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According to Robinhood: “Tesla's stock has jumped 35% over the past month, becoming the most valuable American car company ever. GM and Ford produced a combined

According to Robinhood: “Tesla's stock has jumped 35% over the past month, becoming the most valuable American car company ever. GM and Ford produced a combined 39x as many cars as Tesla did in 2019, but the electric carmaker is now more valuable than GM and Ford combined. Oh, and Tesla lost almost a billion dollars over the past year while GM and Ford made over $10B in profit. Investors care more about future profits, and they think Tesla's e-cars are the future.” I still don’t get it. You may think it’s the future, but to justify such a valuation over all other car companies which have been operating for years, and who can compete with Tesla, it seems a little extreme IMO. EDIT: after reading some comments it seems my conclusions might be inaccurate. All I wanted to point out was that the numbers were shocking at first sight.

awayfromhomenow 7y ago
Everything with humans has a social component. This is a social valuation of Tesla that has nothing to do with the current value of the company. I like Tesla, and hope we go all electric soon, but this is a premature overvaluing of the company (in my opinion).
bryanlarsen 7y ago
If you google "ford enterprise value" and "tesla enterprise value" you get values of 156B and 86B, respectively. Stockholders are not the only people who have claims on the liquidation value and future profits of a company. Bondholders and pensioners do as well. Market cap != valuation.
- deleted 7y ago
  [deleted]
- kbutler 7y ago
  Right, those other claim holders represent reductions in the value of the company. If I borrow $300 billion (heh) and call myself a car company, that doesn't make me a more valuable company than Ford and Tesla combined - my net worth hasn't changed. Market cap == (perceived) value. Enterprise value is the COST TO PURCHASE the company, if I'm considering buying it. Like buying a used car and assuming payments: enterprise value (real cost) = purchase price + loan balance - coins under the seats Market cap is the cash I have to pay up-front Debt is the new debt I will have to pay when I own it. Cash-on-hand is the cash I get back when I buy it
  - MrPowers 7y ago
    The enterprise value is the value of a company. enterprise_value = market_cap + debt - cash Different companies are capitalized differently - some use all equity, some all debt, some a mix. Not sure I agree that other claim holders represent reductions in the "value of the company". The same company can be capitalized different ways - the enterprise value for that company should be unchanged.
    - kbutler 7y ago
      Hold market cap constant. Borrow $1 trillion. Burn the cash. Is the company now more or less valuable? By your formula, how has the enterprise value changed?
      - addicted 7y ago
        Absolutely. Enterprise Value is a metric used for acquisitions to determine the real cost of acquiring a company (that’s why cash lowers enterprise value, since it helps pay off some of the cost of acquiring the company, and liabilities increase the enterprise value because those are additional amounts of money you will Have to pump into the company).
      - bryanlarsen 7y ago
        > Is the company now more or less valuable? More. Normally burning a trillion dollars would have taken about a trillion off the market cap, so if it held steady that means a trillion dollar gain somewhere else.
        kbutler 7y ago
        "There's a pony here somewhere!"
        bryanlarsen 7y ago
        Yup, there's a pony buried in your assumptions.
- throwawayhhakdl 7y ago
  Hmm that sounds misleading for the conversation at hand. If enterprise value is market cap - debt (forget cash) then you’re saying this is the net dollar value of owning every share of Tesla. But “rational” investors are aware of debt. It would seem to me you should be adding the debt to the perceived future earnings to actually come up with gross expected income. That is if I buy Tesla and Ford for $10 each, and the Ford has no debt, and the Tesla has $10 debt, and I pay $10 because I consider them equal value... that would mean you expected total future earnings from holding each to be $10 from Ford and $20 from Tesla.
- lottin 7y ago
  Book value = assets - liabilities Market value = market capitalization Bondholders have claims on part of the company's assets and these claims reduce the value of the company (that's the liabilities part of the equation). Pensioners don't have any claims on anything except perhaps on their pension funds if they have one.
- pbreit 7y ago
  That's a little miss-leading because Ford's EV includes a lot of debt for car loans & leases which tend to get paid back by someone else and are secured by the cars.
sriram_sun 7y ago
Would you invest in Taxi cab companies or App based car rides?
- oliverx0 7y ago
  My main point is that the market cap seems a bit excessive. I can see Tesla having a competitive advantage, and I also see the bet some investors are making on it disrupting the car industry. But after reading those numbers, it just shocked me a little.
- throwaway_tech 7y ago
  Suppose it depends if you are pre IPO investor that is in on the scam or a sucker retail investor post IPO who will be stuck with the bag.
- sremani 7y ago
  Given the Quarterly losses of App based car rides, there is no cut and dry answer to this. May be this is a right time to buy a Cab company. Because sooner or later - Uber and Lyft want to turn profitable, then there is a margin in certain markets where Taxis will not only be competitive but probably cheaper.
  - bdamm 7y ago
    SV companies have made showing losses an art form.
- phildawes 7y ago
  depends on the price
optimiz3 7y ago
> Oh, and Tesla lost almost a billion dollars over the past year How do you know this? Q4 results aren't out.
- aodin 7y ago
  I assume OP meant "last 4 reported financial quarters": 2019 Q3 139.48M 2019 Q2 (702.14M) 2019 Q1 (408.33M) 2018 Q4 143.00M Total of (827.99M) [1] [1] https://www.marketwatch.com/investing/stock/tsla/financials/income/quarter https://www.marketwatch.com/investing/stock/tsla/financials/...
kemitche 7y ago
> who can compete with Tesla From my seat, that really remains to be seen. The existing companies don't seem to have found a way to compete with Tesla's EVs yet. They may get there eventually, but Tesla has it now. Regarding valuation, one point I read elsewhere is that Tesla does a lot more in-house, which adds to the valuation, whereas the existing companies will buy a lot of their parts and/or contract out work. I don't have a source on the specifics, but if true, the logic certainly seems reasonable and would explain things. The value of a company shouldn't be based on their final product, but on the value they added to the parts/components they took in to create that product.
- lhnz 7y ago
  > Tesla does a lot more in-house, which adds to the > valuation, whereas the existing companies will buy > a lot of their parts and/or contract out work. In that respect, they remind me of Apple. However, I thought cars and their component parts were considered to be commodities. Are investors now arguing that not having hardware design know-how is going to hurt the big car companies?
  - mywittyname 7y ago
    It's cheaper this way. The suppliers are beholden to their master and can live or die on a whim. GM, et al know the cost of manufacturing down to a penny and control supplier margins very tightly. They also collude with other manufactures to suppress prices.
- woofcat 7y ago
  >From my seat, that really remains to be seen. The existing companies don't seem to have found a way to compete with Tesla's EVs yet. They may get there eventually, but Tesla has it now. This somewhat reminds me of BlackBerry. They're basically the only game in town right now, and thus maintain a market advantage. However as larger companies shift to EV's as the technology matures how will Tesla be able to maintain its advantage and market valuation? Should the VW group, Toyota, or the Renault–Nissan–Mitsubishi Alliance decide to go all in on EV's will they be able to produce something akin to the iPhone to Tesla's BlackBerry?
jkaptur 7y ago
I read a different analysis [0] arguing that comparing the market cap of Tesla to that of Ford and GM isn't really comparing apples to apples, since the latter have enormous pension fund liabilities. 0: https://mondaynote.com/tesla-and-apple-valuation-questions-cdb95ffcf0a1 https://mondaynote.com/tesla-and-apple-valuation-questions-c...
- oliverx0 7y ago
  Thanks for the article, very insightful!
- xtacy 7y ago
  How enormous are these pension fund liabilities? Looking at the balance sheet of GM, their last annual pension fund liability was put at $18B, roughly 10% of their total liabilities. It doesn't seem much and probably shouldn't factor that highly into comparisons with TSLA, right?
regularfry 7y ago
I do wish people wouldn't say "valuable" when they mean "expensive".
Klinky 7y ago
Isn't it more likely speculation on future stock price than a belief in real world performance? People can pretend it's due to diligent research resulting in a confident position that Tesla will come out on top, but that sounds more like someone trying to create a narrative rather than admitting a lot of people are gambling.
jppope 7y ago
Here's what you're missing... Most of the major automakers: Ford, Toyota, Honda, Nissan, Mazda, etc do not have viable business models in the near future. They are so far behind in sustainable transportation its only a matter of time until they lose their economies of scale and are no longer viable businesses. It's an "Iphone moment"... the other car companies have great "flip phones" right now.
- oliverx0 7y ago
  Gotcha, I can see that analogy making sense.
- jansan 7y ago
  iPhones did not need a charging network. They did not have any disadvantages besides the high price, which made them even more desirable. But I just do not see average people who live in condos buy an EV anytime soon.
  - NotSammyHagar 7y ago
    it's certainly a little inconvenient but people are already buying evs who live in condos in Seattle and San Francisco and probably other places. Don't forget apartments, they have the same issue
    - seanmcdirmid 7y ago
      The higher end apartment buildings are getting chargers here in the Seattle area, while the lower ones are still slow on the uptake. It is just a matter of time now, anyways.
  - deleted 7y ago
    [deleted]
  - bdamm 7y ago
    Then you need to look closer. A long range model 3 can go 310 miles and charge quickly at superchargers. Condo dwellers can basically treat this car just like a gas car with fewer fillup options. A lot of people should do the math on the model 3. The math is current car payment + 90% gas payment = new car payment on a model 3. The remaining 10% is what you pay for electricity.
tdhz77 7y ago
Car companies have years of office politics that impact their ability to see the future. I think this has clouded their judgment. People are rooting for Tesla. The gas industry has propped up the short sellers and now the ones that have the money are the ones that believe climate change is real and that Tesla is apart of the solution. New technology in batteries, automation, AI, etc is driving Tesla not sales of the car. That’s because Tesla is a tech company not a car company. How much data have they collected for their autonomous driving?
- phkahler 7y ago
  >> That’s because Tesla is a tech company not a car company The traditional car companies specialy is not cars. Its manufacturing and supply chain management. Tesla does seem to be mastering manufacturing, and being more vertical they dont need as much supply chain handling. They are not particularly advanced in tech from what I've seen. They do have a bunch of young motivated engineers that have a lot to learn and they can skip over a lot of things and take advantage of the supplier network providing the hard stuff.
  - tromp 7y ago
    > They are not particularly advanced in tech from what I've seen. You may not have seen as far as Sandy Monro [1] [1] https://cleantechnica.com/2018/07/16/munro-model-3-electronics-like-a-symphony-of-engineering/ https://cleantechnica.com/2018/07/16/munro-model-3-electroni...
    - phkahler 7y ago
      >> You may not have seen as far as Sandy Monro I've seen further than that. I did read something a while back that sounded like they have a nicely integrated inverter/motor combo.
  - anon73044 7y ago
    >The traditional car companies specialy is not cars. Its manufacturing and supply chain management. Don't forget the finance side of things! GMAC was founded 101 years ago and also got a large portion of the bailout.
Alex3917 7y ago
> You may think it’s the future, but to justify such a valuation over all other car companies which have been operating for years Operating for years is a cost, not a benefit. TSLA can hire all their most experienced engineers, without the cost of paying pension benefits to their former employees. It's the same playbook that JetBlue used to beat the existing airlines, by poaching pilots from other airlines without paying for their training or funding their legacy cost structure.
x2f10 7y ago
>who can compete with Tesla Perhaps in theory. In reality, Ford & GM are slow to move, slow to adopt, and not seen as a "luxury" / "cool" car manufacturer. I am not a Tesla fanatic, but you must admit it seems they're gaining a bigger and bigger competitive advantage.
maliker 7y ago
Tesla also has a residential energy company inside it. Not saying that should make up the difference in valuation, but it’s a nice compliment to the car business.
hogFeast 7y ago
I don't think your conclusion is inaccurate at all. Yes, enterprise value reflects total business value...but the EV of these companies is pretty similar given the discrepancies in actual profit. Part of Telsa makes sense, they are staking out a corner of the market that isn't big now but will be in the future. But the price you are getting for this risk makes zero sense (there was a very non-zero chance of them going bust this year). I actually knew one of the biggest active shareholders here, and the logic is really "hit and hope". Iirc, they have said publicly that they can see this going bust quite easily but they think the upside will pay off...well, I don't get it either. The upside is whatever Ford or GM is now...and they are worth more than that. As an investor, it isn't worth losing brain cells on this...easier ways to make money, way easier.
- jsight 7y ago
  > The upside is whatever Ford or GM is now...and they are worth more than that. I like Tesla as a car company and agree with this sentiment as an investor. There's a reason that I sold my shares, and also a reason that I never had very many. :) Having said that, I'd like to add Toyota and BMW to your list of comps. BMW in particular demonstrates that there may be at least some potential for upside, IMO.
  - hogFeast 7y ago
    BMW are valuable because their labour is priced in a currency that is very weak (same is true of Toyota but to a far lesser extent). I don't think any of these companies are worth owning (again, there are just far easier games to play than megacaps).
daxorid 7y 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. 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?" - Scott McNealy Now, TSLA is only at P/S of 3.8, but that's even more absurd for a car company than 10 is for a computer company. We'll see. So far we have been wrong. The bulls deserve to gloat, but time will tell.
- pbreit 7y ago
  Ferrari is at 8. Edit: not sure why the downvote. Ferrari has a $32.7b market cap on $3.7b in annual revenue for 8.8x. Tesla has $93b market cap on $24.5b in annual revenue for 3.8x.
  - mrnobody_67 7y ago
    It's a fact, but needs context. Specifically, it ignores the fact that Ferrari is profitable ...
- throwawayhhakdl 7y ago
  That’s a pretty stupid quote. I mean, yes, context matters, and there are cases where things are overvalued (obviously), but the reason prices rise is because revenue (profit) is expected to grow. All of those “basic” assumptions seem to assume that there is 0 growth. The arbitrary ten year payback period doesn’t make sense either. It’s like saying a baby can’t possibly get a job, and ignoring the fact that some babies grow up into adults. I’m sure a more clever analogy exists but that’s the best I have on hand.
- jsight 7y ago
  Honestly, price to sales alone is a joke of a metric for a growing business. Tesla revenue will likely double within the next 24 months (with quarterly trends clearly showing that towards the end of the year). That would put them at 1.9 P/S at that point with more products on the way. P/S only works well when the situation is relatively static.
sixQuarks 7y ago
I actually don't consider Tesla a car company. They are a software company with world-leading expertise in energy production and storage. Vehicles are currently what they're mostly focused in applying this technology to, but that will change in the future. The stock price reflects the likelihood that Elon will accomplish the goals he has set out. If they solve self-driving, that by itself will be worth over 100 billion dollars.
- CrazyStat 7y ago
  > If they solve self-driving, that by itself will be worth over 100 billion dollars. Sadly, as a Tesla driver, I don't think this is coming anytime soon. There are still significant issues with Tesla's hardware, like the cameras getting blinded when the sun is at a low angle.
  - vardump 7y ago
    > like the cameras getting blinded when the sun is at a low angle. That sounds like a pretty serious issue for a vision based system. I wonder how lidars do in that condition. In Europe, I'd also be worried about ability to detect crossing cyclists (when they have right of way) and pedestrians in bad weather conditions, like in mist or when it's snowing heavily. Perhaps front sideways pointing radars could help with that a bit?
  - sixQuarks 7y ago
    I agree it won't be anytime soon, but I think there's a decent chance that we see something in 5-7 years.
pbreit 7y ago
Here's a better comparison (another company where owners love their cars): Tesla built 35x as many cars as Ferrari and is valued at 3x. Tesla trades at 4x sales, Ferrari at 8x. Having been in business longer is not always advantage and is frequently a disadvantage.
- FireBeyond 7y ago
  How on earth is a reasonable comparison Company A, whose _most expensive_ car _tops out_ at about $140K, and Company B, whose _least expensive_ car _starts_ at $335K. These are not remotely comparable companies, regardless of how much "owner love" each may have.
  - pbreit 7y ago
    Ferraris start at $215k vs Roadster at $250k. I don't think the comp is as bad as you suggest. More appropriate than GM/Ford.
    - FireBeyond 7y ago
      I stand corrected, I assumed that their lineup was sorted by pricing. The Portofino does start from there. The Roadster has been discontinued for seven years. What it sold for then, as a fundraising vehicle (literally and figuratively), or what it sells for now as a collector item, used, is still a problematic comparison. I'd probably be thinking more Lincoln / Cadillac when I was looking for a comparison for a US higher end manufacturer.
deleted 7y ago
[deleted]
riantogo 7y ago
It appears extreme only when you think of Tesla as an alternative to one of those car companies. Tesla is as much a car as iPhone is a rotary phone.
remmargorp64 7y ago
Have all the other auto makers dumped massive amounts of investment into sourcing batteries? Do they have their own GigaFactories? How about contracts with lithium mines? Sure, the other auto makers have the existing infrastructure to assemble cars, but if they don't have a way to get batteries cost effectively, they are way behind the curve compared to Tesla.

awayfromhomenow 7y ago

Everything with humans has a social component. This is a social valuation of Tesla that has nothing to do with the current value of the company. I like Tesla, and hope we go all electric soon, but this is a premature overvaluing of the company (in my opinion).

bryanlarsen 7y ago

If you google "ford enterprise value" and "tesla enterprise value" you get values of 156B and 86B, respectively. Stockholders are not the only people who have claims on the liquidation value and future profits of a company. Bondholders and pensioners do as well. Market cap != valuation.

deleted 7y ago
[deleted]
kbutler 7y ago
Right, those other claim holders represent reductions in the value of the company. If I borrow $300 billion (heh) and call myself a car company, that doesn't make me a more valuable company than Ford and Tesla combined - my net worth hasn't changed. Market cap == (perceived) value. Enterprise value is the COST TO PURCHASE the company, if I'm considering buying it. Like buying a used car and assuming payments: enterprise value (real cost) = purchase price + loan balance - coins under the seats Market cap is the cash I have to pay up-front Debt is the new debt I will have to pay when I own it. Cash-on-hand is the cash I get back when I buy it
- MrPowers 7y ago
  The enterprise value is the value of a company. enterprise_value = market_cap + debt - cash Different companies are capitalized differently - some use all equity, some all debt, some a mix. Not sure I agree that other claim holders represent reductions in the "value of the company". The same company can be capitalized different ways - the enterprise value for that company should be unchanged.
  - kbutler 7y ago
    Hold market cap constant. Borrow $1 trillion. Burn the cash. Is the company now more or less valuable? By your formula, how has the enterprise value changed?
    - addicted 7y ago
      Absolutely. Enterprise Value is a metric used for acquisitions to determine the real cost of acquiring a company (that’s why cash lowers enterprise value, since it helps pay off some of the cost of acquiring the company, and liabilities increase the enterprise value because those are additional amounts of money you will Have to pump into the company).
    - bryanlarsen 7y ago
      > Is the company now more or less valuable? More. Normally burning a trillion dollars would have taken about a trillion off the market cap, so if it held steady that means a trillion dollar gain somewhere else.
      - kbutler 7y ago
        "There's a pony here somewhere!"
        bryanlarsen 7y ago
        Yup, there's a pony buried in your assumptions.
throwawayhhakdl 7y ago
Hmm that sounds misleading for the conversation at hand. If enterprise value is market cap - debt (forget cash) then you’re saying this is the net dollar value of owning every share of Tesla. But “rational” investors are aware of debt. It would seem to me you should be adding the debt to the perceived future earnings to actually come up with gross expected income. That is if I buy Tesla and Ford for $10 each, and the Ford has no debt, and the Tesla has $10 debt, and I pay $10 because I consider them equal value... that would mean you expected total future earnings from holding each to be $10 from Ford and $20 from Tesla.
lottin 7y ago
Book value = assets - liabilities Market value = market capitalization Bondholders have claims on part of the company's assets and these claims reduce the value of the company (that's the liabilities part of the equation). Pensioners don't have any claims on anything except perhaps on their pension funds if they have one.
pbreit 7y ago
That's a little miss-leading because Ford's EV includes a lot of debt for car loans & leases which tend to get paid back by someone else and are secured by the cars.

sriram_sun 7y ago

Would you invest in Taxi cab companies or App based car rides?

oliverx0 7y ago
My main point is that the market cap seems a bit excessive. I can see Tesla having a competitive advantage, and I also see the bet some investors are making on it disrupting the car industry. But after reading those numbers, it just shocked me a little.
throwaway_tech 7y ago
Suppose it depends if you are pre IPO investor that is in on the scam or a sucker retail investor post IPO who will be stuck with the bag.
sremani 7y ago
Given the Quarterly losses of App based car rides, there is no cut and dry answer to this. May be this is a right time to buy a Cab company. Because sooner or later - Uber and Lyft want to turn profitable, then there is a margin in certain markets where Taxis will not only be competitive but probably cheaper.
- bdamm 7y ago
  SV companies have made showing losses an art form.
phildawes 7y ago
depends on the price

optimiz3 7y ago

> Oh, and Tesla lost almost a billion dollars over the past year How do you know this? Q4 results aren't out.

aodin 7y ago
I assume OP meant "last 4 reported financial quarters": 2019 Q3 139.48M 2019 Q2 (702.14M) 2019 Q1 (408.33M) 2018 Q4 143.00M Total of (827.99M) [1] [1] https://www.marketwatch.com/investing/stock/tsla/financials/income/quarter https://www.marketwatch.com/investing/stock/tsla/financials/...

kemitche 7y ago

> who can compete with Tesla From my seat, that really remains to be seen. The existing companies don't seem to have found a way to compete with Tesla's EVs yet. They may get there eventually, but Tesla has it now. Regarding valuation, one point I read elsewhere is that Tesla does a lot more in-house, which adds to the valuation, whereas the existing companies will buy a lot of their parts and/or contract out work. I don't have a source on the specifics, but if true, the logic certainly seems reasonable and would explain things. The value of a company shouldn't be based on their final product, but on the value they added to the parts/components they took in to create that product.

lhnz 7y ago
> Tesla does a lot more in-house, which adds to the > valuation, whereas the existing companies will buy > a lot of their parts and/or contract out work. In that respect, they remind me of Apple. However, I thought cars and their component parts were considered to be commodities. Are investors now arguing that not having hardware design know-how is going to hurt the big car companies?
- mywittyname 7y ago
  It's cheaper this way. The suppliers are beholden to their master and can live or die on a whim. GM, et al know the cost of manufacturing down to a penny and control supplier margins very tightly. They also collude with other manufactures to suppress prices.
woofcat 7y ago
>From my seat, that really remains to be seen. The existing companies don't seem to have found a way to compete with Tesla's EVs yet. They may get there eventually, but Tesla has it now. This somewhat reminds me of BlackBerry. They're basically the only game in town right now, and thus maintain a market advantage. However as larger companies shift to EV's as the technology matures how will Tesla be able to maintain its advantage and market valuation? Should the VW group, Toyota, or the Renault–Nissan–Mitsubishi Alliance decide to go all in on EV's will they be able to produce something akin to the iPhone to Tesla's BlackBerry?

jkaptur 7y ago

I read a different analysis [0] arguing that comparing the market cap of Tesla to that of Ford and GM isn't really comparing apples to apples, since the latter have enormous pension fund liabilities. 0: https://mondaynote.com/tesla-and-apple-valuation-questions-cdb95ffcf0a1 https://mondaynote.com/tesla-and-apple-valuation-questions-c...

oliverx0 7y ago
Thanks for the article, very insightful!
xtacy 7y ago
How enormous are these pension fund liabilities? Looking at the balance sheet of GM, their last annual pension fund liability was put at $18B, roughly 10% of their total liabilities. It doesn't seem much and probably shouldn't factor that highly into comparisons with TSLA, right?

regularfry 7y ago

I do wish people wouldn't say "valuable" when they mean "expensive".

Klinky 7y ago

Isn't it more likely speculation on future stock price than a belief in real world performance? People can pretend it's due to diligent research resulting in a confident position that Tesla will come out on top, but that sounds more like someone trying to create a narrative rather than admitting a lot of people are gambling.

jppope 7y ago

Here's what you're missing... Most of the major automakers: Ford, Toyota, Honda, Nissan, Mazda, etc do not have viable business models in the near future. They are so far behind in sustainable transportation its only a matter of time until they lose their economies of scale and are no longer viable businesses. It's an "Iphone moment"... the other car companies have great "flip phones" right now.

oliverx0 7y ago
Gotcha, I can see that analogy making sense.
jansan 7y ago
iPhones did not need a charging network. They did not have any disadvantages besides the high price, which made them even more desirable. But I just do not see average people who live in condos buy an EV anytime soon.
- NotSammyHagar 7y ago
  it's certainly a little inconvenient but people are already buying evs who live in condos in Seattle and San Francisco and probably other places. Don't forget apartments, they have the same issue
  - seanmcdirmid 7y ago
    The higher end apartment buildings are getting chargers here in the Seattle area, while the lower ones are still slow on the uptake. It is just a matter of time now, anyways.
- deleted 7y ago
  [deleted]
- bdamm 7y ago
  Then you need to look closer. A long range model 3 can go 310 miles and charge quickly at superchargers. Condo dwellers can basically treat this car just like a gas car with fewer fillup options. A lot of people should do the math on the model 3. The math is current car payment + 90% gas payment = new car payment on a model 3. The remaining 10% is what you pay for electricity.

tdhz77 7y ago

Car companies have years of office politics that impact their ability to see the future. I think this has clouded their judgment. People are rooting for Tesla. The gas industry has propped up the short sellers and now the ones that have the money are the ones that believe climate change is real and that Tesla is apart of the solution. New technology in batteries, automation, AI, etc is driving Tesla not sales of the car. That’s because Tesla is a tech company not a car company. How much data have they collected for their autonomous driving?

phkahler 7y ago
>> That’s because Tesla is a tech company not a car company The traditional car companies specialy is not cars. Its manufacturing and supply chain management. Tesla does seem to be mastering manufacturing, and being more vertical they dont need as much supply chain handling. They are not particularly advanced in tech from what I've seen. They do have a bunch of young motivated engineers that have a lot to learn and they can skip over a lot of things and take advantage of the supplier network providing the hard stuff.
- tromp 7y ago
  > They are not particularly advanced in tech from what I've seen. You may not have seen as far as Sandy Monro [1] [1] https://cleantechnica.com/2018/07/16/munro-model-3-electronics-like-a-symphony-of-engineering/ https://cleantechnica.com/2018/07/16/munro-model-3-electroni...
  - phkahler 7y ago
    >> You may not have seen as far as Sandy Monro I've seen further than that. I did read something a while back that sounded like they have a nicely integrated inverter/motor combo.
- anon73044 7y ago
  >The traditional car companies specialy is not cars. Its manufacturing and supply chain management. Don't forget the finance side of things! GMAC was founded 101 years ago and also got a large portion of the bailout.

Alex3917 7y ago

> You may think it’s the future, but to justify such a valuation over all other car companies which have been operating for years Operating for years is a cost, not a benefit. TSLA can hire all their most experienced engineers, without the cost of paying pension benefits to their former employees. It's the same playbook that JetBlue used to beat the existing airlines, by poaching pilots from other airlines without paying for their training or funding their legacy cost structure.

x2f10 7y ago

>who can compete with Tesla Perhaps in theory. In reality, Ford & GM are slow to move, slow to adopt, and not seen as a "luxury" / "cool" car manufacturer. I am not a Tesla fanatic, but you must admit it seems they're gaining a bigger and bigger competitive advantage.

maliker 7y ago

Tesla also has a residential energy company inside it. Not saying that should make up the difference in valuation, but it’s a nice compliment to the car business.

hogFeast 7y ago

I don't think your conclusion is inaccurate at all. Yes, enterprise value reflects total business value...but the EV of these companies is pretty similar given the discrepancies in actual profit. Part of Telsa makes sense, they are staking out a corner of the market that isn't big now but will be in the future. But the price you are getting for this risk makes zero sense (there was a very non-zero chance of them going bust this year). I actually knew one of the biggest active shareholders here, and the logic is really "hit and hope". Iirc, they have said publicly that they can see this going bust quite easily but they think the upside will pay off...well, I don't get it either. The upside is whatever Ford or GM is now...and they are worth more than that. As an investor, it isn't worth losing brain cells on this...easier ways to make money, way easier.

jsight 7y ago
> The upside is whatever Ford or GM is now...and they are worth more than that. I like Tesla as a car company and agree with this sentiment as an investor. There's a reason that I sold my shares, and also a reason that I never had very many. :) Having said that, I'd like to add Toyota and BMW to your list of comps. BMW in particular demonstrates that there may be at least some potential for upside, IMO.
- hogFeast 7y ago
  BMW are valuable because their labour is priced in a currency that is very weak (same is true of Toyota but to a far lesser extent). I don't think any of these companies are worth owning (again, there are just far easier games to play than megacaps).

daxorid 7y 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. 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?" - Scott McNealy Now, TSLA is only at P/S of 3.8, but that's even more absurd for a car company than 10 is for a computer company. We'll see. So far we have been wrong. The bulls deserve to gloat, but time will tell.

pbreit 7y ago
Ferrari is at 8. Edit: not sure why the downvote. Ferrari has a $32.7b market cap on $3.7b in annual revenue for 8.8x. Tesla has $93b market cap on $24.5b in annual revenue for 3.8x.
- mrnobody_67 7y ago
  It's a fact, but needs context. Specifically, it ignores the fact that Ferrari is profitable ...
throwawayhhakdl 7y ago
That’s a pretty stupid quote. I mean, yes, context matters, and there are cases where things are overvalued (obviously), but the reason prices rise is because revenue (profit) is expected to grow. All of those “basic” assumptions seem to assume that there is 0 growth. The arbitrary ten year payback period doesn’t make sense either. It’s like saying a baby can’t possibly get a job, and ignoring the fact that some babies grow up into adults. I’m sure a more clever analogy exists but that’s the best I have on hand.
jsight 7y ago
Honestly, price to sales alone is a joke of a metric for a growing business. Tesla revenue will likely double within the next 24 months (with quarterly trends clearly showing that towards the end of the year). That would put them at 1.9 P/S at that point with more products on the way. P/S only works well when the situation is relatively static.

sixQuarks 7y ago

I actually don't consider Tesla a car company. They are a software company with world-leading expertise in energy production and storage. Vehicles are currently what they're mostly focused in applying this technology to, but that will change in the future. The stock price reflects the likelihood that Elon will accomplish the goals he has set out. If they solve self-driving, that by itself will be worth over 100 billion dollars.

CrazyStat 7y ago
> If they solve self-driving, that by itself will be worth over 100 billion dollars. Sadly, as a Tesla driver, I don't think this is coming anytime soon. There are still significant issues with Tesla's hardware, like the cameras getting blinded when the sun is at a low angle.
- vardump 7y ago
  > like the cameras getting blinded when the sun is at a low angle. That sounds like a pretty serious issue for a vision based system. I wonder how lidars do in that condition. In Europe, I'd also be worried about ability to detect crossing cyclists (when they have right of way) and pedestrians in bad weather conditions, like in mist or when it's snowing heavily. Perhaps front sideways pointing radars could help with that a bit?
- sixQuarks 7y ago
  I agree it won't be anytime soon, but I think there's a decent chance that we see something in 5-7 years.

pbreit 7y ago

Here's a better comparison (another company where owners love their cars): Tesla built 35x as many cars as Ferrari and is valued at 3x. Tesla trades at 4x sales, Ferrari at 8x. Having been in business longer is not always advantage and is frequently a disadvantage.

FireBeyond 7y ago
How on earth is a reasonable comparison Company A, whose _most expensive_ car _tops out_ at about $140K, and Company B, whose _least expensive_ car _starts_ at $335K. These are not remotely comparable companies, regardless of how much "owner love" each may have.
- pbreit 7y ago
  Ferraris start at $215k vs Roadster at $250k. I don't think the comp is as bad as you suggest. More appropriate than GM/Ford.
  - FireBeyond 7y ago
    I stand corrected, I assumed that their lineup was sorted by pricing. The Portofino does start from there. The Roadster has been discontinued for seven years. What it sold for then, as a fundraising vehicle (literally and figuratively), or what it sells for now as a collector item, used, is still a problematic comparison. I'd probably be thinking more Lincoln / Cadillac when I was looking for a comparison for a US higher end manufacturer.

deleted 7y ago

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riantogo 7y ago

It appears extreme only when you think of Tesla as an alternative to one of those car companies. Tesla is as much a car as iPhone is a rotary phone.

remmargorp64 7y ago

Have all the other auto makers dumped massive amounts of investment into sourcing batteries? Do they have their own GigaFactories? How about contracts with lithium mines? Sure, the other auto makers have the existing infrastructure to assemble cars, but if they don't have a way to get batteries cost effectively, they are way behind the curve compared to Tesla.