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I love Tesla, but I'm reminded of this quote from Scott McNealy during the first tech bubble: "[T]wo years ago we were selling at 10 times revenues when we wer

I love Tesla, but I'm reminded of this quote from Scott McNealy during the first tech bubble: "[T]wo years ago we were selling at 10 times revenues when we were at $64. At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking!" http://blog.huncap.com/?p=34 http://blog.huncap.com/?p=34

JumpCrisscross 9y ago
> At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends Or you spend 10 years growing revenues by 10x and then, at the end of your 10th, 11th, 12th, 13th, 14th and 15th years, pay a dividend equal to 5% of revenues and earn your investors a 9.3% IRR. Or grow revenues 20x and yield them almost 25% of IRR. (Both analyses assume you close down shop at the end of Year 15 and so represent lower bounds.) High-multiple plays rely on growth. Whether that growth assumption is rational depends on the context.