7 ms·

Why Tesla stock is vastly overpriced

46 points by aminozuur 6y ago

tsjq 6y ago
Why only Yahoo? Why not compare with more additions to the index and give a better picture ?
- xiphias2 6y ago
  Google, Facebook and Amazon would be better comparisons, as Yahoo is a media company, not a fast growing tech company.
pokerhobo 6y ago
TSLA is more like Google+Amazon early on than Yahoo. Also, comparing TSLA to Toyota’s 6% margin when TSLA already has a 20% profit margin excluding ZEV credit sales? Pure FUD!
- jljljl 6y ago
  I’m not sure which profit margin you are talking about (gross? Operating?) But Toyota had a net profit margin of 6.95% in the last reported quarter, vs Tesla’s 3.77% net profit margin
  - pokerhobo 6y ago
    TSLA had a 10% operating margin, but Elon’s stock compensation brought that down.
TruthHurts44 6y ago
Short it big boy, short it.
CydeWeys 6y ago
Well that's a garbage take. This guy fundamentally doesn't seem to understand what an index is. The S&P 500 doesn't (well, shouldn't) make value judgments about the quality of the companies in it. It's just the 500 largest companies on US exchanges. That's what people who use it want. Really, the big problem here was that it wasn't already included on the S&P 500 years ago, so that all of the gains leading up to this point could have been shared with passive investors. It's satisfied the market cap requirement for awhile, but not the profitability requirement, which clearly didn't work well in this case.
- SilasX 6y ago
  Passive investors could have bought a broader market index than the S&P 500.
  - fakedang 6y ago
    The S&P 500 indices far outweigh other indices in the ETF space. Other ETFs tend to be for more risky domains. I agree with GP, Tesla should have been included way back, during the first jump to 250.
- areyousure 6y ago
  > The S&P 500 doesn't (well, shouldn't) make value judgments about the quality of the companies in it. It's just the 500 largest companies on US exchanges. That's what people who use it want. "Like other indices managed by S&P Dow Jones Indices, but unlike indices such as the Russell 1000 which are strictly rule-based, the components of the S&P 500 index are selected by a committee. When considering the eligibility of a new addition, the committee assesses the company's merit using eight primary criteria: market capitalization, liquidity, domicile, public float, Global Industry Classification Standard and representation of the industries in the economy of the United States, financial viability, length of time publicly traded, and stock exchange." https://en.wikipedia.org/wiki/S%26P_500_Index#Selection_criteria https://en.wikipedia.org/wiki/S%26P_500_Index#Selection_crit...
sb057 6y ago
Here's a two-second method to determine whether TSLA is overpriced: currently, their market cap is $659B. The combined caps of Toyota, Volkswagen, Mercedes-Benz, Porsche, BMW, Honda, General Motors, Ford, and Nissan is only $629B. So unless Tesla is worth $30 billion more than all of those companies combined, either those companies are undervalued, or Tesla is massively overvalued. Keep in mind, Tesla sold 367,500 cars in 2019, while those other companies sold over 34 million cars, or nearly 10,000% more. I realize that stock prices are based on future profits, and working capital is factored into it, but still, I just don't see the rationale in an ownership stake in Tesla being that much more valuable.
- kerng 6y ago
  Tesla is the innovator in this space for 10+ years. Only a few of the companies are all in on electric- and 10 years from now there will be no new old school cars. Some of them have even giant liabilities because of the mess to the environment they have created, which also damaged their brand. Some of them probably wouldn't even exist anymore was it not for government backing/looking away and in some cases even intervention. Many of the companies mentioned are quite far behind, and will face severe challenges in the coming years trying to adjust with little marging for error. But most importantly Tesla is also a battery company! Who knows, most of the other players might even have to buy batteries from Tesla. Gut feeling tells me that Tesla will still grow significantly, especially if they start selling batteries to other markets at scale, but also the car business itself will experience a tremendous growth.
  - xnx 6y ago
    Tesla car sales will grow, but their stock continuing to grow is not sustainable. Tesla certainly make desirable cars, but I don't see their product being hard to replicate should any other manufacturer make a serious effort. Other manufacturers will make a serious effort when it makes financial sense to.
  - ashtonkem 6y ago
    The only way for the stock price to be reasonable is if Tesla completely replaces all of the listed car companies combined. That is not realistic, no matter what you think of Tesla’s products.
banjomet 6y ago
The only way to justify the valuation of Tesla is to assume that they do something that doesn't depend on individual customer sales, because those aren't ramping up at the right rate. I think they are about to launch an autonomous taxi service. Here is a good example of Elon Musk talking about how robotaxis are going to push up the price[0]. So far nobody has talked about Tesla operating their own robotaxi service. [0]: https://www.cnbc.com/2019/07/08/elon-musk-self-driving-robotaxis-could-make-teslas-more-expensive.html https://www.cnbc.com/2019/07/08/elon-musk-self-driving-robot...
- wutbrodo 6y ago
  Their strategy hasn't been L5 at all, and they can't have invested in it so secretly that even those in the AV space (like me) wouldn't know about it, through talent exchange at the very least. AV is a pretty small world at the moment.
  - deleted 6y ago
    [deleted]
- gamblor956 6y ago
  Anyone who thinks they are going to use their private car as a robotaxi doesn't understand how much they're going to spend on maintenance and insurance. EVs may cost less to maintain their ICEs, but they still have moving parts that need to be replaced. And taxi insurance is quite expensive; it's one of the reasons that driving for Uber/Lyft is a losing proposition for most of their drivers even before they take vehicle wear-and-tear into account. For autonomous driving, for a company with the worst safety record for AI-driving in the industry, that insurance may cost more than their combined insurance costs for everything else combined (i.e., house, healthcare, other cars, etc.).
awillen 6y ago
I mean yeah, sure, by all reasonable measures, TSLA is grossly overvalued. I absolutely believe it's grossly overvalued. But... so what? A million people have had this take before this guy and for what? You gonna short the stock? I'm certainly not. So that leaves this as just some mental masturbation on Twitter.
pjdemers 6y ago
TSLA owns all its dealerships, distributors, and importers. It is more vertically integrated, designing and manufacturing more of their own parts. What is the sum of the business value of all the traditional automakers dealers, distributors, importers, parts companies, etc? I'll bet its in the trillions. Now, that said, I would not buy TSLA stock at its current price
chollida1 6y ago
This is far more concerning to me https://twitter.com/EricBalchunas/status/1340073777573539840?s=20 https://twitter.com/EricBalchunas/status/1340073777573539840... That's a lot of shares trading hands and its got alot of optionality coming due. Remember that stocks usually drop right after they are added to the index as the arbs tend to over shoot and then get out quick once their even has happened.
pdog 6y ago
"Don't tell me what you think, tell me what you have in your portfolio." Nassim Nicholas Taleb, Skin in the Game If you're convinced Tesla is vastly overpriced, you should prove it by shorting the stock or buying put options. Betting against Elon Musk has been a terrible move up until now, but if you really think the stock is overvalued, you're probably better off simply not owning it. If you're still concerned about its inclusion in the S&P 500, you can buy an S&P 500 index fund and short just enough Tesla stock to exclude it, or buy a different index fund that doesn't include it.
- cambalache 6y ago
  Taleb is an interesting character.50% of the time he is a petulant moron, 50% of the time he is a very perceptive observer and describer of human follies.
- aminozuur 6y ago
  To short succesfully, you have to convince a large portion investors that the price is too high. In current market circumstances that's tough to do, even if you were fundamentally right.
- christophilus 6y ago
  He is short, and he makes the case for why the stock can’t repeat it’s past performance. (The law of large numbers, plus some other factors.)
peter_d_sherman 6y ago
Er, yes, but... Everything in Economics/Business/Transactions can be thought of as having two separate dimensions: 1) Intrinsic Value 2) Perceptual Value (that is, all value that is not intrinsic) We might call #2 "Speculative Value" or value that can change relative to outside circumstances or conditions, and #1 value that cannot so easily change, perhaps "Fixed Value" or "Constant Value". Now, if your idea that Tesla stock is overpriced -- well, I would politely submit that "the market thinks otherwise". The market, at the time a measurement is taken, represents the exact parity value of the Intrinsic and Perceptual (at that point in time) values, or the constant (underlying) and varying (speculative) values combined. The market is always exactly correct when it makes a price determination, at the exact point in time when that price determination was made. In other words, if you know the fixed value of something (e.g., company earnings and projected profits over the next 20 years), you can figure out the varying, speculative value of something by simple subtraction of that from the market price. Thus you can determine that Tesla, at this point in time, has a huge amount of speculative value. Maybe your bet is that Tesla is going to go down in the future, that some of that speculative value will be lost, and maybe that's true, but to advance a personal opinion against a market in terms of determinating the speculative value of something at the present point in time is foolhardy, because by definition the market is always right, because it's always the best measure of that speculative value. Now, there are other factors. One important factor is how much money is being injected or taken out of the money supply. When a lot of money is put in -- then stock prices naturally rise. That's because in addition to the intrinsic and speculative values of a stock, one must also consider a stock's value relative to the money supply. A positive earning stock should (if all other economic factors were equal, but they aren't) rise naturally when more money enters the money supply (it isn't rising, it's keeping pace with inflation minimally, and maximally, it's outstripping the inflation curve.) Opinion: Tesla may rise for a few years to come... but watch out(!) when when there's less money in the money supply... ...Although, when that happens, Tesla's (and other similarly high-performing stock) might be the equivalent of the proverbial "canary in a coal mine" -- that is, a marker or warning of things to come...
- WheelsAtLarge 6y ago
  So true... "2) Perceptual Value (that is not intrinsic)" i.e. extrinsic value. This is the part that most stock investors don't factor into their equations but is something that has a huge impact on how the stock is valued and priced. In general accepted accounting practices there is something called "good will" that is similar. And it's how companies account for the value that is in addition to the economic value of an acquired company. It's completely legal and correct accounting. I think financial analysts need to have something similar so they can at least try to price a stock correctly. Eventually all stocks find their true value. Right now people are thinking of a future where Tesla will dominate the car industry plus a few other industries. True or not that's where we are. In reality Tesla is no different than many growth stocks of the past. The difference is that it has a CEO that can promote his dreams to a very large audience on a very short time. People are then compelled to buy the stock and drive it up. I'm sure we'll see similar rising stocks like Tesla in the future. All this to say that this article is not taking all variables into account when pricing the stock.
1experience 6y ago
I wonder what would be the valuation of 2011 apple today, back then it was trading at 10 p/e ratio, I bet it would be at least 100 today. we are in a completely different financial environment. https://www.macrotrends.net/stocks/charts/AAPL/apple/pe-ratio https://www.macrotrends.net/stocks/charts/AAPL/apple/pe-rati...
proverbialbunny 6y ago
This is a pretty great walk down memory lane, but it helps to keep in mind _why_ Yahoo failed so badly. After all, history does not repeat itself but it does rhyme. Yahoo failed, because a new competitor popped up, Google. Yahoo at one point in time was the market leading search engine, which was a pretty big deal. But then when Google popped up, not only did it take users from Yahoo, it took its market cap as well. If you had invested in Yahoo, gotten out when its customers started moving to Google, and then invested in Google when it went IPO you'd be quite rich today. Value investing wins again. What if we look at TSLA from a value investing lense as a way to compare and contrast: Tesla is currently leading the market when it comes to electric cars and self driving cars. However, Cruise (GM's baby) filed with the CA DMW two weeks ago to have commercial fully self driving cars on the road in the near future. It looks like in the coming years GM will take a large chunk out of Tesla's self driving technology. However, unlike Yahoo to Google, do you really want to buy a GM car? Will GM steal customers from Tesla? GM's rapport is ruined. Their cars go 80,000 to 120,000 thousand miles, fall apart, are a maintenance burden, are not amazing in any way, and let us not forget: They filed for bankruptcy only 10 years (or so) ago, and haven't exactly improved since then. So, yes they may be able to take some market share from Tesla, but until Toyota, BMW, or similar gets fully autonomous self driving tech, I imagine Tesla is still going to be the most desirable car on the road, which will keep its stock strong.
badinsie 6y ago
some blind MFers here. Teslas robotaxi technology alone should be valued at around 2 trillion today! can none of you really see the insane disruption that is about to come?

46 points by aminozuur 6y ago

tsjq 6y ago

Why only Yahoo? Why not compare with more additions to the index and give a better picture ?

xiphias2 6y ago
Google, Facebook and Amazon would be better comparisons, as Yahoo is a media company, not a fast growing tech company.

pokerhobo 6y ago

TSLA is more like Google+Amazon early on than Yahoo. Also, comparing TSLA to Toyota’s 6% margin when TSLA already has a 20% profit margin excluding ZEV credit sales? Pure FUD!

jljljl 6y ago
I’m not sure which profit margin you are talking about (gross? Operating?) But Toyota had a net profit margin of 6.95% in the last reported quarter, vs Tesla’s 3.77% net profit margin
- pokerhobo 6y ago
  TSLA had a 10% operating margin, but Elon’s stock compensation brought that down.

TruthHurts44 6y ago

Short it big boy, short it.

CydeWeys 6y ago

Well that's a garbage take. This guy fundamentally doesn't seem to understand what an index is. The S&P 500 doesn't (well, shouldn't) make value judgments about the quality of the companies in it. It's just the 500 largest companies on US exchanges. That's what people who use it want. Really, the big problem here was that it wasn't already included on the S&P 500 years ago, so that all of the gains leading up to this point could have been shared with passive investors. It's satisfied the market cap requirement for awhile, but not the profitability requirement, which clearly didn't work well in this case.

SilasX 6y ago
Passive investors could have bought a broader market index than the S&P 500.
- fakedang 6y ago
  The S&P 500 indices far outweigh other indices in the ETF space. Other ETFs tend to be for more risky domains. I agree with GP, Tesla should have been included way back, during the first jump to 250.
areyousure 6y ago
> The S&P 500 doesn't (well, shouldn't) make value judgments about the quality of the companies in it. It's just the 500 largest companies on US exchanges. That's what people who use it want. "Like other indices managed by S&P Dow Jones Indices, but unlike indices such as the Russell 1000 which are strictly rule-based, the components of the S&P 500 index are selected by a committee. When considering the eligibility of a new addition, the committee assesses the company's merit using eight primary criteria: market capitalization, liquidity, domicile, public float, Global Industry Classification Standard and representation of the industries in the economy of the United States, financial viability, length of time publicly traded, and stock exchange." https://en.wikipedia.org/wiki/S%26P_500_Index#Selection_criteria https://en.wikipedia.org/wiki/S%26P_500_Index#Selection_crit...

sb057 6y ago

Here's a two-second method to determine whether TSLA is overpriced: currently, their market cap is $659B. The combined caps of Toyota, Volkswagen, Mercedes-Benz, Porsche, BMW, Honda, General Motors, Ford, and Nissan is only $629B. So unless Tesla is worth $30 billion more than all of those companies combined, either those companies are undervalued, or Tesla is massively overvalued. Keep in mind, Tesla sold 367,500 cars in 2019, while those other companies sold over 34 million cars, or nearly 10,000% more. I realize that stock prices are based on future profits, and working capital is factored into it, but still, I just don't see the rationale in an ownership stake in Tesla being that much more valuable.

kerng 6y ago
Tesla is the innovator in this space for 10+ years. Only a few of the companies are all in on electric- and 10 years from now there will be no new old school cars. Some of them have even giant liabilities because of the mess to the environment they have created, which also damaged their brand. Some of them probably wouldn't even exist anymore was it not for government backing/looking away and in some cases even intervention. Many of the companies mentioned are quite far behind, and will face severe challenges in the coming years trying to adjust with little marging for error. But most importantly Tesla is also a battery company! Who knows, most of the other players might even have to buy batteries from Tesla. Gut feeling tells me that Tesla will still grow significantly, especially if they start selling batteries to other markets at scale, but also the car business itself will experience a tremendous growth.
- xnx 6y ago
  Tesla car sales will grow, but their stock continuing to grow is not sustainable. Tesla certainly make desirable cars, but I don't see their product being hard to replicate should any other manufacturer make a serious effort. Other manufacturers will make a serious effort when it makes financial sense to.
- ashtonkem 6y ago
  The only way for the stock price to be reasonable is if Tesla completely replaces all of the listed car companies combined. That is not realistic, no matter what you think of Tesla’s products.

banjomet 6y ago

The only way to justify the valuation of Tesla is to assume that they do something that doesn't depend on individual customer sales, because those aren't ramping up at the right rate. I think they are about to launch an autonomous taxi service. Here is a good example of Elon Musk talking about how robotaxis are going to push up the price[0]. So far nobody has talked about Tesla operating their own robotaxi service. [0]: https://www.cnbc.com/2019/07/08/elon-musk-self-driving-robotaxis-could-make-teslas-more-expensive.html https://www.cnbc.com/2019/07/08/elon-musk-self-driving-robot...

wutbrodo 6y ago
Their strategy hasn't been L5 at all, and they can't have invested in it so secretly that even those in the AV space (like me) wouldn't know about it, through talent exchange at the very least. AV is a pretty small world at the moment.
- deleted 6y ago
  [deleted]
gamblor956 6y ago
Anyone who thinks they are going to use their private car as a robotaxi doesn't understand how much they're going to spend on maintenance and insurance. EVs may cost less to maintain their ICEs, but they still have moving parts that need to be replaced. And taxi insurance is quite expensive; it's one of the reasons that driving for Uber/Lyft is a losing proposition for most of their drivers even before they take vehicle wear-and-tear into account. For autonomous driving, for a company with the worst safety record for AI-driving in the industry, that insurance may cost more than their combined insurance costs for everything else combined (i.e., house, healthcare, other cars, etc.).

awillen 6y ago

I mean yeah, sure, by all reasonable measures, TSLA is grossly overvalued. I absolutely believe it's grossly overvalued. But... so what? A million people have had this take before this guy and for what? You gonna short the stock? I'm certainly not. So that leaves this as just some mental masturbation on Twitter.

pjdemers 6y ago

TSLA owns all its dealerships, distributors, and importers. It is more vertically integrated, designing and manufacturing more of their own parts. What is the sum of the business value of all the traditional automakers dealers, distributors, importers, parts companies, etc? I'll bet its in the trillions. Now, that said, I would not buy TSLA stock at its current price

chollida1 6y ago

This is far more concerning to me https://twitter.com/EricBalchunas/status/1340073777573539840?s=20 https://twitter.com/EricBalchunas/status/1340073777573539840... That's a lot of shares trading hands and its got alot of optionality coming due. Remember that stocks usually drop right after they are added to the index as the arbs tend to over shoot and then get out quick once their even has happened.

pdog 6y ago

"Don't tell me what you think, tell me what you have in your portfolio." Nassim Nicholas Taleb, Skin in the Game If you're convinced Tesla is vastly overpriced, you should prove it by shorting the stock or buying put options. Betting against Elon Musk has been a terrible move up until now, but if you really think the stock is overvalued, you're probably better off simply not owning it. If you're still concerned about its inclusion in the S&P 500, you can buy an S&P 500 index fund and short just enough Tesla stock to exclude it, or buy a different index fund that doesn't include it.

cambalache 6y ago
Taleb is an interesting character.50% of the time he is a petulant moron, 50% of the time he is a very perceptive observer and describer of human follies.
aminozuur 6y ago
To short succesfully, you have to convince a large portion investors that the price is too high. In current market circumstances that's tough to do, even if you were fundamentally right.
christophilus 6y ago
He is short, and he makes the case for why the stock can’t repeat it’s past performance. (The law of large numbers, plus some other factors.)

peter_d_sherman 6y ago

Er, yes, but... Everything in Economics/Business/Transactions can be thought of as having two separate dimensions: 1) Intrinsic Value 2) Perceptual Value (that is, all value that is not intrinsic) We might call #2 "Speculative Value" or value that can change relative to outside circumstances or conditions, and #1 value that cannot so easily change, perhaps "Fixed Value" or "Constant Value". Now, if your idea that Tesla stock is overpriced -- well, I would politely submit that "the market thinks otherwise". The market, at the time a measurement is taken, represents the exact parity value of the Intrinsic and Perceptual (at that point in time) values, or the constant (underlying) and varying (speculative) values combined. The market is always exactly correct when it makes a price determination, at the exact point in time when that price determination was made. In other words, if you know the fixed value of something (e.g., company earnings and projected profits over the next 20 years), you can figure out the varying, speculative value of something by simple subtraction of that from the market price. Thus you can determine that Tesla, at this point in time, has a huge amount of speculative value. Maybe your bet is that Tesla is going to go down in the future, that some of that speculative value will be lost, and maybe that's true, but to advance a personal opinion against a market in terms of determinating the speculative value of something at the present point in time is foolhardy, because by definition the market is always right, because it's always the best measure of that speculative value. Now, there are other factors. One important factor is how much money is being injected or taken out of the money supply. When a lot of money is put in -- then stock prices naturally rise. That's because in addition to the intrinsic and speculative values of a stock, one must also consider a stock's value relative to the money supply. A positive earning stock should (if all other economic factors were equal, but they aren't) rise naturally when more money enters the money supply (it isn't rising, it's keeping pace with inflation minimally, and maximally, it's outstripping the inflation curve.) Opinion: Tesla may rise for a few years to come... but watch out(!) when when there's less money in the money supply... ...Although, when that happens, Tesla's (and other similarly high-performing stock) might be the equivalent of the proverbial "canary in a coal mine" -- that is, a marker or warning of things to come...

WheelsAtLarge 6y ago
So true... "2) Perceptual Value (that is not intrinsic)" i.e. extrinsic value. This is the part that most stock investors don't factor into their equations but is something that has a huge impact on how the stock is valued and priced. In general accepted accounting practices there is something called "good will" that is similar. And it's how companies account for the value that is in addition to the economic value of an acquired company. It's completely legal and correct accounting. I think financial analysts need to have something similar so they can at least try to price a stock correctly. Eventually all stocks find their true value. Right now people are thinking of a future where Tesla will dominate the car industry plus a few other industries. True or not that's where we are. In reality Tesla is no different than many growth stocks of the past. The difference is that it has a CEO that can promote his dreams to a very large audience on a very short time. People are then compelled to buy the stock and drive it up. I'm sure we'll see similar rising stocks like Tesla in the future. All this to say that this article is not taking all variables into account when pricing the stock.

1experience 6y ago

I wonder what would be the valuation of 2011 apple today, back then it was trading at 10 p/e ratio, I bet it would be at least 100 today. we are in a completely different financial environment. https://www.macrotrends.net/stocks/charts/AAPL/apple/pe-ratio https://www.macrotrends.net/stocks/charts/AAPL/apple/pe-rati...

proverbialbunny 6y ago

This is a pretty great walk down memory lane, but it helps to keep in mind _why_ Yahoo failed so badly. After all, history does not repeat itself but it does rhyme. Yahoo failed, because a new competitor popped up, Google. Yahoo at one point in time was the market leading search engine, which was a pretty big deal. But then when Google popped up, not only did it take users from Yahoo, it took its market cap as well. If you had invested in Yahoo, gotten out when its customers started moving to Google, and then invested in Google when it went IPO you'd be quite rich today. Value investing wins again. What if we look at TSLA from a value investing lense as a way to compare and contrast: Tesla is currently leading the market when it comes to electric cars and self driving cars. However, Cruise (GM's baby) filed with the CA DMW two weeks ago to have commercial fully self driving cars on the road in the near future. It looks like in the coming years GM will take a large chunk out of Tesla's self driving technology. However, unlike Yahoo to Google, do you really want to buy a GM car? Will GM steal customers from Tesla? GM's rapport is ruined. Their cars go 80,000 to 120,000 thousand miles, fall apart, are a maintenance burden, are not amazing in any way, and let us not forget: They filed for bankruptcy only 10 years (or so) ago, and haven't exactly improved since then. So, yes they may be able to take some market share from Tesla, but until Toyota, BMW, or similar gets fully autonomous self driving tech, I imagine Tesla is still going to be the most desirable car on the road, which will keep its stock strong.

badinsie 6y ago

some blind MFers here. Teslas robotaxi technology alone should be valued at around 2 trillion today! can none of you really see the insane disruption that is about to come?