4 ms·

Is TSLA stock at the wrong value? Let's layout the numbers: - Market cap: 50B - Expected return on capital: 10% - Expectable profit margin: 10% - Expectable

Is TSLA stock at the wrong value? Let's layout the numbers: - Market cap: 50B - Expected return on capital: 10% - Expectable profit margin: 10% - Expectable average unitary price: 50k 50B*10%/10%/50k = 1 million vehicles. Tesla is selling about 80k vehicles yearly (at about double the above average sales price): http://www.ibtimes.com/tesla-motors-tsla-1q-2016-sales-14820-model-s-model-x-cars-were-delivered-first-three-2348000 http://www.ibtimes.com/tesla-motors-tsla-1q-2016-sales-14820... The current valuation requires an increase in volume of five to ten times. Given the sales volume evolution of the current product lineup and the entry in a lower segment, it's definitely not out of reach in a five year horizon. Add up to five years to pay accrued debt (it should amount to about 10B before Tesla reaches steady state in the known product lineup). All numbers are order-of-magnitude precision, but they surely do not point to a «certainly "wrong" stock value».

vkou 9y ago
It can also be argued that: The market for ~$70,0000 sedans is not so great that increasing volume 10x is reasonable, within 5 years. The margins for ~$30,000 sedans are lower then 10%. So, volume may go up 10x, but returns might not.
- Animats 9y ago
  What seems to be happening is that the price of the Model 3 is creeping up. The base model is supposedly $35K, but you get an undersized battery, no self-driving sensors, and probably give up some other things. The typical model is currently expected to be around $50K. This is not unusual in automotive; the profits are in the overpriced upgrades. (There is now a $60,000 Ford F-150 pickup. The base price of that line is $27,110.)
  - bjelkeman-again 9y ago
    No self-driving sensors? Really? Got a source for that?
    - edsouza 9y ago
      I can't remember where source, but the model 3 will have sensors, unfortunately you need to pay extra for autopilot software to be enabled. Not sure if the pricing will be higher that the other models.
      - sbierwagen 9y ago
        The self driving sensors are optional extras on both the model S and the model X. Cost is $8,000.
        bjelkeman-again 9y ago
        The sensors are not optional, they are included, but the software for autopilot and full autonomy is optional.
  - stupidhn 9y ago
    >What seems to be happening is that the price of the Model 3 is creeping up. Of course it is, and it will surprise no one but the eternal bulls. Tesla has nailed the tech, but auto manufacturing is big and they're new at it (despite how many robots they've bought). You can see the prices at which the other manufacturers are having to subsidize their small EVs and still lose money. Tesla threw out the $35,000 years ago and have stuck with it. So, it's really no surprise that the price will creep up; the real question is: how big is the market for a $50k EV? Is it as large as people are assuming? Can they make money on 250k cars annually?
- sergiosgc 9y ago
  I wouldn't expect a 10x increase in volume without the model 3. The average unitary price in the model reflects that assumption. The 10% margin is what is typical of established manufacturers: VW is around that mark, GM too, Toyota is higher, Porsche is the record holder at almost 17%. Since other manufacturers also have complete product mixes, it's a good rough mark.
stock_toaster 9y ago
TSLA isn't "just" a car company any more though are they? Didn't they complete the acquisition of Solar City in Q4'16?

vkou 9y ago

It can also be argued that: The market for ~$70,0000 sedans is not so great that increasing volume 10x is reasonable, within 5 years. The margins for ~$30,000 sedans are lower then 10%. So, volume may go up 10x, but returns might not.

Animats 9y ago
What seems to be happening is that the price of the Model 3 is creeping up. The base model is supposedly $35K, but you get an undersized battery, no self-driving sensors, and probably give up some other things. The typical model is currently expected to be around $50K. This is not unusual in automotive; the profits are in the overpriced upgrades. (There is now a $60,000 Ford F-150 pickup. The base price of that line is $27,110.)
- bjelkeman-again 9y ago
  No self-driving sensors? Really? Got a source for that?
  - edsouza 9y ago
    I can't remember where source, but the model 3 will have sensors, unfortunately you need to pay extra for autopilot software to be enabled. Not sure if the pricing will be higher that the other models.
    - sbierwagen 9y ago
      The self driving sensors are optional extras on both the model S and the model X. Cost is $8,000.
      - bjelkeman-again 9y ago
        The sensors are not optional, they are included, but the software for autopilot and full autonomy is optional.
- stupidhn 9y ago
  >What seems to be happening is that the price of the Model 3 is creeping up. Of course it is, and it will surprise no one but the eternal bulls. Tesla has nailed the tech, but auto manufacturing is big and they're new at it (despite how many robots they've bought). You can see the prices at which the other manufacturers are having to subsidize their small EVs and still lose money. Tesla threw out the $35,000 years ago and have stuck with it. So, it's really no surprise that the price will creep up; the real question is: how big is the market for a $50k EV? Is it as large as people are assuming? Can they make money on 250k cars annually?
sergiosgc 9y ago
I wouldn't expect a 10x increase in volume without the model 3. The average unitary price in the model reflects that assumption. The 10% margin is what is typical of established manufacturers: VW is around that mark, GM too, Toyota is higher, Porsche is the record holder at almost 17%. Since other manufacturers also have complete product mixes, it's a good rough mark.

stock_toaster 9y ago

TSLA isn't "just" a car company any more though are they? Didn't they complete the acquisition of Solar City in Q4'16?