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The stock price increased by 15x in 1.5 years on basically no major news. If you don't include profits from regulatory credits, they've lost over $700M so far t

The stock price increased by 15x in 1.5 years on basically no major news. If you don't include profits from regulatory credits, they've lost over $700M so far this year. Government money is not scalable or sustainable, so this an important indicator of how their finances are doing. The intuition is that Tesla cars are like iPhones. I think it's wrong. This is a low-margin business, where you increasingly compete with all of the goods and services people buy, like housing, education, healthcare. It's not a "buy a new phone for Christmas every 2 years" business. People are on the phone all the time, so paying $200 more for an improved experience for several hours per day is justified. But paying $5k or $10k more for an improved experience for 1 or 2 hours per day? If you're rich, maybe. If not, why not move closer to your work instead, so you don't have to use the car? Why not take a longer vacation, or eat out every day, or retire earlier, or pay for your kid's college education?

grecy 6y ago
> on basically no major news I think the evidence proves otherwise. It's the other automakers that have had no news. 1. They announced and are rapidly building a factory in China 2. They announced the Cybertruck, and are rapidly building a factory in Texas to build it. 3. They held "battery day" where they deep dived into how they're streamlining the production of cells to crack the $100/Kwh mark 4. Factory in China is now building over 20k vehicles/month.
- RivieraKid 6y ago
  1, 2 and 4 were expected and incorporated in the price, 3 was a nothingburger. A good valuation takes into account the risk that anything which is expected fails for some reason, so when the expected stuff happens, it should increase the valuation by removing the risk. But it's never a game changer that should increase the valuation by a factor of 15.
  - LanceJones 6y ago
    According to whom? Anyone who understands battery density, costs, and scaling production certainly wouldn't agree with your "assessment".
  - ericd 6y ago
    Weird, I thought #3 was by far the most exciting of the 4. It outlined the path to the tipping point where EVs with decent range are cheaper than low end ICE cars.
fomine3 6y ago
Agree with this. 15x in 1.5 years shows that the stock price is not only made by real value.
Rapzid 6y ago
Speaking to your last point, and I believe I agree with you, people will likely on average spend that same X% of their pay on a vehicle? I mean there are already vehicles covering every price and quality point. We know that people will happily spend all their income and essentially live paycheck to paycheck. Somebody driving a Honda Fit(a great value) either can't afford more car or doesn't want to pay for more car; there is already more car for more money available right this second.
- davidgould 6y ago
  Anecdotal data point: I sold my Honda Fit to buy a Model 3 Performance, both are outstanding value for the money.
kjksf 6y ago
What you failed to mention is that in the preceding 4 years the stock price was flat despite Tesla growing revenues 50% a year and improving every other business metric. What really happen was: for several years Tesla was executing very well but faced unprecedented amounts of FUD. That kept (many but not all) investors away. But you can only fool people for so long. Investors finally realized that none of the FUD of imminent bankruptcy etc. is happening and things flipped. That was the reason for the 10x run up of the stock price within 1 year. Not Tesla is fairly valued based on modest assumption about the future 5 years out and doing DCF (Discounted Cash Flow analysis).
- RivieraKid 6y ago
  What are these modest assumptions?
- sixQuarks 6y ago
  It's crazy to me that you get downvoted for this comment, especially on HN. Everything you said is true.
  - vardump 6y ago
    This seems to be a pattern. Positive facts and opinions about Tesla are pretty often downvoted.
- anonymouse008 6y ago
  Don’t they raise a MFT (metric falcon ton) of money, consistently? I think the narrative flip really came down to — “oh they may always be on the verge of bankruptcy, but they can always raise from the public because the public loves Elon” So really they will always have runway to get to those goals, timelines really don’t matter.
LanceJones 6y ago
You're overlooking an important consideration. Tesla is well aware of the regulatory credits it will likely receive and recognize before each quarter begins -- and therefore can make decisions about where to make capital expenditures as a results of the additional revenue. If they weren't receiving the ZEV credits, they have stated that their expenses would be different. The media overlook this simple point regularly.
- elevenoh 6y ago
  more capital expenditures, more ZEC credit?
lazyjones 6y ago
The major news is that it was the only car maker that managed to grow significantly despite the pandemic and that they're still the technology leader despite many announcements from the competition.
jillesvangurp 6y ago
Depends what you call news. We're pretty spoiled when it comes to Tesla news; there's been no shortage. In the last year they've announced and built most of the Berlin factory. It seems on track to start producing next year. That's on the home turf of Volkswagen, Daimler, and BMW. Pretty big news. The same year also saw the announcement of the Texas factory where they are also executing rapidly. And that of course came on the back of the Chinese factory. The news for Tesla in the last few months has been of them executing extremely well. They're growing production and turning profits in a market where all their competitors are shrinking production and losing money. There's also been some minor news about them ramping up production of their in house designed batteries a few new models and model variants. The cyber truck announcement was only a year ago; so that counts as well and half a million reservations for such a thing is nothing to sneeze at. Then there was a minor thing called Corona which should have put the brakes on profits; except it didn't in Tesla's case. Tesla's valuation is based on their historic ability to execute and their competitors apparent struggle to do so. Turning profits in the middle of two major lock downs is pretty hard evidence that they are doing something right. So, maybe it's not that irrational for investors to look at Tesla and see a strategy that while ballsy is apparently working and looking like it might be just the right strategy for the foreseeable future as well. Your picking nits over government subsidies. Everybody else has that same advantage. In any case, without government subsidies, most of the Detroit based car manufacturers would have gone bust around the 2008 crisis already. I'd say 700M is peanuts compared to that probably; and they are still losing money. General Motors' losses alone this year exceed that.
Muanh 6y ago
Funny how you ignore the 7 years the stock remained flat before this 2019 yet on car deliveries alone they grew 2400%.

grecy 6y ago

> on basically no major news I think the evidence proves otherwise. It's the other automakers that have had no news. 1. They announced and are rapidly building a factory in China 2. They announced the Cybertruck, and are rapidly building a factory in Texas to build it. 3. They held "battery day" where they deep dived into how they're streamlining the production of cells to crack the $100/Kwh mark 4. Factory in China is now building over 20k vehicles/month.

RivieraKid 6y ago
1, 2 and 4 were expected and incorporated in the price, 3 was a nothingburger. A good valuation takes into account the risk that anything which is expected fails for some reason, so when the expected stuff happens, it should increase the valuation by removing the risk. But it's never a game changer that should increase the valuation by a factor of 15.
- LanceJones 6y ago
  According to whom? Anyone who understands battery density, costs, and scaling production certainly wouldn't agree with your "assessment".
- ericd 6y ago
  Weird, I thought #3 was by far the most exciting of the 4. It outlined the path to the tipping point where EVs with decent range are cheaper than low end ICE cars.

fomine3 6y ago

Agree with this. 15x in 1.5 years shows that the stock price is not only made by real value.

Rapzid 6y ago

Speaking to your last point, and I believe I agree with you, people will likely on average spend that same X% of their pay on a vehicle? I mean there are already vehicles covering every price and quality point. We know that people will happily spend all their income and essentially live paycheck to paycheck. Somebody driving a Honda Fit(a great value) either can't afford more car or doesn't want to pay for more car; there is already more car for more money available right this second.

davidgould 6y ago
Anecdotal data point: I sold my Honda Fit to buy a Model 3 Performance, both are outstanding value for the money.

kjksf 6y ago

What you failed to mention is that in the preceding 4 years the stock price was flat despite Tesla growing revenues 50% a year and improving every other business metric. What really happen was: for several years Tesla was executing very well but faced unprecedented amounts of FUD. That kept (many but not all) investors away. But you can only fool people for so long. Investors finally realized that none of the FUD of imminent bankruptcy etc. is happening and things flipped. That was the reason for the 10x run up of the stock price within 1 year. Not Tesla is fairly valued based on modest assumption about the future 5 years out and doing DCF (Discounted Cash Flow analysis).

RivieraKid 6y ago
What are these modest assumptions?
sixQuarks 6y ago
It's crazy to me that you get downvoted for this comment, especially on HN. Everything you said is true.
- vardump 6y ago
  This seems to be a pattern. Positive facts and opinions about Tesla are pretty often downvoted.
anonymouse008 6y ago
Don’t they raise a MFT (metric falcon ton) of money, consistently? I think the narrative flip really came down to — “oh they may always be on the verge of bankruptcy, but they can always raise from the public because the public loves Elon” So really they will always have runway to get to those goals, timelines really don’t matter.

LanceJones 6y ago

You're overlooking an important consideration. Tesla is well aware of the regulatory credits it will likely receive and recognize before each quarter begins -- and therefore can make decisions about where to make capital expenditures as a results of the additional revenue. If they weren't receiving the ZEV credits, they have stated that their expenses would be different. The media overlook this simple point regularly.

elevenoh 6y ago
more capital expenditures, more ZEC credit?

lazyjones 6y ago

The major news is that it was the only car maker that managed to grow significantly despite the pandemic and that they're still the technology leader despite many announcements from the competition.

jillesvangurp 6y ago

Depends what you call news. We're pretty spoiled when it comes to Tesla news; there's been no shortage. In the last year they've announced and built most of the Berlin factory. It seems on track to start producing next year. That's on the home turf of Volkswagen, Daimler, and BMW. Pretty big news. The same year also saw the announcement of the Texas factory where they are also executing rapidly. And that of course came on the back of the Chinese factory. The news for Tesla in the last few months has been of them executing extremely well. They're growing production and turning profits in a market where all their competitors are shrinking production and losing money. There's also been some minor news about them ramping up production of their in house designed batteries a few new models and model variants. The cyber truck announcement was only a year ago; so that counts as well and half a million reservations for such a thing is nothing to sneeze at. Then there was a minor thing called Corona which should have put the brakes on profits; except it didn't in Tesla's case. Tesla's valuation is based on their historic ability to execute and their competitors apparent struggle to do so. Turning profits in the middle of two major lock downs is pretty hard evidence that they are doing something right. So, maybe it's not that irrational for investors to look at Tesla and see a strategy that while ballsy is apparently working and looking like it might be just the right strategy for the foreseeable future as well. Your picking nits over government subsidies. Everybody else has that same advantage. In any case, without government subsidies, most of the Detroit based car manufacturers would have gone bust around the 2008 crisis already. I'd say 700M is peanuts compared to that probably; and they are still losing money. General Motors' losses alone this year exceed that.

Muanh 6y ago

Funny how you ignore the 7 years the stock remained flat before this 2019 yet on car deliveries alone they grew 2400%.