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Well if you read the article they mention these things. > Far more typically, I was three years too early in the Japan bubble. We at GMO got entirely out of Ja
by JohnJamesRambo 6y ago
Well if you read the article they mention these things.
> Far more typically, I was three years too early in the Japan bubble. We at GMO got entirely out of Japan in 1987, when it was over 40% of the EAFE benchmark and selling at over 40x earnings, against a previous all-time high of 25x. It seemed prudent to exit at the time, but for three years we underperformed painfully as the Japanese market went to 65x earnings on its way to becoming over 60% of the benchmark! But we also stayed completely out for three years after the top and ultimately made good money on the round trip.
It’s really really hard to call tops and bottoms but that doesn’t mean I just blindly invest no matter how irrational the market has become. Some of these things are just plain math, something Hacker News readers should be good at.
> As a Model 3 owner, my personal favorite Tesla tidbit is that its market cap, now over $600 billion, amounts to over $1.25 million per car sold each year versus $9,000 per car for GM. What has 1929 got to equal that?
- viktorcode 6y ago>> As a Model 3 owner, my personal favorite Tesla tidbit is that its market cap, now over $600 billion, amounts to over $1.25 million per car sold each year versus $9,000 per car for GM. What has 1929 got to equal that? This example shows how shallow this analysis is. They totally ignoring shift to green energy and that Tesla is a participant in this market. They are also considering Tesla as just another carmaker in the market, not paying enough attention to the many core differences. GM in my view is as far anti-Tesla as you can get.
- jgalt212 6y agoyes, but the question remains, what's more dissimilar TSLA / GM or $1.25M / $9K?
- peteradio 6y agobuh buh tesla has musk aka ironman aka tony stark the most smartestest and handsome man in the whole wide world ... did i mention spacex ... im gonna get pornos on my phone from space now ... did you even consider that?
- pinky1417 6y agoIf I have to answer, I’d say $1.25MM vs $9k is more dissimilar than Tesla vs GM. But unless you believe that both Tesla and GM won’t grow sales, comparing market cap to cars sold in the last year(s) has only limited usefulness. If we assume Tesla will grow units sold while GM will remain about static AND we assume GM is fairly valued (while assuming unit margins are the same for both companies), then it tells us Tesla needs to sell about 140 times as many cars per year in the future to justify its current stock price. Now, if you assume Tesla’s cars will have a margin 4x as large as GM’s and that GM’s business is undervalued by half, then if my math is correct, Tesla needs to sell only 17 times as many cars per year ($1.25MM/4=$312k, $9k*2=$18k, $312k/$18k=17). That 17x increase doesn’t seem totally unreasonable. Of course, this also assumes that Tesla will make its money off of cars sold and not some other wild Muskian idea: if he develops world-beating self-driving software selling at 90% gross margins or wisely acquires other companies like Henry Singleton did at Teledyne, we could all be saying a $5 trillion market cap is cheap for Tesla in a few years! That said, as an investor, I wouldn’t buy today’s Tesla at even half its current stock price nor would I bet against Elon Musk (especially by shorting!). A lot of things have to go right for Tesla to justify its stock price; I just don’t have any way of predicting what Musk will do next!
- paulmendoza 6y agoTesla can capture more profit per car than GM has a chance to because Tesla doesn’t have third parties doing... - seats - selling - soon batteries - ai chip - soon insurance - charge stations is like if GM could own the gas stations This doesn’t even count the growth of the other product lines like utility grid storage and solar roof and Uber like services.
- pinky1417 6y agoI agree with you that the analysis is shallow. Moreover, even if we assumed Tesla is overvalued (including a future shift to green energy and whatever brilliant ideas Musk comes up with in the future), that wouldn’t mean the whole market is frothy - TSLA is just one company. At any one moment, there will overvalued, undervalued, and fairly valued stocks. All that changes is the ratio between them.
- CapmCrackaWaka 6y agoI haven’t ever seen any rationalization _in numbers_ for why TSLA has the market cap it does. All justifications use abstract phrasing like “they’re in the green market” and “Tesla has core differences”. That doesn’t explain anything, in fact, it makes me more pessimistic than before. What are Tesla’s actual advantages that make it worth more than all of the other car manufacturers combined?
- ProjectArcturis 6y agoI don't own any TSLA, but the bull case would be that they have a 1000-mile head start on their competition, and a unique culture that allows them to be far nimbler than the GMs of the world. In 20 years, when we drive only electric cars, TSLA will be the near-monopolist of that market, similar to Google, Amazon, or Facebook. I don't think I really believe that case, but that's the way the valuation is justified. It's not something that can be captured easily in a discounted cash flow model, because after a couple years you're basically just inventing numbers there. But if you knew for sure that TSLA would succeed in dominating the electric car market, you'd probably buy it at much higher prices than we see today.
- remote_phone 6y agoTesla has already lost market share in Europe and North America. There are many smaller and cheaper alternatives and that’s what people are buying.
- Closi 6y agoI looked at this earlier in the year, and my personal view at the time was that actually other electric cars were a bit cheaper but you get a lot less car. The price difference just isn’t that big in relative terms (the starting prices are all relatively high), but the difference in what you get is huge. And I think that’s part of the allure of Tesla - can a 2010-era-supercar be built for $25k? What about less? I ended up getting a 2nd hand diesel BMW because I got the feeling that the market would move a lot in the next 5 years.
- 6y ago
- itsoktocry 6y ago>This example shows how shallow this analysis is. Yeah, we should follow the Morgan Stanley sum-of-parts valuation model for their client (Tesla), who values Tesla Insurance, which has never written a single policy, as one of the most valuable insurance companies in the US. That's the kind of "deep" analysis I'm looking for!
- jariel 6y ago"They totally ignoring shift to green energy and that Tesla is a participant in this market." No, they don't. Actually, this notion that Tesla is somehow going to beat every other car company is shallow.
- JohnJamesRambo 6y agoOk what multiplier should we give them for any of that? They are currently at 138x. Over two orders of magnitude and in business like making a car you don’t get orders of magnitude easily.
- bob33212 6y agoIn 2000 AMZN was worth $500 per book sold each year and Enron was worth $.01 megawatt hour traded each year.
- missedthecue 6y agoAnd both collapsed drastically shortly thereafter