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Tesla's market cap is $55B If you do a quick math let's say they sold 400,000 Tesla (which they haven't yet) at an average of $100,000 each (which is probably

Tesla's market cap is $55B If you do a quick math let's say they sold 400,000 Tesla (which they haven't yet) at an average of $100,000 each (which is probably lower) its net worth comes around $44B. I feel like company is way over valued and there is lot of fluff in the evaluation.

tomp 8y ago
Then short it.
dragontamer 8y ago
That's not how people typically evaluate companies. The "standard" way to evaluate a company is to take the price of the stock, and divide by the profits. There are some details like "historical PE" vs "forward-looking PE", but that's the basic metric. The PE ratio represents the number of years it'd take for a company to make back the price you paid. And for most people, PE of 15 to 25 (15 years to 25 years of profits) to make back their market-cap is reasonable. Some companies like Amazon have PE-ratios over 100, as they're considered to be in "growth mode". Tesla never has made a profit however, so its PE ratio is negative, at least historically. So evaluations are most likely based on expectations of future profits. Assuming Tesla is "worth it" at $55 Billion market cap or so, then Tesla needs $2.2 billion of consistent PROFIT / year (not revenue) to get to ~25 PE ratio. Anyway, that's analysis from just one metric. There are other metrics out there, but I think PE ratio is the most common, and one of the simpler metrics to understand.
- qaq 8y ago
  if you can just invest based on simple metrics like that it would be very easy to make money in the market.
  - dragontamer 8y ago
    I'm not saying "invest in simple metrics". I'm explaining how a typical evaluation is done. The original poster's evaluation is fundamentally nonsense. > If you do a quick math let's say they sold 400,000 Tesla (which they haven't yet) at an average of $100,000 each (which is probably lower) its net worth comes around $44B. This line just doesn't make sense at all. There's no metric I'm aware of that matches this methodology.
    - stephengillie 8y ago
      The original poster appears to be confusing revenue and profit. Also, the math is imprecise or incorrect - 400,000 cars sold at $100,000 each would be $40 billion. In lieu of profits, is there any way to use revenue to estimate a company's valuation? Tesla has $28.6 billion in assets, according to NASDAQ[0], yet their market cap is nearly twice that. Is that a normal ratio? [0] https://www.nasdaq.com/symbol/tsla/financials?query=balance-sheet https://www.nasdaq.com/symbol/tsla/financials?query=balance-...
      - dragontamer 8y ago
        > Tesla has $28.6 billion in assets, according to NASDAQ[0], yet their market cap is nearly twice that. Is that a normal ratio? No. Ford has $257 billion in assets for example but a smaller market cap than Tesla. One could argue that "Market cap" is a poor metric of size and that "Enterprise Value" is better. Teslas numbers move in the right direction if you're looking at Enterprise Value, but its still kinda bad in terms of classical evaluation. --------- Ultimately, the only way you square the round-hole of Tesla's balance sheet is imagining future earnings, future assets, and future growth. Alternatively, you invest because you believe in the cause and not because you plan to make money in the stock. Arguably irrational. But the world isn't really about money. I generally respect people who make that kind of decision, as long as they don't become an annoying fanboy.
        qaq 8y ago
        Ford also has $222 billion in liabilities
        dragontamer 8y ago
        Note that enterprise value takes into account liabilities. Which is why I mentioned it. Also note that of Tesla's $28 Billion in assets, Tesla has $24-billion in liabilities. So the company is overall +$4 Billion in assets, while Ford is +$35 Billion in assets. So Ford is 9x bigger than Tesla by assets, and is also 9x bigger by (Assets - Liabilities). In either case, the metric suggests that Ford should be bigger than Tesla, and yet both Tesla's market cap AND enterprise value is larger. Clearly, no one investing cares about Tesla's current size relative to Ford. At best, people are speculating on Tesla's future growth.
Fricken 8y ago
They've got $10 billion in debt, and have benefited from about $6 billion in various subsidies, incentives and tax breaks. It works out to about $40k per car shipped. I think of Tesla not so much as a business than as a charitable religious nonprofit that relies on donations to assist the disadvantaged in acquiring luxury automobiles. Never underestimate the power of belief.
- mlindner 8y ago
  Just to correct you here, most of that $6 Billion is tax relief on future taxes. You can't account those yet.
qaq 8y ago
If you think it's overvalued there is easy way to act on it short some stock.
- kgwgk 8y ago
  It's not so easy. You have to pay to borrow shares and the risk is unlimited. Fun fact: in October 2008 VW became the largest company in the world by market cap. https://www.quora.com/What-are-some-of-the-greatest-short-squeezes-ever https://www.quora.com/What-are-some-of-the-greatest-short-sq...
  - qaq 8y ago
    Yep that was fun :) well buy a put

tomp 8y ago

Then short it.

dragontamer 8y ago

That's not how people typically evaluate companies. The "standard" way to evaluate a company is to take the price of the stock, and divide by the profits. There are some details like "historical PE" vs "forward-looking PE", but that's the basic metric. The PE ratio represents the number of years it'd take for a company to make back the price you paid. And for most people, PE of 15 to 25 (15 years to 25 years of profits) to make back their market-cap is reasonable. Some companies like Amazon have PE-ratios over 100, as they're considered to be in "growth mode". Tesla never has made a profit however, so its PE ratio is negative, at least historically. So evaluations are most likely based on expectations of future profits. Assuming Tesla is "worth it" at $55 Billion market cap or so, then Tesla needs $2.2 billion of consistent PROFIT / year (not revenue) to get to ~25 PE ratio. Anyway, that's analysis from just one metric. There are other metrics out there, but I think PE ratio is the most common, and one of the simpler metrics to understand.

qaq 8y ago
if you can just invest based on simple metrics like that it would be very easy to make money in the market.
- dragontamer 8y ago
  I'm not saying "invest in simple metrics". I'm explaining how a typical evaluation is done. The original poster's evaluation is fundamentally nonsense. > If you do a quick math let's say they sold 400,000 Tesla (which they haven't yet) at an average of $100,000 each (which is probably lower) its net worth comes around $44B. This line just doesn't make sense at all. There's no metric I'm aware of that matches this methodology.
  - stephengillie 8y ago
    The original poster appears to be confusing revenue and profit. Also, the math is imprecise or incorrect - 400,000 cars sold at $100,000 each would be $40 billion. In lieu of profits, is there any way to use revenue to estimate a company's valuation? Tesla has $28.6 billion in assets, according to NASDAQ[0], yet their market cap is nearly twice that. Is that a normal ratio? [0] https://www.nasdaq.com/symbol/tsla/financials?query=balance-sheet https://www.nasdaq.com/symbol/tsla/financials?query=balance-...
    - dragontamer 8y ago
      > Tesla has $28.6 billion in assets, according to NASDAQ[0], yet their market cap is nearly twice that. Is that a normal ratio? No. Ford has $257 billion in assets for example but a smaller market cap than Tesla. One could argue that "Market cap" is a poor metric of size and that "Enterprise Value" is better. Teslas numbers move in the right direction if you're looking at Enterprise Value, but its still kinda bad in terms of classical evaluation. --------- Ultimately, the only way you square the round-hole of Tesla's balance sheet is imagining future earnings, future assets, and future growth. Alternatively, you invest because you believe in the cause and not because you plan to make money in the stock. Arguably irrational. But the world isn't really about money. I generally respect people who make that kind of decision, as long as they don't become an annoying fanboy.
      - qaq 8y ago
        Ford also has $222 billion in liabilities
        dragontamer 8y ago
        Note that enterprise value takes into account liabilities. Which is why I mentioned it. Also note that of Tesla's $28 Billion in assets, Tesla has $24-billion in liabilities. So the company is overall +$4 Billion in assets, while Ford is +$35 Billion in assets. So Ford is 9x bigger than Tesla by assets, and is also 9x bigger by (Assets - Liabilities). In either case, the metric suggests that Ford should be bigger than Tesla, and yet both Tesla's market cap AND enterprise value is larger. Clearly, no one investing cares about Tesla's current size relative to Ford. At best, people are speculating on Tesla's future growth.

Fricken 8y ago

They've got $10 billion in debt, and have benefited from about $6 billion in various subsidies, incentives and tax breaks. It works out to about $40k per car shipped. I think of Tesla not so much as a business than as a charitable religious nonprofit that relies on donations to assist the disadvantaged in acquiring luxury automobiles. Never underestimate the power of belief.

mlindner 8y ago
Just to correct you here, most of that $6 Billion is tax relief on future taxes. You can't account those yet.

qaq 8y ago

If you think it's overvalued there is easy way to act on it short some stock.

kgwgk 8y ago
It's not so easy. You have to pay to borrow shares and the risk is unlimited. Fun fact: in October 2008 VW became the largest company in the world by market cap. https://www.quora.com/What-are-some-of-the-greatest-short-squeezes-ever https://www.quora.com/What-are-some-of-the-greatest-short-sq...
- qaq 8y ago
  Yep that was fun :) well buy a put