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A lot of it is that many investors and media covering the market only care about the fundamentals of the company and quarterly earnings, and can't understand ho

by tcoppi 10y ago

A lot of it is that many investors and media covering the market only care about the fundamentals of the company and quarterly earnings, and can't understand how a company that constantly dilutes its stock and mostly misses expectations/predictions and isn't turning a profit has such a high valuation.

_ph_ 10y ago
Because its sales volume is constantly raising. About 50% year to year. Also, a lot of the money gets used for building the production infrastructure. Tesla owns now a car manufacturing plant in Freemont and the Gigafactory in Nevada just had its opening party. These are real values Tesla owns. But then, I cannot understand how Whats App could be valued 19 billion...
- tcoppi 10y ago
  Right, investors won't bat an eye at Instagram, Whatsapp, Airbnb, or Pintrest valuations, but can't possibly see how Tesla is worth $30b. I suppose that is slightly unfair since I happen to think Tesla is fairly well valued, maybe slightly undervalued currently, and obviously investors are the ones supporting that price. It seems like it is mostly a few institutional investors and the general public propping them up right now though, not the sell side firms that can dominate coverage and mentality sometimes.
  - erikpukinskis 10y ago
    The companies you name receive a lot of eye-batting.
    - tcoppi 10y ago
      Mostly by the tech community itself, not the financial or venture capital world.
  - pakitan 10y ago
    All those companies can pretend that they are part of the "new economy" where valuations are not bound by mere fundamentals like revenue and profit. Tesla, on the other hand, can't do that. They manufacture a tangible product and have a lot of established competition to which they can be easily compared. Currently Tesla's market cap is 150% that of Renault's. A company that sells millions of vehicles, has factories all around the world and makes a very healthy profit for its shareholders. So, Tesla, instead of trading at a discount to reflect the risk involved, is traded as if it's already a successful company 1.5 times the size of Renault. So, if you think Tesla is valued "fairly" now, please, tell me what should be its market cap when it actually starts making profit? $300B? $3T?
    - tcoppi 10y ago
      If Tesla is successful in their vision, the entire transportation(and potentially energy) industry will be completely different and hence incomparable with existing car company valuations, since they will have created a completely new slice of pie to eat from. If they are not successful and only end up as a middling premium electric car company they are probably extremely overvalued. You're comparing the valuation of horse and buggy companies in the 1910s to Ford.
      - pakitan 10y ago
        > You're comparing the valuation of horse and buggy companies in the 1910s to Ford. You mean there are no other companies selling electric vehicles? And clearly, if, say, Mercedes, doesn't have electric model now, it's absolutely impossible that they have one in 5 years, just like a horse & buggy company, right? But forget about Mercedes, how about Nissan Leaf, which exists now and is the world's best selling electric car? Shouldn't Nissan be valued at similarly crazy valuations? Or they won't be part of this new brave world and don't get to eat from the "new slice of pie"?
        tcoppi 10y ago
        You're right, Tesla should just pack it in right now. They have no competitive advantage or product that anyone wants, and Nissan has far better prospects than Tesla ever had.
- Mikeb85 10y ago
  > But then, I cannot understand how Whats App could be valued 19 billion... Over a billion monthly users... Not exactly small potatoes.
  - deleted 10y ago
    [deleted]
  - psykpsyk 10y ago
    but how do they translate into revenue and profit?
    - serge2k 10y ago
      Whatsapp does charge money.
      - JonnyaiR 10y ago
        no, whatsapp is free since early 2016 ( https://blog.whatsapp.com/615/Making-WhatsApp-free-and-more-useful https://blog.whatsapp.com/615/Making-WhatsApp-free-and-more-...)
- noonespecial 10y ago
  Its almost like selling stuff to people who want it for more than it cost to make it has some sort of strange effect on valuation. Wierd. Someone should do a study...
Florin_Andrei 10y ago
Wasn't / isn't Amazon in a somewhat similar situation? (financials seem less than ideal due to massive investments)
maxerickson 10y ago
I realize that only care about the fundamentals is turn of phrase/jargon, but the above discussion of shipments vs recognized sales is fundamental to understanding the company. I guess a more accurate thing to say would be that the group you are talking about is obsessed with scheduled reports.
- tcoppi 10y ago
  I don't have a problem with people trying to understand the quarter-by-quarter performance of a company. That data is legally required to be published by the SEC for a reason. In Tesla's case, so much of their value is discounted into the future, and if the company was purely valued on quarterly results, would not be worth very much at all. Obviously a lot of the investing world disagrees with that and chooses to value Tesla a bit more highly based on the investment they are undertaking and demand they have demonstrated. Their stock is modestly up today after these results and news of the solarcity merger(also reported as disastrous in the media). Their quarterly results would generally be accepted by most methods of valuing companies as disastrous, and is being reported like so by most of the financial media. Maybe the shorts will win out eventually, but lots of people seem to be willing to finance Tesla despite their constant fundraising, unprofitably, and missed expectations. I wonder if the reasons might not be reflected in their 10-qs?
  - _ph_ 10y ago
    The difference between produced and delivered vehicles points to why quarterly numbers have to be taken with a huge grain of salt. Did you miss numbers because you had a bad quarter, or did you miss numbers because some sales slip by a week or two? The first might be meaningful, but the second usually is not - quite the contrary, for the overall business its often better to slip a few weeks, than to artificially "make" the quarter numbers.
    - mikeash 10y ago
      They explicitly stated that the difference between production and delivery was due to a sudden production increase near the end of the quarter resulting in many more cars still in transit to their buyers. They had about 2,500 more cars in transit at the end of Q2 than at the end of Q1. They were producing about 1,000 more cars per week at the end of Q2 than at the end of Q1. If it takes their cars an average of 2.5 weeks to be delivered from the factory (which is a reasonable number) then everything lines up. I don't see any need for a grain of salt or thinking it's mysterious.

by tcoppi 10y ago

_ph_ 10y ago

Because its sales volume is constantly raising. About 50% year to year. Also, a lot of the money gets used for building the production infrastructure. Tesla owns now a car manufacturing plant in Freemont and the Gigafactory in Nevada just had its opening party. These are real values Tesla owns. But then, I cannot understand how Whats App could be valued 19 billion...

tcoppi 10y ago
Right, investors won't bat an eye at Instagram, Whatsapp, Airbnb, or Pintrest valuations, but can't possibly see how Tesla is worth $30b. I suppose that is slightly unfair since I happen to think Tesla is fairly well valued, maybe slightly undervalued currently, and obviously investors are the ones supporting that price. It seems like it is mostly a few institutional investors and the general public propping them up right now though, not the sell side firms that can dominate coverage and mentality sometimes.
- erikpukinskis 10y ago
  The companies you name receive a lot of eye-batting.
  - tcoppi 10y ago
    Mostly by the tech community itself, not the financial or venture capital world.
- pakitan 10y ago
  All those companies can pretend that they are part of the "new economy" where valuations are not bound by mere fundamentals like revenue and profit. Tesla, on the other hand, can't do that. They manufacture a tangible product and have a lot of established competition to which they can be easily compared. Currently Tesla's market cap is 150% that of Renault's. A company that sells millions of vehicles, has factories all around the world and makes a very healthy profit for its shareholders. So, Tesla, instead of trading at a discount to reflect the risk involved, is traded as if it's already a successful company 1.5 times the size of Renault. So, if you think Tesla is valued "fairly" now, please, tell me what should be its market cap when it actually starts making profit? $300B? $3T?
  - tcoppi 10y ago
    If Tesla is successful in their vision, the entire transportation(and potentially energy) industry will be completely different and hence incomparable with existing car company valuations, since they will have created a completely new slice of pie to eat from. If they are not successful and only end up as a middling premium electric car company they are probably extremely overvalued. You're comparing the valuation of horse and buggy companies in the 1910s to Ford.
    - pakitan 10y ago
      > You're comparing the valuation of horse and buggy companies in the 1910s to Ford. You mean there are no other companies selling electric vehicles? And clearly, if, say, Mercedes, doesn't have electric model now, it's absolutely impossible that they have one in 5 years, just like a horse & buggy company, right? But forget about Mercedes, how about Nissan Leaf, which exists now and is the world's best selling electric car? Shouldn't Nissan be valued at similarly crazy valuations? Or they won't be part of this new brave world and don't get to eat from the "new slice of pie"?
      - tcoppi 10y ago
        You're right, Tesla should just pack it in right now. They have no competitive advantage or product that anyone wants, and Nissan has far better prospects than Tesla ever had.
Mikeb85 10y ago
> But then, I cannot understand how Whats App could be valued 19 billion... Over a billion monthly users... Not exactly small potatoes.
- deleted 10y ago
  [deleted]
- psykpsyk 10y ago
  but how do they translate into revenue and profit?
  - serge2k 10y ago
    Whatsapp does charge money.
    - JonnyaiR 10y ago
      no, whatsapp is free since early 2016 ( https://blog.whatsapp.com/615/Making-WhatsApp-free-and-more-useful https://blog.whatsapp.com/615/Making-WhatsApp-free-and-more-...)
noonespecial 10y ago
Its almost like selling stuff to people who want it for more than it cost to make it has some sort of strange effect on valuation. Wierd. Someone should do a study...

Florin_Andrei 10y ago

Wasn't / isn't Amazon in a somewhat similar situation? (financials seem less than ideal due to massive investments)

maxerickson 10y ago

I realize that only care about the fundamentals is turn of phrase/jargon, but the above discussion of shipments vs recognized sales is fundamental to understanding the company. I guess a more accurate thing to say would be that the group you are talking about is obsessed with scheduled reports.

tcoppi 10y ago
I don't have a problem with people trying to understand the quarter-by-quarter performance of a company. That data is legally required to be published by the SEC for a reason. In Tesla's case, so much of their value is discounted into the future, and if the company was purely valued on quarterly results, would not be worth very much at all. Obviously a lot of the investing world disagrees with that and chooses to value Tesla a bit more highly based on the investment they are undertaking and demand they have demonstrated. Their stock is modestly up today after these results and news of the solarcity merger(also reported as disastrous in the media). Their quarterly results would generally be accepted by most methods of valuing companies as disastrous, and is being reported like so by most of the financial media. Maybe the shorts will win out eventually, but lots of people seem to be willing to finance Tesla despite their constant fundraising, unprofitably, and missed expectations. I wonder if the reasons might not be reflected in their 10-qs?
- _ph_ 10y ago
  The difference between produced and delivered vehicles points to why quarterly numbers have to be taken with a huge grain of salt. Did you miss numbers because you had a bad quarter, or did you miss numbers because some sales slip by a week or two? The first might be meaningful, but the second usually is not - quite the contrary, for the overall business its often better to slip a few weeks, than to artificially "make" the quarter numbers.
  - mikeash 10y ago
    They explicitly stated that the difference between production and delivery was due to a sudden production increase near the end of the quarter resulting in many more cars still in transit to their buyers. They had about 2,500 more cars in transit at the end of Q2 than at the end of Q1. They were producing about 1,000 more cars per week at the end of Q2 than at the end of Q1. If it takes their cars an average of 2.5 weeks to be delivered from the factory (which is a reasonable number) then everything lines up. I don't see any need for a grain of salt or thinking it's mysterious.