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I for the life of me cannot figure out what could possibly justify this valuation for Tesla. Sure, their cars are pretty great, they have a ravid fanbase, and t
by nerdkid93 7y ago
I for the life of me cannot figure out what could possibly justify this valuation for Tesla. Sure, their cars are pretty great, they have a ravid fanbase, and they have a pretty entertaining CEO who excels at driving interest in the company. They would need to execute perfectly and deliver more cars to customers than Volkswagen in a few years to justify such a valuation right now, and I just don't see that happening for quite some time.
- JohnJamesRambo 7y agoMaybe this is just what the top of bubbles feels like. I can’t explain the stock price either, other than human irrational exuberance.
- beamatronic 7y agoIs your taxi driver or your hairdresser talking about buying TSLA themselves? That’s how you know.
- daxorid 7y agoThere's also TA bots. Both algorithmic and human traders who will eschew a stock at $280 but consider it a buy at $430 because it crossed some magical technical level, without anything fundamental having changed about the underlying company. These traders tend to conduct the opposite of the value strategy, often buying all-time highs for no other reason than it hit an all time high.
- deleted 7y ago[deleted]
- stanferder 7y agoIt's also hard to reconcile this valuation with the practice of making it easy to fat-finger a $4,000 non-refundable purchase in their mobile application. Do they need to go back and hit up their existing customers for more money? https://twitter.com/tedstein/status/1219406746868953088 https://twitter.com/tedstein/status/1219406746868953088
- xedeon 7y agoThat upgrade process on the app is a three step-process when two confirmations. That's not including unlocking a phone, opening the Tesla app and selecting the upgrades menu... Quite impossible to "fat-finger" it.
- stanferder 7y agoI don't have the app (or car) so I can't verify for myself, but now it's hard to reconcile your statement with the twitter thread analysis I referenced above. EDIT: Maybe it's a discrepancy about what a "confirmation" is? If the author of the twitter thread is correct, the "confirmation" is just a large button on the screen that doesn't require password re-entry, which is not much of a confirmation. He proposes that it's easy to accidentally spend the money if you go to the "upgrades" screen, then put the phone in your pocket without locking it.
- jmeyer2k 7y agoIs their really any other CEO who is as entertaining as Elon Musk? Tesla definitely has a monopoly on "entertaining CEO" and people don't really know how to value that.
- blackearl 7y agoIf you want less likable but more crazy, perhaps McAfee?
- xenospn 7y agoMcAfee is insane and definitely not a household name.
- willhslade 7y agoWarren Buffett's a pretty fun guy if you're into making money. Views differ.
- gyeonggi 7y agoIt's also their ahead-of-market technology and long term visions for infrastructure and sustainable energy generation
- deleted 7y ago[deleted]
- reilly3000 7y agoWith each car they get a lifetime of service revenue, mostly without competition. They expand their network effect, their supercharger footprint, and their technology lead as they maintain momentum. Cybertruck is poised to be a giant success, reaching into new markets outside of traditional EV buyers and into rural and suburban light trucks, the highest margin section of auto sales. Finally, its prominence attracts unsophisticated, long position investors. Perhaps it’s still overvalued beyond all of those factors. If you feel strongly about that, why not take out a short position?
- sombremesa 7y ago> Perhaps it’s still overvalued beyond all of those factors. If you feel strongly about that, why not take out a short position? The issue with that is that GP is arguing that this stock's investors continue to behave irrationally. There is no reason to believe they are going to suddenly behave rationally. Thus, a short position is inadvisable. If you are a value investor, the right thing to do is to just not invest in it.
- rjkennedy98 7y ago> why not take out a short position? To quote John Maynard Keynes, “The market can stay irrational longer than you can stay solvent"
- mushufasa 7y agoprobably a mix of a) hype. stock market actually like a beauty contest[0] where what matters is other's perceptions. it's a secondary market. a lot of investors, both sophisticated and not, think tesla is beautiful. b) expectations of future technology. Cruise just announced a self-driving taxi initiative. If you think tesla has as-good or better tech, you might now think they have access to that finally manifesting market. Better unit economics than for human car sales. c) track record of meeting/beating expectations. By now tesla has outlived the shorts. Beyond shedding off many of the shorts that were exerting downward pressure on price, elon musk's mantra of "innovation as his competitive moat" has outlived the doubters among traditional investors. Large public equity investors originally were very skeptical of that fuzzy idea of a moat, especially considering stunts like when Elon released a lot of the electric driving patents for free (!). But a decade later, nothing else on the market has come close to Tesla's product despite several also-ran attempts. It may also help to know that SpaceX is doing well, and Elon has shown willingness to personally bail out his companies during moments of trouble. This decreases downside risk. [0] keynes' famous essay https://en.wikipedia.org/wiki/Keynesian_beauty_contest https://en.wikipedia.org/wiki/Keynesian_beauty_contest
- vardump 7y agoWho'd be credible competitors to Tesla? Old ICE companies are still struggling to even compete with Tesla's 2012 Model S. It might be that if anyone beats Tesla, it'd be some of the tech giants. Like Apple.
- arethuza 7y agoMost people aren't in the market for a Model S or a competitor.
- xedeon 7y agoMany are in the market for the Model 3. I would imagine that the Model Y SUV will eclipse Model S,3,X sales by a wide margin. There are rumors going around that they will start deliveries next month. Which is probably one the reasons for the stock rally.
- himinlomax 7y agoI can see one good reason: the rest of the auto industry is playing catch up with Tesla. Nobody else afaik is even able to do over the air updates (reliable updates, that is). They have a charging network, the competition basically doesn't and can't seem to get their act together, and that's not even really a technological issue.
- 7777fps 7y agoIsn't the "charging network" a thing that shouldn't be vendor locked? Imagine if every petrol pump was tied to specific makes of cars? Any current vendor lock-in of charging is surely at risk at being legislated away, by insisting that EV charging is done through a standard port like refueling petrol/diesel vehicles. If governments were serious about electric vehicles as a way of improving air quality they would legislate that already.
- jrbuhl 7y agoTesla payed a lot of money (billions) to build the super charger network. Money no government or other company seems to want to spend. Legislating away vendor lock-in would just cause companies to be even more averse to capital investment in recharging infrastructure.
- WBrad 7y agoElon has received billions from the US government across his companies. It'd be a slap in the face to the entire US population for Tesla to have a 100% proprietary charging network when we helped get the company going.
- _ph_ 7y agoDid he? What kind of government money did Tesla get? I am not aware of any specific money paid to Tesla, only general benefits for electric cars, which were paid to the buyers, not Tesla. Not like GM, which got billions in a government-bailout, which they used to build their charging network /s.
- fjabre 7y agoMusk is a disrupter and he is disrupting this industry turning it on its head. We've been stuck in the same boring recycled car designs and concepts for decades and here comes Elon with the promise of self driving flying cars on their way to Mars with SpaceX in the background making incredible strides forward everyday. To be honest I think this valuation is too low. Elon continues to eat the competition's lunch on a daily basis with new ideas and approaches to just about every industry he touches. The competition will be left in the dust once he straps some rockets on his new model Ts. All the incumbents are slow, fat, and happy with a lot of inertia and management layers from decades of success. They became too fat and too comfortable. They all look old fashioned by comparison to what Musk is producing. EDIT: Top comment is disparaging Musk's success here. I think in all honesty there are a lot of people who are envious of Musk so they will always have something negative to say when he or his companies are in the news.
- xenospn 7y agoCorrect me if I'm wrong (and I've been a Tesla fan for years, and invested back when they first IPOd), but isn't the Porsche Taycan superior to the Model S in every way (except for a slightly shorter range)? If Porsche can "catch up" and leapfrog the Model S in just their first iteration, I'm pretty sure Tesla's growth is going to slow down significantly going forward.
- chasd00 7y agoGoogle says the Porsche costs about $25k more, so there's that.
- deleted 7y ago[deleted]
- fjabre 7y agoDoes Porsche have domain expertise in launching vehicles into orbit? Do you not think that the cross pollination between Musk's ground breaking companies won't give him a competitive edge against incumbents? I don't think anyone realizes just how significant it is to have Silicon Valley know how in this industry where the visionary is an engineer and not a traditional CEO salesman. It defies common sense that people question this so much. It's so obvious that Musk is disrupting all of these industries at once and breaking new ground daily. I think, judging by the downvotes of my above comment that people are jealous or envious of Musk and they will always have a negative reaction to his success.
- deleted 7y ago[deleted]
- abc_lisper 7y agoSoftware magic. The same reason Apple is valued more than Nokia in 2008, even though Nokia sold many more phones. Once you have software, you can do magical things like upgrading the car’s capabilities, create an eco system for various apps allowing the car to slowly creep into your life. Imagine someday using your car as a backup battery for your home, now, who wouldn’t want that? Allow refueling at hours of day when electricity is cheaper. It’s the story we have mostly seen before. Software adds a new dimension to existing solutions and decimates the competitors, because they can’t compete in that dimension.
- andoma 7y agoYes, this. An example: I remember a few years (?) ago someone complained on Twitter to Elon about people leaving their cars hooked up to super chargers all day (basically just using the super chargers as parking lots). In less then a week (if I remember correctly) a firmware upgrade was out that imposes an idle charge if you leave your car in the Super charger after it's full. I just can't see any other car company being able to deploy these kind of things on that timescale. Perhaps Tesla just happened to have this feature in the pipeline already and just feature flagged it to "on"? Still something other car companies just can't do.
- dmurray 7y agoThat doesn't sound like something that requires a firmware update to the car. The billing logic should live on the server side for obvious reasons. The supercharger already knows who's plugged in and whether they're drawing charge. Maybe other companies couldn't even roll out that feature to their chargers in a week. But they could duplicate the effect with, say, one employee and a spreadsheet.
- keooe020nnd 7y agoBecause it isn’t just cars. It’s energy infrastructure. Battery plants, storage, charging stations, solar roofs, AND personal transportation. Aristocrats are humans and get the environment thing is real. They’re talking about Tesla in a way we can’t see. We live in a managed society from an information perspective. Think about security in IT? The entire premise is no one has all the details at any one time. Do you really believe they’re discussing just car sales with what he’s been building?
- kome 7y ago> I for the life of me cannot figure out what could possibly justify this valuation for Tesla. Tesla is innovative, and they deserve praise. That said: finance is prone to bubbles and animal spirits. At one point investors will understand that old producers like FCA or Ford sell better, produce more and innovate in a prudent way. Tesla bubble will pop, and their valuation will get more realistic.
- trhway 7y agoTesla ARR (edit as it seems to get some people confused: "Annualized Run Rate") is something like $25B/year. That for tech company easily makes for $250B+ valuation. (and yes i do own some) >than Volkswagen those dinosaurs are still not getting it. They continue to stay car companies instead of becoming tech companies. Paradigm shift must be very well familiar to tech people here at HN.
- matthewdgreen 7y agoThe hallmark of a "tech" company, and the reason it can have such huge valuations, is that they don't do silly and expensive things like build relatively low-margin physical objects. Tesla has not demonstrated its plans beyond that yet.
- trhway 7y agoDid you just dismissed Apple (and other hardware companies) as a tech company?
- mediaman 7y agoARR is not a synonym for "revenue." Tesla's total revenue was $6.3bn for the last reported quarter, an annual run rate of $25.2bn. That's all sales, nearly all of which are sales of new vehicles. Sales of durable new vehicles does not fit the definition of "annual recurring revenue" by any stretch of the imagination. ARR is valued highly because it implies steady revenue from each customer. Less the churn rate, it makes for a super steady long tail of cash flows. Once you've made a sale, you can count on that sale again the next year, and success of new sales builds on that existing base of recurring sales. These kinds of revenues tend to be more resistant to recessions, changes in preferences, etc., versus churning through new customers every year. Car companies are the exact opposite. Sell a car? Great, you have to sell another car to someone else next year just to tread water. Your customers don't buy new cars every year. Maybe in five to ten years they'll come back to you. That's why ARR is worth so much more, and why a durable goods maker does not get a high valuation because of their ARR. They're different business models. In short, one can't justify Tesla's revenue valuation multiple based on multiples of ARR subscription companies.
- aantix 7y agoDid you watch their presentation on their plans for autonomous vehicles? I think the market knows that they will win on this front, if they can remain financially solvent. Also: 1) Via their customers, they have access to a massive trove of of nuanced, real-world driving data needed to train their models. No other competitor has that much data. 2) They're willing to ship. They're willing to put features in front of customers, even before they are fully baked. They will learn so much more quickly approaching the problem this way. The only things that could stop them are legislation or a flurry of lawsuits if they get too reckless with releases. But it won't be the tech issues - Tesla is full-throttle and solving edge cases at a rapid pace.
- erikpukinskis 7y agoIf the whole car market goes EV and Tesla keeps their share of it (17%) and maintains their margins (20%) then that is 4000 * .17 * .2 = 136B profit per year. That would justify a trillion dollar valuation. I expect them to fall short of that model in auto sales, but I expect mobility services and stationary storage to make up the difference. Either way there’s plenty of headroom in that equation for more conservative models that still yield a $100B valuation. E.g. 2000 * .08 * .1 = $16B annual profit which is reasonable for $100B mkt cap.
- donogh 7y agoTesla is the Apple of the auto industry. They are getting stellar customer satisfaction ratings, which is translating into brand loyalty[1]. They've built an ecosystem between their above-average EV hardware, industry-leading software (with frequent improvements), and a top-notch charging network. I can see some automakers matching them on hardware, but they have a huge lead in software. Traditional car manufacturers update software at a glacial pace and, aside from Mercedes' recent voice control system, I haven't seen anything come close. Also, Musk is right: no one else has even come close to matching the 2012 Model S. Tesla's lead is starting to look unassailable (in the medium term). Not to mention their foothold in China, which can only get stronger with the introduction of a Chinese-designed model. [1] https://cleantechnica.com/2019/01/09/tesla-has-the-highest-customer-loyalty-of-all-car-brands/ https://cleantechnica.com/2019/01/09/tesla-has-the-highest-c...
- ec109685 7y agoOne thing Tesla doesn’t have is the lock in that Apple has. If you are using iPhoto, iWatch and iMessage, switching to another manufacturer is hugely disruptive. I totally agree that Tesla’s software chops are light years ahead.
- nicoburns 7y agoDo most apple hardware users use those apps? I'd imagine at least as many if not more use google photos + whatsapp or facebook messenger.
- TomVDB 7y agoWhatsApp is pretty popular, but Google Photos? The vast majority of people take a picture with the standard camera app and never look at the pictures again. You don’t need a non-native app for that.
- londons_explore 7y agoIphone doesn't let you search photos really - try searching for "photos of me skiing" or "igloo picture" and you'll soon find google photos is way ahead.
- TekMol 7y agoMarket cap is expected value of the sum of all discounted future earnings. So to be worth $100B, they have to earn that amount in future money eventually. Not within the next few years.
- davidivadavid 7y agoWhat's your discount rate for Tesla? Now, taking that into account (profits past a certain time period are essentially discounted to 0), over what period of time should they realistically collect that money for the valuation to make sense?
- TekMol 7y agoIt is not specific to Tesla. https://en.wikipedia.org/wiki/Present_value https://en.wikipedia.org/wiki/Present_value If we assume a 3% inflation rate, 2030s earnings need to be discounted by 34%. 2040s earnings by 56%. And 2040s earnings by 71%. As you can see, even 2040 earnings still have a substantial impact on today's value.
- davidivadavid 7y agoErm, I know what present value is. The discount rate for Tesla is not 3%, unless you think it's a risk-free asset (it's not).
- TekMol 7y agounless you think it's a risk-free asset And unless your risk aversion is zero. Which more or less holds true for me. (Aka, playing a game of coin tossing where head wins a dollar and tail loses a dollar does not make me uncomfortable). Otherwise it depends on: 1) Your risk aversion 2) The percentage of your portfolio you intend to invest into Tesla 3) How correlated your portfolio is to Tesla If you only invest a sufficiently small amount (compared to your overall portfolio) into something, then the overall risk of your portfolio will go down. No matter how volatile that something is. So in that case, there also is no need to discount future earnings except for expected inflation.
- bryanlarsen 7y agoIMO, the best metric for comparison of the two companies is the ratio of Enterprise Value to Sales. (P/S doesn't work as well because of the massive debt loads of car companies). For VWAGY, the ratio is about 1: $240B of sales and $260B EV. For Tesla, the ratio is about 4.5: $24B of sales and $108B EV. 4.5 is not a massive number for this ratio. It indicates the market expects growth, but not hit-it-out-of-the-park growth. 1 is a relatively small number; the market is expecting Volkswagen to shrink slightly.
- jfengel 7y agoSales seems an odd metric, since there's a big difference between high and low margin industries. But I suppose it's somewhat reasonable within an industry, especially when one is trying to compare an established company with one that is so busy growing that nobody expects its profit and loss this quarter to tell you much about the long term. Interesting, thanks.
- xedeon 7y agoYou're missing quite a few more... Solar, Energy Storage, Battery and Drivetrain tech, Supercharger Network, and the possibility of the cars becoming the"third screen" a curated app store would bring tons of revenue. They are more than just an "auto manufacturer".
- grey-area 7y agoThey're not just a car company (seriously, that's what investors are betting). Also, as a car company they are well positioned to take a lot of the market when evs take over and are only worth half of the market leader but executing better on evs. If you believe we're shifting to evs, battery storage and integrated solar roofs, and automated transport, they could easily grow as large as Apple or Amazon say in the next decade (10x from current price). Now that's a risky bet but it's certainly possible.
- cdiamand 7y agoYou're not alone! I've been tracking /r/wallstreetbets for my new project https://topstonks.com https://topstonks.com and no one there seems to understand it. A lot of great theories though. Out of the 6434 stock mentions in the last 24 hours ~10% of that is about TSLA and that's up 45% since yesterday. Heres a bubble graph of the most mentioned equities over the last 7 days (as of yesterday) on /r/wallstreetbets. ignore F and C, still working on the filter :) https://preview.redd.it/22mrpbh3g5c41.png?width=985&format=png&auto=webp&s=6b9d8144736149ab74755346a28f47bb7cae8bc9 https://preview.redd.it/22mrpbh3g5c41.png?width=985&format=p... Ps - we're doing our Show HN right now, feel free to come by and say hi :) https://news.ycombinator.com/item?id=22109610 https://news.ycombinator.com/item?id=22109610
- ethbro 7y agoI figured it was another short squeeze. Probably coupled with automated trading. Observed short interest over total outstanding seems like the kind of thing an algorithm could target, as it makes the stock more sensitive to moves, no?
- cdiamand 7y agoI'm sure algos key off metrics like the amount shorted as a percentage of float. I can't know their algo but I'd imagine they like to see the specs jumping in before they start buying. Tesla is a battle of narratives and WSB are the specs looking to start or jump on a stock meme. ~10% of the chatter around TSLA in last 24 hours has the word "short" in it :)
- joering2 7y agoShort answer: because when it comes to stock market, people invest in future of the company, not its present. And Musk is unpredictable. Tesla only car allowed to drive on Mars? Why the heck not?? Who knows. People been investing in Tesla for many years now and barely were ever disappointed unless you were shorting the stock in which case when expiry date came (futures) many were taking second mortages to clear their calls. There is too much money on the market for enough people needing to exit Tesla stock and enter something else that would possibly give them better gains over next 5-10 years, so they hold long term, making less stock moving on the floor and giving it longer stretch.
- georgeburdell 7y agoDisclaimer, I am long TSLA. You’re right if Tesla were just a car company, but I view them as half Ford and half Exxon with their energy business. A Tesla car owner might also purchase Tesla solar panels (and eventually a solar roof) with a Tesla Powerwall.
- cs702 7y agoAs someone who has purchased and owned multiple luxury European vehicles (mainly BMW and Mercedes) for the past 20+ years, for the first time I'm seriously considering switching over to Teslas when I replace my current vehicles. From my perspective, Tesla has now gained long-term credibility, so we may well be on the cusp of seeing much broader adoption by a mass of non-early adopters, i.e., people like me, who evaluate buying a Tesla the same way we would evaluate buying any other car brand. We judge the purchase on "boring" criteria like long-term quality, everyday reliability, real-world practicality, service delivery, overall reputation, interior features, exterior design, resale value, etc. The stock market appears to be pricing this kind of broader-mass-adoption scenario.
- xedeon 7y agoOur household came from driving BMWs, MBenz and Lexus cars/SUVs. Now we are an all Tesla household. The gas and maintenance savings are huge benefits. The Tesla Reddit forums is also filled with many owners who share the same sentiment.
- cs702 7y agoIt's a common enough story. I myself have quite a few friends and acquaintances who are in your camp, including a handful of bleeding-edge adopters who bought model S's seven years ago and suffered through some of the company's growing pains. The difference now, I think, is that the people who are switching to Teslas are not early adopters.
- Consultant32452 7y agoI'm not an early adopter. I currently drive a Kia. I'm buying a cybertruck. Just thought I'd give an anecdote that's not switching from the luxury market.
- xedeon 7y agoThe KIA EV's are actually not bad for the value. Alas, dealerships are very resistant in selling them. Which is a big shame. Another reason the direct from manufacturer approach works so well for Tesla.
- segmondy 7y agoThis is Tesla not WeWorks. We often see companies having high valuation and this same sort of comment plays out. Implying that they have to deliver more cars than Volkswagen is also implying that their cars are equivalent. They are not. Tesla is the future, we saw this with Netflix. Folks couldn't understand it or believe it till blockbuster went broke.
- erk__ 7y agoThe future is a monopoly?
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- shyn3 7y agoEveryone seems to miss the biggest reason why Tesla has won and the other companies won't be able to catch them. The dealer network. The Nissan Leaf came out and was way ahead of everyone but nobody bought it because they couldn't find it. The dealers would hide the car in the back and avoid showing it to you. There was no incentive for them to get you in a Nissan Leaf because they would make profits, negligible ones, on the sale but the place they make their money is maintenance and that would deplete their profits. The issue with this is the dealerships aren't owned by the organization so the incentives aren't aligned. If GM/Ford/Toyota create the best EV the dealer won't have any incentive to sell them until unless they make up significant profits, which means they would have to make up 5-7 years of maintenance profits on the initial sale. In essence they will just sell their land and move on and have to take a loss. The smart dealers sold their stake in the dealerships and now the suckers are holding onto the last bit hoping to get out. The dealerships we have now Ford/GM/Chrysler/Toyota/Volkswagen/Nissan are all going to disappear, that's why their valuation is justified. The only competitors are going to be the new car companies because they will adopt the same model Tesla has where they own their own dealerships. It's why the current Auto companies and dealers are lobbying to not allow Tesla to own their own dealership.
- shmerl 7y ago> It's why the current Auto companies and dealers are lobbying to not allow Tesla to own their own dealership. More like they simply want to remain the parasitic middleman. In practice, no one needs dealerships to begin with these days. They fight through corruption, because they are already obsolete.
- braythwayt 7y agoThe only competitors are going to be the new car companies because they will adopt the same model Tesla has where they own their own dealerships. The general form of your argument is correct, however existing automobile companies aren't all wedded to their dealer networks. Volvo (which is now owned by Geely in China) took their Polestar performance brand and launched an entire automobile brand a few years ago. They now have a Polestar 1 performance hybrid coupe, and are taking orders for their Polestar 2 small sedan that will compete with the Tesla Model 3. And when I say, "taking orders," I mean over the web. You cannot buy or lease a Polestar automobile in a Volvo dealership. I think Tesla has a lot of technical advantages that throw up barriers to competition from existing manufacturers, and there is no doubt that from a management perspective, these companies are their own worse enemy. But the dealer network thing I think is a much weaker moat than it appears at first glance. I think it's a lot easier for an existing company to sell cars direct--possibly under a new marque--than it may seem. There are problems of institutional inertia and lobbying and so on to overcome, but for some manufacturers, like Volvo, selling cars without a dealership just happened, without fanfare. Are they a "new car company?" I don't think it matters that the cars they sell online are called "Polestar," and the ones in their dealership are called "Volvo."
- rolltiide 7y agoShort squeeze
- 40acres 7y agoI'm surprised at this sentiment. The other major auto makers have had at least 5 years now to show what they can do in regards to developing EVs and the results are not good. Nissan's leaf is a solid car but with the recent departure of Ghosn the future is in doubt. Many of the American auto makers are still focused on squeezing as much as they can from SUVs and don't inspire confidence that they will be able to produce a quality vehicle to threaten Tesla's potential customer base. The limited (read luxury) SKUs, word of mouth, and differentiated software give Tesla a distinct advantage over traditional autos. In the past it was viable to worry about execution but with the new gigafactory and China expansion underway , coupled with recent sales figures it's difficult to bet against them.
- bobjordan 7y agoEarlier this year about 8 months ago, Tesla shares were down 38% on the year. At that time, I took a trip to Inner Mongolia. I was about 150 miles from anywhere anyone in the western world would call a city. I saw a Tesla there in the middle of the desert of Inner Mongolia [0]. That's pretty impressive penetration. [0] https://www.linkedin.com/posts/bjordan1_tesla-shares-are-down-38-this-year-today-activity-6536589110344282112-wduR https://www.linkedin.com/posts/bjordan1_tesla-shares-are-dow...
- 0xff00ffee 7y ago> I for the life of me cannot figure out what could possibly justify this valuation for __INSERT_SKYROCKETING_SEC_LISTING__ FTFY. Why? It's what the stock market has become. It used to be a way for companies to raise cash to grow and pay dividends, and for investors to amass generational wealth at generational speeds. Now it is just a war of algorithms and differential equations to get rich as fast as possible. Some reasons: 1. Option trading (really came into its own in the late 80's/90's) 2. Electronic trading (anyone with a brokerage account and $1,000 can play) 3. Algorithm trading (trades happening at the microsecond scale) 4. Insane speculation (Look at the historical graph of the DJIA and you will see in the last 40 years things have gone batshit insane) 5. Black-Scholes equation (the equation that governs the insanity) For trading firms with servers in the NYSE building that are making trillions of trades a day at microsecond speeds, it is a statistical gambling model fought by algorithms (check out RadioLab's special on this) with no reason. For the rest of us, we're left with index funds that hope the average trends upwards.
- sixQuarks 7y agoIt's simple, I don't see why more people don't get it. The stock is mostly about anticipation about the future. Tesla has hit all of its stated goals from 2009. Elon's other venture, SpaceX has also hit most of its stated goals or is on track to hit them. These are world-changing goals, not your normal everyday corporate goals. Elon has proven he can hit them. The goals set out for the next 10 years are also incredible goals, which should set the company up to be a trillion dollar market cap if the goals are reached.
- slg 7y agoYou shouldn't look at Tesla as just a company that sells cars. Uber has a market cap of $64b. If Tesla ever nails self driving, they could turn themselves into Uber almost overnight by deploying that tech to their already sold fleet of vehicles. That obviously isn't a guarantee and I wouldn't even say it the most likely outcome, but even at a low probability it is a possibility that likely adds billions to the company's valuation. There are similar scenarios for other industries with their solar, battery, and trucking businesses.
- bryanlarsen 7y agoA $100B market cap for a fast growing company with $25B in annual sales is on the cheap side, if anything. The real question is why is VWAGY valued so poorly? A $100B market cap for a company with $240B in annual sales means the market is quite pessimistic about VW.
- zamfi 7y agoRevenue isn't earnings. A $100B market cap for a fast-growing company with ~$0 profit is definitely not "on the cheap side". But I agree that a $100B market cap for a company with ~$13B in profit is quite pessimistic. VW's future is cloudy.
- bryanlarsen 7y agoAs Amazon demonstrated quite convincingly, profit is not an appropriate number to value fast growing companies by. Tesla may or may not be another Amazon, but revenue is the best heuristic we have for any company investing so much into growth. It's not a great heuristic, but it's the best we have.
- KoftaBob 7y agoIf all they did was produce cars, then yes, the valuation wouldn't make sense. But you're completely ignoring their solar panel and battery production business. Those two things on their own will make them a powerhouse in the upcoming renewable energy industry. Solar panels on residential homes with batteries for storage/backup + utility level solar fields with utility level battery arrays = a massive business on its own. People make the mistake of comparing them to GM or Ford, when in reality they're the equivalent of General Motors + General Electric.
- ctdonath 7y agoICE autos are locked into three near-monopoly supports: - Manufacturing scale is enormous, with vast supply chains and deeply ingrained middlemen & unions locking in prices. - Sales is via local monopolies(-ish) which dictate what models & variants of a few brands are available & manufactured. - Power comes from an infrastructure of commodity stations which are not controlled by vehicle manufacturers. Most EVs are a modification of this: made by the same few brands, defined & sold by the same few dealers, powered by a mundane infrastructure of independent power suppliers. Tesla has transcended this model: - Manufacturing is extremely concentrated & efficient, built ground-up in-house. - Sales is online to-your-door. The few showrooms are just that: show rooms, letting you experience a couple premium builds. (I expect one benefit of self-driving is your by-credit-card purchase will literally deliver itself; ~$0 delivery cost.) - [Inter-]national "supercharger" network assures you can go anywhere; owned by Tesla, it is optimized for the vehicle and cuts out independent business' cut of profits. This is huge. Apple succeeded in large part because it's a one-stop-shop for personal information tools; the entire ecosystem is owned & optimized by one business, keeping TCO relatively low yet profits for that business high & sustained. Not beholden to anyone else, Apple can perfect a few devices for a total 24/7 user experience. Tesla is following similar: I can tap a couple buttons on my phone and a car will appear a couple days later, having extreme longevity & desirability, powered mostly at home and nationally by cheap & optimized chargers - with no third-party overhead & complications. That vs the EV I last had, involving needless extra costs & confusion from a dealer, unable to fast-charge, and otherwise (while nice) failed to go above-and-beyond. Eagerly awaiting Cybertruck.
- erk__ 7y agoThere is one place where it currently is a pretty large failure, and that is repair shops. The waiting times are very large compared to other manufactures.
- ctdonath 7y agoYes, repair still needs sorting out. HOWEVER, other manufacturers build for repairs: there are high-cost repair services provided at every dealership. Yes you can get a car fixed, but that's because it's built to need fixing often & terminally.
- jfoster 7y agoHaving better sales might help for a few quarters/years. Having better technology might help for a few decades.
- drunner 7y agoTo me, its the next big bubble out there. We had dotcom, we had subprime mortgage, next we have the VC bubble. Tesla has had 5 profitable quarters in 10 years. Uber loses billions of dollars a quarter. Chalk it up to R&D or whatever you want, but this is only sustainable because of this giant bull run. When the money starts to dry up, these companies are going to implode.
- londons_explore 7y agoWhen half the nations market cap and everyone's pension funds are wrapped up in it, it won't be allowed to implode. Instead, the government will give emergency cash injections so all the investors don't loose much. Instead all holders of US currency and taxpayers will pay for it via more government debt and inflation.
- chemmail 7y agoWell I guess you would still use film then.