. In the big picture, Tesla has gone from producing less than 400 Model 3 vehicles per week at the beginning of 2018 to producing several thousand per week today, proof that production ramp is heading in the right direction.

What about cash burn? That was another thing bears hated about Tesla. But, the company burned through significantly less cash in the quarter than expected.

Better yet, the cash burn rate is dramatically dropping from over $1 billion per quarter to well under $1 billion per quarter. Considering production is ramping alongside this lessened cash burn, it looks like the worst of the cash burn issues are in the rear-view mirror.

Demand issues? Quite simply, it doesn’t look there are any. Third-party sources showed that despite a rise in cancellations due to product delays, Tesla Model 3 total reservations remain sky high. Tesla management reiterated that on the call, and specifically pointed to big spike in Model 3 test drive requests in July.

Offbeat CEO behavior? After dismissing analyst questions on the last conference call, Musk actually apologized for that behavior on this conference call and struck a much more professional and humble tone. Thus, it does appear that bad PR risks are also in the rear-view mirror.

All together, the quarter was quite good. It showed that Tesla is heading in the right direction, and that the bearish arguments on the stock are either presently overstated or unnecessarily short-sighted.

Tesla Stock Could Hit $800 In 10 Years

The reason to own Tesla, though, isn’t due to a strong second quarter earnings report.

Instead, it is because the company continues to take big steps towards becoming a major player in what promises to be a huge electric vehicle market.

In a scenario that Tesla takes home just 5.5% of that market in 10 years (which it should, given the company’s high consumer awareness, quality brand image, and ahead-of-its-time mass production capability), then I reasonably see Tesla stock eclipsing $800 in 10 years.

Here are the numbers.

There were over 70.8 million new car registrations in the world in 2017. About 1.3 million of those were electric vehicles, meaning EV share of total vehicle sales is presently under 2%. Of those 1.3 million electric vehicles, just over 100,000 were Tesla deliveries, giving Tesla an EV market share of about 8%.

Total new car registrations have grown at about 3-4% per year over the past several years. I think that growth rate will slow to about 1% per year over the next 10 years due to ride-sharing headwinds. Still, that puts the global new car market at just under 78.3 million vehicles in 2027.

At that time, EV share of total vehicle sales should be about 30%. Norway is the gold standard of the EV market, and a glimpse of what will happen to the world as legislation moves towards making EVs the norm. In Norway, EV market share has gone from 0% to 30% in a decade.

The world should easily follow in those footsteps, and global EV market share should head from 2% today to 30% by 2027. That implies 23.5 million EV sales in 2027.

Over time, competition will erode Tesla’s market share. But, the company’s high consumer awareness and brand image will help it defend market share. Thus, projecting 5.5% market share (versus 8% today) seems reasonable. That would put Tesla deliveries at roughly 1.3 million in 2027.

Assuming an average selling price of $60,000 and that the company’s other revenue streams (leases, services, and energy) amount to $15 billion in 10 years, then you are looking at total Tesla revenues in 10 years of nearly $93 billion.

Gross margins should average out around 25%, while the opex rate should normalize to the auto-industry average of 10%. That combination leads me to believe that $93 billion in revenues will flow into $40 in earnings per share by 2027. A growth-average 20X forward multiple on that implies a long-term price target for TSLA stock of $800.

Bottom Line on Tesla Stock

There is going to be a lot of near-term noise and volatility in Tesla stock. But, long-term investors would be wise to ignore that noise and pay attention to the big picture.

In the big picture, Tesla is making advances towards becoming a major player in what promises to be a huge a electric vehicle market. Assuming legislation and consumer demand push the EV market to mainstream adoption within 10 years and that Tesla captures ~5% of that market, then Tesla stock could be worth a lot more in 10 years than where it trades today.

As of this writing, Luke Lango was long TSLA.