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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 sli

by 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.
      - FireBeyond 10y ago
        That's just snarky and completely misses the point. No-one said that. But you -did- say that Tesla is working this "completely new slice of the pie". Which they're not. Unless you artificially constrain it to a segment where only Tesla exists. Whilst the current Tesla models might well be "luxury electric", the upcoming stuff is entirely in the same segment as Nissan, hence the reply to you.
        tcoppi 10y ago
        I replied to snark with snark. Tesla is not just a car company. They are going to be the largest li-ion battery manufacturer, distributed energy provider(with the solarcity acquisition), energy storage provider, supply grid stabilization services(important when more of the generation is not base-load), and compete in the autonomous car sector. Its fine with me if people don't think those other areas are going to be profitable for Tesla, but thinking of them as just a car manufacturer is kind of missing the point. And those other areas I mentioned do make up a largely untapped pie that Tesla is poised to tap into.
- BookmarkSaver 10y ago
  That's kind of the point. People (investors) think that in the not-so-distant future Tesla will be much bigger than Renault, and are extremely confident in this. It doesn't really matter to investors where Tesla is right now except as a mechanism to build extrapolations. If you are extremely confident that in 10 years Tesla will be twice the size of Renault, then you need to buy buy buy right now before other people realize it. Renault's size isn't expected to change significantly over the next decade. Tesla's is. This means that if you own Tesla shares now, 10 years later they are going to be worth a massive amount because Tesla will be much bigger than Renault, so the price naturally rises to that expectation, only abetted by the possibility that Tesla collapses. It isn't about where the company is at the moment. It is about where you think the company will be in "the future" (at whatever point that is relevant to you) reduced by the probability that you think they will fail (and most people think that chance is tiny). So when Tesla starts making a profit, its market cap probably won't have grown that much, because it was expected behavior priced into today's valuation.
  - pakitan 10y ago
    If I think something will be worth $100 in 10 years I won't be paying $100 for it today. That's not how finance works. There is a risk and interest premium. Sure, if you think the risk is zero, then yes, Tesla may not be overvalued. But that's exactly my point - the risk is not zero. Neither for Tesla, nor for any other company.
    - eloff 10y ago
      Yes but that's a strawman. You also won't be paying the current value. You'll pay something between what it's worth now and what the market thinks it will be worth one day. That will be discounted for risk and for the delayed gratification.
      - pakitan 10y ago
        > You'll pay something between what it's worth now and what the market thinks it will be worth one day That sentence doesn't make sense. I think you're conflating worth/value (subjective measures) with price (objective). I can't pay more for an item than what's it worth to me
- hangonhn 10y ago
  The current market valuation IS what people expects Tesla to be worth when/if it makes a profit in the future -- at least according to the efficient market theorem. Right? So unless new information comes along, the current valuation already encompasses the market's expectations of success and failure.
  - davidivadavid 10y ago
    According to the EMH, the current market valuation is what people expect it to be worth today, if it makes a profit in the future. But if you assume the EMH, discussing valuations is kind of pointless, isn't it?

by tcoppi 10y ago

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.
    - FireBeyond 10y ago
      That's just snarky and completely misses the point. No-one said that. But you -did- say that Tesla is working this "completely new slice of the pie". Which they're not. Unless you artificially constrain it to a segment where only Tesla exists. Whilst the current Tesla models might well be "luxury electric", the upcoming stuff is entirely in the same segment as Nissan, hence the reply to you.
      - tcoppi 10y ago
        I replied to snark with snark. Tesla is not just a car company. They are going to be the largest li-ion battery manufacturer, distributed energy provider(with the solarcity acquisition), energy storage provider, supply grid stabilization services(important when more of the generation is not base-load), and compete in the autonomous car sector. Its fine with me if people don't think those other areas are going to be profitable for Tesla, but thinking of them as just a car manufacturer is kind of missing the point. And those other areas I mentioned do make up a largely untapped pie that Tesla is poised to tap into.
BookmarkSaver 10y ago
That's kind of the point. People (investors) think that in the not-so-distant future Tesla will be much bigger than Renault, and are extremely confident in this. It doesn't really matter to investors where Tesla is right now except as a mechanism to build extrapolations. If you are extremely confident that in 10 years Tesla will be twice the size of Renault, then you need to buy buy buy right now before other people realize it. Renault's size isn't expected to change significantly over the next decade. Tesla's is. This means that if you own Tesla shares now, 10 years later they are going to be worth a massive amount because Tesla will be much bigger than Renault, so the price naturally rises to that expectation, only abetted by the possibility that Tesla collapses. It isn't about where the company is at the moment. It is about where you think the company will be in "the future" (at whatever point that is relevant to you) reduced by the probability that you think they will fail (and most people think that chance is tiny). So when Tesla starts making a profit, its market cap probably won't have grown that much, because it was expected behavior priced into today's valuation.
- pakitan 10y ago
  If I think something will be worth $100 in 10 years I won't be paying $100 for it today. That's not how finance works. There is a risk and interest premium. Sure, if you think the risk is zero, then yes, Tesla may not be overvalued. But that's exactly my point - the risk is not zero. Neither for Tesla, nor for any other company.
  - eloff 10y ago
    Yes but that's a strawman. You also won't be paying the current value. You'll pay something between what it's worth now and what the market thinks it will be worth one day. That will be discounted for risk and for the delayed gratification.
    - pakitan 10y ago
      > You'll pay something between what it's worth now and what the market thinks it will be worth one day That sentence doesn't make sense. I think you're conflating worth/value (subjective measures) with price (objective). I can't pay more for an item than what's it worth to me
hangonhn 10y ago
The current market valuation IS what people expects Tesla to be worth when/if it makes a profit in the future -- at least according to the efficient market theorem. Right? So unless new information comes along, the current valuation already encompasses the market's expectations of success and failure.
- davidivadavid 10y ago
  According to the EMH, the current market valuation is what people expect it to be worth today, if it makes a profit in the future. But if you assume the EMH, discussing valuations is kind of pointless, isn't it?