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I guess the hard to understand part is: how does a $50B company that is growing revenue at 1% annually more than double its market cap in 3 months. It's insane

I guess the hard to understand part is: how does a $50B company that is growing revenue at 1% annually more than double its market cap in 3 months. It's insane (ludicrous?)!

toomuchtodo 7y ago
They’re growing while the market for legacy automakers is shrinking. Everyone else is tapped out, while there’s still a whole lot of people left on Earth who’ll buy Tesla products (and you’ll notice Tesla keeps changing where the production firehose is pointed based on local incentives maximizing sales). Heck, Fiat has to hand over almost $2B to Tesla just to be permitted to sell cars in Europe because they have little to no low or zero emissions vehicles to sell. As an investor desperate for returns, do you invest in the past or the future?
- aguyfromnb 7y ago
  >They’re growing while the market for legacy automakers is shrinking. Do you have data for this? Tesla had, essentially zero growth in the US in 2019, which is where it sells half of its cars. There are many companies that had higher growth than that, including Volvo, which grew 10% in the US. LandRover sold 125k units in the US in 2019, which is far more than the Model S + X (its competitors). So, I'm not sure where you get the idea that everyone else is shrinking while Tesla is growing. Some companies might be, but some are growing faster than Tesla. These are not mysteries; there is data out there.
  - deleted 7y ago
    [deleted]
  - hw 7y ago
    The growth will come from China, where there's still plenty of EV incentives by the government. Growth in US will depend on new EV incentives IMO
    - xkjkls 7y ago
      Why is that a bull thesis though? If the growth is that dependent on subsidies?
      - toomuchtodo 7y ago
        China is one of the biggest markets in the world and is committed to the rapid deployment of EVs. Unlike the US, those subsides will be around for a while. China also gave Tesla very favorable loan terms for the China Gigafactory.
        xkjkls 7y ago
        > Unlike the US, those subsides will be around for a while. Why? That doesn't seem like a stable investment thesis. > China also gave Tesla very favorable loan terms for the China Gigafactory. And if Tesla doesn't meet a number of targets the Chinese government takes complete ownership of the factory. They didn't give the good financing terms out of goodwill. Tesla entered an incredibly risky proposition with its Chinese factory.
        toomuchtodo 7y ago
        You asked what the bill thesis is. Bull thesis is there’s a ton of growth ahead for Tesla. Market reaction seems to agree. If one disagrees with the market, short TSLA. Hasn’t worked out that well for those starting with relatively large amounts of capital, but maybe shorts are still right! Vote with your dollars.
        xkjkls 7y ago
        Maybe they agree, but the last two quarters should make anyone skeptical. For a company at the multiple it is it post negative to zero YoY growth for two quarters is crazy
  - jsight 7y ago
    Tesla delivered ~250k cars in 2018 and ~360k cars in 2019. In the 4th quarter, they had a run rate of >400k, and it is expected that 2020 will produce at least 500k. I'm purely focused on why people see it as a growth story, despite some numbers implying otherwise. Its a drop in the bucket compared to the rest of the industry, so I wouldn't expect it to be possible to tease out the impact on other manufacturers in a reliable way.
mrtksn 7y ago
What I do not understand is, what the company performance has anything to do with its stock performance? It's not like they are paying dividends, right? Totally unrelated markets, it's no different than the crypto coin markets. Even the volatility is similar. Besides that, Tesla has a rockstar CEO. He can achieve things that conventional companies can't even dream of. If he needs money he can do a publicity stunt and collect the money. It's a cult and the members believe in the cause and the members are quite affluent.
- xkjkls 7y ago
  > What I do not understand is, what the company performance has anything to do with its stock performance? It's not like they are paying dividends, right? Stocks are valued at the long term discounted value of their future cash flows. Are the markets always accurate and rational? No, but that's how they are intended to be valued.
  - mrtksn 7y ago
    Is there a central authority that makes the calculation and assigns the right value? AFAIK, there's no such thing and the price is determined by the amount that a buyer agrees to pay. It has nothing to do with company performance. The company performance can result in an acquisition, bankruptcy or shares sales/buybacks though, but until that happens nobody knows.
    - xkjkls 7y ago
      > It has nothing to do with company performance. If that's true then no one would ever invest in stocks.
      - mrtksn 7y ago
        Why wouldn't they?
        xkjkls 7y ago
nordsieck 7y ago
> I guess the hard to understand part is: how does a $50B company that is growing revenue at 1% annually more than double its market cap in 3 months. This is just my opinion: The way people were valuing Tesla is a massively valuable stock with a high potential of blowing up. From the looks of things, Tesla has crossed into prolonged profitability. It's not a huge increase in revenue, but it is a big decrease in the chance of bankruptcy. Additionally, because Tesla can self fund and doesn't have to rely on the markets to raise money, they don't have to care very much about short sellers driving the price down. The bull case (robo-taxis, etc.) is still there, but the chance of Tesla going bankrupt is much lower than 1 year ago, so the stock has shot up.
- xkjkls 7y ago
  > From the looks of things, Tesla has crossed into prolonged profitability How? They lost $800 million in 2019. > Additionally, because Tesla can self fund and doesn't have to rely on the markets to raise money, they don't have to care very much about short sellers driving the price down. They still have increasing bills and huge liabilities. Acting like they have no risks if they don't raise money is crazy.
  - nordsieck 7y ago
    > They lost $800 million in 2019. You're not wrong. Of course the counterpoint is that they were profitable both the 3rd and 4th quarter. > They still have increasing bills and huge liabilities. That is true. However, some of their debt will convert into equity as long as the stock price remains where it is. More broadly, I'm not trying to convince anyone that Tesla is some sort of value stock. It's not. It's absurdly volatile. There's also a good chance that they won't win the race to level 5 autonomy. All I'm saying is: enough people believe in the upside and think the downside has been diminished sufficiently to drive up the price to where it is. Maybe they're wrong. Maybe they're right. I certainly don't know.
    - xkjkls 7y ago
      > Of course the counterpoint is that they were profitable both the 3rd and 4th quarter. Less so than last year. Why do we believe this is sustainable over a full year? > More broadly, I'm not trying to convince anyone that Tesla is some sort of value stock. It's not. There seem to be people who do, and I want to insure that they don't lose their whole retirement savings chasing that.

I guess the hard to understand part is: how does a $50B company that is growing revenue at 1% annually more than double its market cap in 3 months. It's insane (ludicrous?)!

toomuchtodo 7y ago

They’re growing while the market for legacy automakers is shrinking. Everyone else is tapped out, while there’s still a whole lot of people left on Earth who’ll buy Tesla products (and you’ll notice Tesla keeps changing where the production firehose is pointed based on local incentives maximizing sales). Heck, Fiat has to hand over almost $2B to Tesla just to be permitted to sell cars in Europe because they have little to no low or zero emissions vehicles to sell. As an investor desperate for returns, do you invest in the past or the future?

aguyfromnb 7y ago
>They’re growing while the market for legacy automakers is shrinking. Do you have data for this? Tesla had, essentially zero growth in the US in 2019, which is where it sells half of its cars. There are many companies that had higher growth than that, including Volvo, which grew 10% in the US. LandRover sold 125k units in the US in 2019, which is far more than the Model S + X (its competitors). So, I'm not sure where you get the idea that everyone else is shrinking while Tesla is growing. Some companies might be, but some are growing faster than Tesla. These are not mysteries; there is data out there.
- deleted 7y ago
  [deleted]
- hw 7y ago
  The growth will come from China, where there's still plenty of EV incentives by the government. Growth in US will depend on new EV incentives IMO
  - xkjkls 7y ago
    Why is that a bull thesis though? If the growth is that dependent on subsidies?
    - toomuchtodo 7y ago
      China is one of the biggest markets in the world and is committed to the rapid deployment of EVs. Unlike the US, those subsides will be around for a while. China also gave Tesla very favorable loan terms for the China Gigafactory.
      - xkjkls 7y ago
        > Unlike the US, those subsides will be around for a while. Why? That doesn't seem like a stable investment thesis. > China also gave Tesla very favorable loan terms for the China Gigafactory. And if Tesla doesn't meet a number of targets the Chinese government takes complete ownership of the factory. They didn't give the good financing terms out of goodwill. Tesla entered an incredibly risky proposition with its Chinese factory.
        toomuchtodo 7y ago
        You asked what the bill thesis is. Bull thesis is there’s a ton of growth ahead for Tesla. Market reaction seems to agree. If one disagrees with the market, short TSLA. Hasn’t worked out that well for those starting with relatively large amounts of capital, but maybe shorts are still right! Vote with your dollars.
        xkjkls 7y ago
        Maybe they agree, but the last two quarters should make anyone skeptical. For a company at the multiple it is it post negative to zero YoY growth for two quarters is crazy
- jsight 7y ago
  Tesla delivered ~250k cars in 2018 and ~360k cars in 2019. In the 4th quarter, they had a run rate of >400k, and it is expected that 2020 will produce at least 500k. I'm purely focused on why people see it as a growth story, despite some numbers implying otherwise. Its a drop in the bucket compared to the rest of the industry, so I wouldn't expect it to be possible to tease out the impact on other manufacturers in a reliable way.

mrtksn 7y ago

What I do not understand is, what the company performance has anything to do with its stock performance? It's not like they are paying dividends, right? Totally unrelated markets, it's no different than the crypto coin markets. Even the volatility is similar. Besides that, Tesla has a rockstar CEO. He can achieve things that conventional companies can't even dream of. If he needs money he can do a publicity stunt and collect the money. It's a cult and the members believe in the cause and the members are quite affluent.

xkjkls 7y ago
> What I do not understand is, what the company performance has anything to do with its stock performance? It's not like they are paying dividends, right? Stocks are valued at the long term discounted value of their future cash flows. Are the markets always accurate and rational? No, but that's how they are intended to be valued.
- mrtksn 7y ago
  Is there a central authority that makes the calculation and assigns the right value? AFAIK, there's no such thing and the price is determined by the amount that a buyer agrees to pay. It has nothing to do with company performance. The company performance can result in an acquisition, bankruptcy or shares sales/buybacks though, but until that happens nobody knows.
  - xkjkls 7y ago
    > It has nothing to do with company performance. If that's true then no one would ever invest in stocks.
    - mrtksn 7y ago
      Why wouldn't they?
      - xkjkls 7y ago

nordsieck 7y ago

> I guess the hard to understand part is: how does a $50B company that is growing revenue at 1% annually more than double its market cap in 3 months. This is just my opinion: The way people were valuing Tesla is a massively valuable stock with a high potential of blowing up. From the looks of things, Tesla has crossed into prolonged profitability. It's not a huge increase in revenue, but it is a big decrease in the chance of bankruptcy. Additionally, because Tesla can self fund and doesn't have to rely on the markets to raise money, they don't have to care very much about short sellers driving the price down. The bull case (robo-taxis, etc.) is still there, but the chance of Tesla going bankrupt is much lower than 1 year ago, so the stock has shot up.

xkjkls 7y ago
> From the looks of things, Tesla has crossed into prolonged profitability How? They lost $800 million in 2019. > Additionally, because Tesla can self fund and doesn't have to rely on the markets to raise money, they don't have to care very much about short sellers driving the price down. They still have increasing bills and huge liabilities. Acting like they have no risks if they don't raise money is crazy.
- nordsieck 7y ago
  > They lost $800 million in 2019. You're not wrong. Of course the counterpoint is that they were profitable both the 3rd and 4th quarter. > They still have increasing bills and huge liabilities. That is true. However, some of their debt will convert into equity as long as the stock price remains where it is. More broadly, I'm not trying to convince anyone that Tesla is some sort of value stock. It's not. It's absurdly volatile. There's also a good chance that they won't win the race to level 5 autonomy. All I'm saying is: enough people believe in the upside and think the downside has been diminished sufficiently to drive up the price to where it is. Maybe they're wrong. Maybe they're right. I certainly don't know.
  - xkjkls 7y ago
    > Of course the counterpoint is that they were profitable both the 3rd and 4th quarter. Less so than last year. Why do we believe this is sustainable over a full year? > More broadly, I'm not trying to convince anyone that Tesla is some sort of value stock. It's not. There seem to be people who do, and I want to insure that they don't lose their whole retirement savings chasing that.