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It's doesn't matter. Tesla's stock price is around 450 times its cash flow, which is an order of magnitude beyond insane for a public company. Apple is around 3

It's doesn't matter. Tesla's stock price is around 450 times its cash flow, which is an order of magnitude beyond insane for a public company. Apple is around 30. The average S&P500 company is around 15. For Tesla's stock to be worth the same relative to the company's business as Apple the stock should be 15X less than it is now. To justify this price they would have to sell 15X more vehicles. Apple's gross margins are like 30%, cars are probably just a few % due to the complexity of making something as big as a car. Unless Tesla becomes the only seller of cars in the world, there is no way it will ever be worth the current price.

davedx 6y ago
Can you provide a citation for that 450x cash flow statement please?
- JMTQp8lwXL 6y ago
  Tesla's PE ratio for 2020 is 627; it is forecast to quickly decline to a more reasonable 144 in 2022. https://www.nasdaq.com/market-activity/stocks/tsla/price-earnings-peg-ratios https://www.nasdaq.com/market-activity/stocks/tsla/price-ear...
  - Retric 6y ago
    Stock prices are always based predicted returns over time. Their revenue growth for 2020 was 40%, 2019 14.52%, 2018 82.51%, and 2017 67.98%. So, you really need to predict when that stops before you can get a reasonable estimate for sock value. A more reasonable 144x in 2022 after 2 years of ~40% growth is the equivalent of ~282x today. That’s not exactly the huge drop people are expecting. In other words I do expect a drop, but I don’t expect short selling is a great risk adjusted investment.
    - manquer 6y ago
      That is also assuming the stock won't grow crazy in the next 2 years as well.
  - ketamine__ 6y ago
    Yahoo Finance says PE ratio is 1200.
- vardump 6y ago
  Q3 free cash flow was 1.4B. 640/1.4 = ~450. So stock price is currently about 450x previous quarter free cash flow. So I guess that's what the grandparent meant. Link: https://ir.tesla.com/ https://ir.tesla.com/
  - davedx 6y ago
    Weird to calculate a multiple based on a quarterly financial metric without stating it as such.
deleted 6y ago
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lazyjones 6y ago
That's a strange metric you chose there. What's Airbnb's cash flow? Their market cap is $160b.
- coldcode 6y ago
  If you go to MSN Finance page for a stock, look at the Financials tab, Cash flow tab you see the value. Price/Cash Flow is a metric that can't be manipulated like P/E can since its based on revenue not profits.
pmart123 6y ago
Not quite. Growth and incremental returns on invested capital could greatly influence where a stock should trade. The market could be assuming Tesla doesn't have to expand factory capacity much after Germany or the margins on vehicles will go up as more customers purchase the self-driving option. Sometimes it's usual to assume a question to be true such as "what if every Tesla buyer bought the 'self-driving' package? next year and Tesla sold 30% more cars?" If Tesla is still trading at 100x cash flow in this unrealistic scenario?

davedx 6y ago

Can you provide a citation for that 450x cash flow statement please?

JMTQp8lwXL 6y ago
Tesla's PE ratio for 2020 is 627; it is forecast to quickly decline to a more reasonable 144 in 2022. https://www.nasdaq.com/market-activity/stocks/tsla/price-earnings-peg-ratios https://www.nasdaq.com/market-activity/stocks/tsla/price-ear...
- Retric 6y ago
  Stock prices are always based predicted returns over time. Their revenue growth for 2020 was 40%, 2019 14.52%, 2018 82.51%, and 2017 67.98%. So, you really need to predict when that stops before you can get a reasonable estimate for sock value. A more reasonable 144x in 2022 after 2 years of ~40% growth is the equivalent of ~282x today. That’s not exactly the huge drop people are expecting. In other words I do expect a drop, but I don’t expect short selling is a great risk adjusted investment.
  - manquer 6y ago
    That is also assuming the stock won't grow crazy in the next 2 years as well.
- ketamine__ 6y ago
  Yahoo Finance says PE ratio is 1200.
vardump 6y ago
Q3 free cash flow was 1.4B. 640/1.4 = ~450. So stock price is currently about 450x previous quarter free cash flow. So I guess that's what the grandparent meant. Link: https://ir.tesla.com/ https://ir.tesla.com/
- davedx 6y ago
  Weird to calculate a multiple based on a quarterly financial metric without stating it as such.

deleted 6y ago

[deleted]

lazyjones 6y ago

That's a strange metric you chose there. What's Airbnb's cash flow? Their market cap is $160b.

coldcode 6y ago
If you go to MSN Finance page for a stock, look at the Financials tab, Cash flow tab you see the value. Price/Cash Flow is a metric that can't be manipulated like P/E can since its based on revenue not profits.

pmart123 6y ago

Not quite. Growth and incremental returns on invested capital could greatly influence where a stock should trade. The market could be assuming Tesla doesn't have to expand factory capacity much after Germany or the margins on vehicles will go up as more customers purchase the self-driving option. Sometimes it's usual to assume a question to be true such as "what if every Tesla buyer bought the 'self-driving' package? next year and Tesla sold 30% more cars?" If Tesla is still trading at 100x cash flow in this unrealistic scenario?