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Tesla jumps 14% on S&P 500 inclusion speculation Now the 10th by market value
- andrewmcwatters 6y agoClearly worth more than book value of approximately $59.76 at the time of writing. But over 28 times so? Sure, OK.
- DudeInBasement 6y agoBut muh: AI, Battery tech, Charging stations. I imagine at some point it will drop back to reality, but not this year
- enraged_camel 6y agoMuch of this is driven by retail investors, of whom there are many more now since sports betting has not been available for months.
- jgalt212 6y agoYou raise a very interesting wrinkle here. When/if sports resume and the gamblers can gamble again, does the $TSLA money move back into sports?
- RivieraKid 6y agoTesla's market cap per car sold is 112x higher than Volkswagen (sales data for last year). They never had a profitable year.
- chrisseaton 6y agoTesla completely turned the industry on its head with their electric cars - something dinosaur incumbents like Volkswagen were either unwilling or unable to do. Maybe people see a future in Tesla and not as much in Volkswagen, and the price reflects the future not the past?
- fzeroracer 6y agoThis seems like a similar argument to what I saw for Bitcoin before the crash came. Bitcoin prices were high because the bitcoin price reflected the future of currency and that bitcoin turned the finance industry upside down.
- jmastrangelo 6y agoNot sure why you got downvoted. I think Tesla is a great company, but these valuations suggest they're going dominate transportation in a way no car manufacturer ever has. Even if that is possible, which I'm not sure it is, the future is uncertain and the stock should have significant discount to reflect that.
- Barrin92 6y ago>Maybe people see a future in Tesla and not as much in Volkswagen, and the price reflects the future not the past? Tesla's valuation is now three times higher than in April, what exactly is supposed to have happened in the last few months that changed investors minds about the long term future? Had they not turned the car industry on its head in April yet?
- nickik 6y agoTesla lost far less during COVID and has shown to be resistant to even a crazy recession. They showed demand in the worst economic climate in 10+ years. They continue to show very good margin that nobody else can match with EVs, not even close.
- RivieraKid 6y agoThey were break even in Q1, thanks to $400m of tax credits thanks to tax credits. They had to drop prices in Q2. Deliveries would be down YoY if it wasn't for China.
- nickik 6y ago
- adventured 6y ago> They never had a profitable year. I think you're trying too hard. Is Tesla overvalued? Very overvalued? Reasonable debate to have given where the market cap is at now. However Tesla very obviously isn't being valued today based on whether they turned a profit in the past. Companies aren't valued by their profit from five years ago. That they have never had a profitable year, doesn't dictate whether they will in the future. Tesla has grown by nearly 300% in 3.x years. The market is primarily concerned about growth and cash burn rate, limiting excess red ink, not that they must immediately generate immense profit. Tesla has also shown a drastic improvement in their operating picture. From negative $1.6 billion in operating income in 2017, to negative $252m in 2018, to positive $80m in 2019, to positive $841 million in the last four quarters. Investors tend to pay attention to direction in particular, betting on where the company is going.
- deleted 6y ago[deleted]
- slg 6y agoI think Tesla is extremely overvalued. I was long on them for years and cashed out at around $800 because I couldn't understand the valuation anymore. However, it is a mistake to compare Tesla best case scenario against current car companies. They are also a energy company, a battery company, a logistics company, and a transportation company. For example, Uber isn't that far behind Volkswagen in terms of total valuation. If Tesla ever nails Autopilot, Tesla can immediately become Uber. Volkswagen doesn't have nearly as clear of a path to those extra revenue streams.
- bmitc 6y agoHow are they an energy or logistics company? What products or services do they sell that fit those categories?
- orcasauce 6y agohttps://www.tesla.com/powerwall https://www.tesla.com/powerwall https://www.tesla.com/solarroof https://www.tesla.com/solarroof
- slg 6y agoYou forgot https://www.tesla.com/semi https://www.tesla.com/semi for logistics. Lots of these products and services are nowhere near maturity, but the stock market is the sum of all future revenue streams weighted for probability. There is a potential future in which many of us get our energy from Tesla solar panels, that energy is stored in Tesla battery, we use that to power our autonomous Tesla cars that we either own or call to us with a ridesharing app, all while Tesla owned and operated trucks cross the nation autonomously. I don't think that is a particularly likely outcome, but there is a way for Tesla to get there while there is a near zero chance Volkswagen has a similar future.
- bmitc 6y agoThat's still a vehicle isn't it? Are semi-truck makers considered logistics companies?
- deleted 6y ago[deleted]
- justicezyx 6y agoI am happy for Tesla, and the original master plan to fund the Mars colonization. I would politely remind Mr. Elon Must where he started. He was on a grand mission that I believe was right and important. That was the reason I became a Tesla stock owner.
- xiphias2 6y agoTesla already succeeded by moving electrification of cars earlier than it would have been normally done by other car companies. The biggest change in the master plan is moving to self driving cars instead of cheap cars. We'll see how much time the achievement takes, but my guess is that it will be faster than replacing all cars in the world with electric ones.
- boromi 6y agoShort squeeze coming up?
- DudeInBasement 6y agoThey already got btfo a few months ago.
- BobbyJo 6y agoThey get btfo every few months tho
- bobcostas55 6y agoIt's a complete mystery to me why they don't raise some capital at this valuation. They could wipe off all the debt and have a decade's worth of capex in cash for a very small dilution.
- jfengel 6y agoPerhaps because they see it going even higher. In that sense they're like any other stockholder: they want to sell only when they think it has peaked. They're just fine having debt as long as they can get the debt cheaply: raising money with debt is easier and more flexible than issuing stock. They see themselves as far more than a car company, and their opinion is that they are going to inherit a lot of the energy sector. I suspect that they believe their stock is still a bargain.
- bobcostas55 6y agoI mean Musk said the stock was overvalued at $700, fretting over whether to raise money at $1400 or $1700 seems a bit silly.
- modeless 6y agoThey already did an offering earlier this year for $2B when it first started going crazy. You're right that they should do another. What I don't understand is how all the S&P 500 index funds don't get soaked every time a stock enters or leaves the index. Everyone in the world can front-run those giant trades, just like we're seeing now. Do the index funds just absorb the losses every time or do they have enough flexibility to avoid it somehow?
- dcolkitt 6y ago> Everyone in the world can front-run those giant trades This is a perennial quant strategy. Buy the names likely to be included into the index, short those that are likely to be dropped. And the answer is that arbitrage has mostly wiped out the premium. The average gain (loss) on being added (removed) to the index has steadily decreased since the 1990s[1]. [1] https://repository.upenn.edu/cgi/viewcontent.cgi?article=1020&context=joseph_wharton_scholars https://repository.upenn.edu/cgi/viewcontent.cgi?article=102...
- SilasX 6y agoTesla wasn't already in the S&P 500? Even at the more sane $100 share price, that would put it at ~$20 billion market cap, well above about two fifths of the existing S&P 500 companies. Source: Sortable list last updated July 7: https://fknol.com/list/stock-list-sp-500-index.php https://fknol.com/list/stock-list-sp-500-index.php
- boramalper 6y agoCompanies must be profitable in the past four quarters to be qualified for inclusion; I might be wrong though.
- cj 6y agoCompanies need a straight year of profitability to be included in the S&P 500. Tesla has only had 3 quarters in a row profitable. If their upcoming quarter turns a profit, that will make 4 consecutive quarters.
- snarf21 6y agoIt is more than just market cap that lets you into the S&P. There are also other rules. Tesla is projected to pass the GAAP positive earnings test soon. A committee selects each of the index's 500 corporations based on their liquidity, size, and industry. It rebalances the index quarterly, in March, June, September, and December. To qualify for the index, a company must be in the United States, have an unadjusted market cap of at least $8.2 billion. At least 50% of the corporation's stock must be available to the public. Its stock price must be at least $1 per share. It must file a 10-K annual report. At least 50% of its fixed assets and revenues must be in the United States. Finally, it must have at least four consecutive quarters of positive earnings.
- spocklivelong 6y agoValuations like these are unsustainable, and so far fetched from reality. It is only a matter of time before TSLA gets a correction, which will drop the stock ~ 30 - 40% from its ATH.
- mrnobody_67 6y ago... and yet they still haven't answered questions from David Einhorn about their accounts receivable: https://www.bloomberg.com/news/articles/2019-11-22/einhorn-again-questions-tesla-accounts-receivable-k3aii1g2 https://www.bloomberg.com/news/articles/2019-11-22/einhorn-a...
- chvid 6y agoVolkswagen once got to be the world most valuable public traded company ...
- anw 6y agoI love the idea of Tesla, and what it's helped promote. But I do worry about its cult of personality, and what effect that could have on the stock should something happen to Elon. I got in around late 2012 because Elon spoke about really good ideas, and I really wanted to promote what he was talking about. It's been quite a ride, with the acquisitions of Solar City and Maxwell Technologies. Those additions made me have hope we'd see a real mover that could help get a lot of the world onto solar energy. However, I look at the stock prices right now, and I can't help but see they've been greatly overvalued since ~January 2020 with the major driving force (in my opinion) only being the cult of Elon. I admire what he's done, and his ambition, but I also worry if he gets removed or hit by a CyberTruck, if the company will still continue as it is now, or if it would spell disaster.
- pletsch 6y agoCompletely agree, Tesla's stock has a bus factor of 1. I do believe it's made a big enough push already to spark the change to clean energy, and that's what really matters here.
- bmitc 6y ago> I do believe it's made a big enough push already to spark the change to clean energy Are there studies that show this? I don't see or know how any push in cars, electric or not, is necessarily moving us toward cleaner transportation much less clean energy.
- 9HZZRfNlpR 6y agoIt's about advancing battery tech not (just) cars. You have to have a demand first.
- pletsch 6y agoHere's a couple links, one a paper from McGill tying green energy and political power, and an article from National Geographic saying "Two-thirds of young adults (aged 18 to 34) say they’re inclined to vote for a political candidate who supports cutting greenhouse gas emissions and increasing financial incentives for renewable energy". https://www.sciencedirect.com/science/article/pii/S2214629617303468 https://www.sciencedirect.com/science/article/pii/S221462961... https://www.nationalgeographic.com/environment/great-energy-challenge/2014/poll-finds-generation-gap-on-energy-issues-as-millennials-voice-climate-concerns/ https://www.nationalgeographic.com/environment/great-energy-...
- partiallypro 6y agoI love Tesla, SpaceX and Elon (as a visionary) but don't understand the valuation. I remember when we (most of us) all laughed at this $420/share buyout valuation, because it was so far from reality...and now it's trading nearly 4x that, in less than a year...on really no real news outside of hitting production numbers. The fact that Tesla is now bigger than Toyota is absolutely bonkers to me. Toyota isn't that far behind the curve.
- tdhoot 6y agoThis sucks for everyone in S&P 500 funds who didn't jump on the Tesla bandwagon because they thought it was overvalued. Now you got none of the upside but you get to hold the bag.
- pmiller2 6y agoYet another good reason to invest in total market funds rather than S&P 500 funds.
- rjkennedy98 6y agoIs this the new IPO? Pump a stock till index investors are forced to own it?
- tpae 6y agoAs a former engineer at Tesla, the valuation does not make sense at all. Their internal infrastructure is a complete mess, and honestly, it's full of security issues, I wouldn't be surprised if things start falling apart.
- rosywoozlechan 6y agoA mistake some engineers make, I've made it myself, is thinking that a company's success has anything to do with how good the code is from a computer science ivory tower perspective. A fast growing startup usually has a huge mess from the fast growth no? Haven't seen it otherwise, but that's just my anecdotal sample size.
- deleted 6y ago[deleted]
- anonu 6y agoSecond this. A company is more than just software and code... It's also marketing, hype, goodwill, customer service, design, UX etc...
- nickik 6y agoUnless you can provide evidence that other companies coding and infrastructure practices are many time better then Tesla the impact on valuation is basically 0.
- deleted 6y ago[deleted]
- tpae 6y agoI'm afraid of speaking out, but let's just say I've worked with many fast growing startups (several to IPO), and none of them were as bad as Tesla.
- cvhashim 6y agoMaybe talk to an investigative journalist anonymously? And report what you’ve seen..
- llamataboot 6y agoSo individual heavyweights get to front-run the ETFs and then sell to them at an inflated value? Sounds about right...
- mchusma 6y agoTesla really did accelerate renewable energy and battery tech by maybe a decade. I would love to see them raise $20B and just massively move us another decade forward towards a sustainable energy future. But relative to Uber, etc Elon has always been less aggressive on equity raises, as he believes that constraints help.