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Revenues of $10.7bn are a notable improvement. However, even if one would add a zero to that number, it would be less than VW's and Toyota's combined revenue, y

Revenues of $10.7bn are a notable improvement. However, even if one would add a zero to that number, it would be less than VW's and Toyota's combined revenue, yet Tesla is valued almost three times as much as those companies combined. There's one paragraph on FSD, basically an empty statement of "we're iterating". That sounds realistic. Back in April 2019 (Autonomy Day), Musk predicted that they will have a million robotaxis on the road in 2020. Solar deployments up 18% to 205MW, which is totally negligible. Total new solar in 2020 globally was projected to be around 140GW.

deleted 6y ago
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bryanlarsen 6y ago
Toyota's Enterprise Value is $350B, VW's is $230B and Tesla is $840B. That's not triple both combined.
- nemetroid 6y ago
  Presumably, then, the GP comment is not referring to enterprise value.
  - ckastner 6y ago
    I was indeed referring to market cap, but even acknowledging the sibling comments and going by enterprise value, the situation still appears incredulous for a company that is, as of yet, an emerging car manufacturer, a possible FSD contender, and an energy niche player.
  - georgeecollins 6y ago
    Well it should. Market cap is meaningless for companies with a lot of debt (industrial companies typically). And if you don't understand that you will make a lot of meaningless comparisons. Also, if you believe in efficient markets (and lets admit this is a hard week to do that) then you know that companies are valued based on future profits, not future revenues. Google and Ford had very similar revenue in say, 2019. But there enterprise values were completely different because of gross margins and profits.
    - nemetroid 6y ago
      I don't disagree.
    - reitzensteinm 6y ago
      You have to be careful when making a blind comparison, though, because a lot of debt VW and Toyota have is related to their financial service divisions. They're going to receive lease payments to service it. If you were evaluating a bank that had $1tn in deposits and issued $800bn of home loans and had $200bn in cash, the $800bn figure of debt minus cash just doesn't mean that much, and people don't typically calculate EV for banks. So say Tesla buys that bank - does their EV double to ~$2tn? IMO, the only meaningful way to compare EVs is to unwind the financial divisions valuing them like financial companies, then compare what's left. It's not all rosy, though, because even after unwinding financial services from these companies they've still got a lot of debt. And EVs do pose a risk that the value of the leased ICEs cars will plummet. If it happens very rapidly, that could well be an existential threat.
      - bryanlarsen 6y ago
        That's a great example. They have $1T in debts (the deposits), and $1T in assets (the cash + home loans owed them). To simplify our example, let's assume that some of those home loans are in trouble so the "continuing business" part of the company is worth $0, that the expected profit from those loans exactly balances the expected interest expenses on their deposits. So their market cap is $0. Market cap is $0, EV is $800B. So is the company worth $0 or $800B? *Both answers are right*. You have to specify worth to who before getting an answer. To the economy it has almost a trillion dollar impact, to an investor it's worthless.
        reitzensteinm 6y ago
        But in the case of a car company owning a bank, neither market cap or EV are good answers for comparison. The first lets debt cloud the intrinsic value of the manufacturing operation, and the second dumps the value of six months worth of production onto the calculation for no real reason. VW has 133 billion euros of receivables for its leases. If we talk about Tesla's worth in comparison to VW by comparing EV, we're essentially discarding that line item - worth double the market cap of GM. And as I said above, if Tesla buys this $0 market cap $800bn EV bank, why should it change the relative value of the car companies to each other? Using your method, it does. To put it another way, when Tesla took on $500m in debt to offer Model 3 leases - did the business really change in any material way? If they financed $10bn 3/Y leases this year - would the value of the company bump up by 1% compared to if they used a leasing partner?
  - baking 6y ago
    "Tesla is valued almost three times as much as those companies combined." He didn't say market cap, he said "valued" and you need to consider debt financing in making a fair comparison of market value.
- deleted 6y ago
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tejohnso 6y ago
TSLA left the land of sound fundamental investments long ago. It is comfortably enjoying life in the land of exuberant speculation.
- ericmay 6y ago
  Yea... but what exactly are sound fundamentals? (Not directed at you, just topical). Is Apple at 40x P/E (which is a very simple and over-used metric) still fundamentally sound? Amazon? I think the rule of thumb was always 12x. Ok so what company is that? Intel? I think what we're seeing is the result of excess capital. Items like accredited investor definitions lock people out of the VC space so if you can't buy a house because they are too expensive or sold before they hit market... what else are you going to do with your money? Some return looks a lot better than no return... Granted, Tesla does have an extremely high valuation but, well, who cares? I think that's the general sentiment. It's a speculative investment. * Disclaimer I own a small amount of Apple and Tesla shares and have a positive outlook on the future of both companies. Use your own judgement when investing or considering things you read on the Internet
  - threeseed 6y ago
    Apple and Amazon are ridiculously profitable, highly diversified, corporate, fiscally stable and aren't a prism of the CEO's whims and machinations. I wouldn't consider Tesla to have any of those characteristics.
    - Kranar 6y ago
      Funny because honestly 10 years ago people said very similar things about Apple under Jobs that people say today about Tesla under Musk. One big difference is that Twitter exists, so now you get to hear directly from certain CEOs outside of highly polished and rehearsed presentations, whereas 10 years ago the public never got that chance. And don't get me started about what people said about Amazon's profitability and fiscal stability 10-15 years ago. Amazon's PE ratio was around 4000 whereas Tesla's is 1500. My speculation, and that's all it is, speculation, is that for the most part people invest in companies that they want to see succeed and by investing in it, they become a kind of participant in the future growth and success of the company. It's mostly a place for people to park their money in a venture that they want to see flourish. There is no magic formula you plug into an Excel spreadsheet and get out a perfect stock price, there is no metric that can reliably be used to press a button to invest. You see a company working in an area you are interested in and that has a chance to succeed in, you have a positive feeling about the company, its products, its people, then you invest. Good luck finding a stable, fiscally responsible and reliable company that ticks off all the fundamental indicators, a CEO who is a rock who never offends anyone or anything, and has a stock that does more than barely beat the rate of inflation and maybe pays out a measly 1-2% dividend. The reality is that if the degree to which you value a stock is based on its PE ratio and other naïve but nice sounding metrics, then to be blunt you're no more sophisticated an investor than the people blowing their money on GME.
tahoeskibum 6y ago
You would've made the same comparison between Apple and Nokia back in 2008. If you've ever driven a Tesla, you'll realize that it is a paradigm shift just like the iPhone was back in 2008 relative to Nokia.
- ChuckMcM 6y ago
  Or Blackberry/RIM but the same. Basically the market has priced in that while existing car manufacturers have more sales, they are essentially dying and they need to come up with a car that is competitive to the Tesla electric offerings to compete. And so far they haven't shown the ability to do that.
  - orange_tee 6y ago
    And who are they going to sell them too? The people who buy Teslas are Tesla fanbois not generic EV customers. And a car company like Honda cannot generate the kind of hype theater that Tesla can, especially not in the US. Other car manufacturers cannot replicate Tesla's success because their customers are different and generic EVs are not a good value preposition for most of these customers.
    - ChuckMcM 6y ago
      I would be interested in hearing how you reason to the statement that the "Other car manufacturers customers are different." As I see it, there are just "car customers." And they are a diverse population, from those who need maximum reliability and economy to those for whom their vehicle is an extension of their need for attention. But as diverse as they are, they form a single set, known in marketing parlance as the "total addressable market." When you write, "The people who buy Teslas are Tesla fanbois ..." it reminds me when people would say "The people who buy a computer for their home are nerds ..." I expect that both of these statements were solidly true at one point, and then became less and less true over time as the diversity of people who felt the product in question was the right choice increased. So what I see in Tesla's results, and their history, is that they created a niche product that many people didn't understand the need for. But over time, as more and more have been shipped, more people can see the benefit. For example, here is a real anecdote. As an anecdote it means nothing of course, but for me it felt significant. My neighbor just bought a model 3. They had been in the camp that these things were a fad, a toy, a ridiculous idea, and "what about the range, and who wants to wait an hour to fill up?" kind of things. But another neighbor has one as well and has had it for a couple of years now. And we all talk and that neighbor was chuckling that they didn't even know the price of gas anymore since they hadn't been to a gas station in over a year! In those discussions, the range of the model 3 was such that they charge at home, and even on very "busy" days never have to plan to stop at a charging station. That is because in "real life" they never drive more than 200 miles in a day, and they never cannot fully recharge over night. Once the lightbulb went on about the reality of this, my other neighbor got their own Model 3. It was, for me, seeing one of the general pool of customers switch over from "only gas is okay" to "this could work for me." And that was instructive. Given the volume ramp reported by Tesla, I would not be surprised if this "conversion" experience were happening at an accelerating pace.
avrionov 6y ago
Tesla stock price is high, but compared to the other car manufacturers they look quite good: - Tesla increased their revenue in a year where Toyota and VW saw a significant decline in their revenue. - Tesla can produce 1M electric cars at the end of this year. - Ford, BMW, MBZ, GM, and Fiat are not going to produce any meaningful number of electric cars this year. - Japanese car manufacturers are completely missing (They have great hybrid models, but not pure BEVs). - The only serious competition is the Chinese manufacturers, VW and Hyundai / Kia. VW will have to deal with the cannibalization of their own business by BEVs. Same with Hyundai / Kia. - Tesla is taking business not only from auto manufacturers, but also from dealerships, gas stations, and insurance (this is a very small part, but it will increase). - Most of the Tesla killers failed to make a significant dent. I don't expect 2021 to be the year of the Tesla killer, although there is a slight possibility that ID.3 and ID.4 will sell enough to endanger Tesla.
- 11thEarlOfMar 6y ago
  >> VW will have to deal with the cannibalization of their own business Great point. Tesla revenue will grow substantially, VW et al will maintain sales, except for the portion of their sales lost to Tesla. Also, it's a major capital investment for VW that they otherwise wouldn't have to make. This is one of several reasons why it's not meaningful to compare their stock prices.

deleted 6y ago

[deleted]

bryanlarsen 6y ago

Toyota's Enterprise Value is $350B, VW's is $230B and Tesla is $840B. That's not triple both combined.

nemetroid 6y ago
Presumably, then, the GP comment is not referring to enterprise value.
- ckastner 6y ago
  I was indeed referring to market cap, but even acknowledging the sibling comments and going by enterprise value, the situation still appears incredulous for a company that is, as of yet, an emerging car manufacturer, a possible FSD contender, and an energy niche player.
- georgeecollins 6y ago
  Well it should. Market cap is meaningless for companies with a lot of debt (industrial companies typically). And if you don't understand that you will make a lot of meaningless comparisons. Also, if you believe in efficient markets (and lets admit this is a hard week to do that) then you know that companies are valued based on future profits, not future revenues. Google and Ford had very similar revenue in say, 2019. But there enterprise values were completely different because of gross margins and profits.
  - nemetroid 6y ago
    I don't disagree.
  - reitzensteinm 6y ago
    You have to be careful when making a blind comparison, though, because a lot of debt VW and Toyota have is related to their financial service divisions. They're going to receive lease payments to service it. If you were evaluating a bank that had $1tn in deposits and issued $800bn of home loans and had $200bn in cash, the $800bn figure of debt minus cash just doesn't mean that much, and people don't typically calculate EV for banks. So say Tesla buys that bank - does their EV double to ~$2tn? IMO, the only meaningful way to compare EVs is to unwind the financial divisions valuing them like financial companies, then compare what's left. It's not all rosy, though, because even after unwinding financial services from these companies they've still got a lot of debt. And EVs do pose a risk that the value of the leased ICEs cars will plummet. If it happens very rapidly, that could well be an existential threat.
    - bryanlarsen 6y ago
      That's a great example. They have $1T in debts (the deposits), and $1T in assets (the cash + home loans owed them). To simplify our example, let's assume that some of those home loans are in trouble so the "continuing business" part of the company is worth $0, that the expected profit from those loans exactly balances the expected interest expenses on their deposits. So their market cap is $0. Market cap is $0, EV is $800B. So is the company worth $0 or $800B? *Both answers are right*. You have to specify worth to who before getting an answer. To the economy it has almost a trillion dollar impact, to an investor it's worthless.
      - reitzensteinm 6y ago
        But in the case of a car company owning a bank, neither market cap or EV are good answers for comparison. The first lets debt cloud the intrinsic value of the manufacturing operation, and the second dumps the value of six months worth of production onto the calculation for no real reason. VW has 133 billion euros of receivables for its leases. If we talk about Tesla's worth in comparison to VW by comparing EV, we're essentially discarding that line item - worth double the market cap of GM. And as I said above, if Tesla buys this $0 market cap $800bn EV bank, why should it change the relative value of the car companies to each other? Using your method, it does. To put it another way, when Tesla took on $500m in debt to offer Model 3 leases - did the business really change in any material way? If they financed $10bn 3/Y leases this year - would the value of the company bump up by 1% compared to if they used a leasing partner?
- baking 6y ago
  "Tesla is valued almost three times as much as those companies combined." He didn't say market cap, he said "valued" and you need to consider debt financing in making a fair comparison of market value.
deleted 6y ago
[deleted]

tejohnso 6y ago

TSLA left the land of sound fundamental investments long ago. It is comfortably enjoying life in the land of exuberant speculation.

ericmay 6y ago
Yea... but what exactly are sound fundamentals? (Not directed at you, just topical). Is Apple at 40x P/E (which is a very simple and over-used metric) still fundamentally sound? Amazon? I think the rule of thumb was always 12x. Ok so what company is that? Intel? I think what we're seeing is the result of excess capital. Items like accredited investor definitions lock people out of the VC space so if you can't buy a house because they are too expensive or sold before they hit market... what else are you going to do with your money? Some return looks a lot better than no return... Granted, Tesla does have an extremely high valuation but, well, who cares? I think that's the general sentiment. It's a speculative investment. * Disclaimer I own a small amount of Apple and Tesla shares and have a positive outlook on the future of both companies. Use your own judgement when investing or considering things you read on the Internet
- threeseed 6y ago
  Apple and Amazon are ridiculously profitable, highly diversified, corporate, fiscally stable and aren't a prism of the CEO's whims and machinations. I wouldn't consider Tesla to have any of those characteristics.
  - Kranar 6y ago
    Funny because honestly 10 years ago people said very similar things about Apple under Jobs that people say today about Tesla under Musk. One big difference is that Twitter exists, so now you get to hear directly from certain CEOs outside of highly polished and rehearsed presentations, whereas 10 years ago the public never got that chance. And don't get me started about what people said about Amazon's profitability and fiscal stability 10-15 years ago. Amazon's PE ratio was around 4000 whereas Tesla's is 1500. My speculation, and that's all it is, speculation, is that for the most part people invest in companies that they want to see succeed and by investing in it, they become a kind of participant in the future growth and success of the company. It's mostly a place for people to park their money in a venture that they want to see flourish. There is no magic formula you plug into an Excel spreadsheet and get out a perfect stock price, there is no metric that can reliably be used to press a button to invest. You see a company working in an area you are interested in and that has a chance to succeed in, you have a positive feeling about the company, its products, its people, then you invest. Good luck finding a stable, fiscally responsible and reliable company that ticks off all the fundamental indicators, a CEO who is a rock who never offends anyone or anything, and has a stock that does more than barely beat the rate of inflation and maybe pays out a measly 1-2% dividend. The reality is that if the degree to which you value a stock is based on its PE ratio and other naïve but nice sounding metrics, then to be blunt you're no more sophisticated an investor than the people blowing their money on GME.

tahoeskibum 6y ago

You would've made the same comparison between Apple and Nokia back in 2008. If you've ever driven a Tesla, you'll realize that it is a paradigm shift just like the iPhone was back in 2008 relative to Nokia.

ChuckMcM 6y ago
Or Blackberry/RIM but the same. Basically the market has priced in that while existing car manufacturers have more sales, they are essentially dying and they need to come up with a car that is competitive to the Tesla electric offerings to compete. And so far they haven't shown the ability to do that.
- orange_tee 6y ago
  And who are they going to sell them too? The people who buy Teslas are Tesla fanbois not generic EV customers. And a car company like Honda cannot generate the kind of hype theater that Tesla can, especially not in the US. Other car manufacturers cannot replicate Tesla's success because their customers are different and generic EVs are not a good value preposition for most of these customers.
  - ChuckMcM 6y ago
    I would be interested in hearing how you reason to the statement that the "Other car manufacturers customers are different." As I see it, there are just "car customers." And they are a diverse population, from those who need maximum reliability and economy to those for whom their vehicle is an extension of their need for attention. But as diverse as they are, they form a single set, known in marketing parlance as the "total addressable market." When you write, "The people who buy Teslas are Tesla fanbois ..." it reminds me when people would say "The people who buy a computer for their home are nerds ..." I expect that both of these statements were solidly true at one point, and then became less and less true over time as the diversity of people who felt the product in question was the right choice increased. So what I see in Tesla's results, and their history, is that they created a niche product that many people didn't understand the need for. But over time, as more and more have been shipped, more people can see the benefit. For example, here is a real anecdote. As an anecdote it means nothing of course, but for me it felt significant. My neighbor just bought a model 3. They had been in the camp that these things were a fad, a toy, a ridiculous idea, and "what about the range, and who wants to wait an hour to fill up?" kind of things. But another neighbor has one as well and has had it for a couple of years now. And we all talk and that neighbor was chuckling that they didn't even know the price of gas anymore since they hadn't been to a gas station in over a year! In those discussions, the range of the model 3 was such that they charge at home, and even on very "busy" days never have to plan to stop at a charging station. That is because in "real life" they never drive more than 200 miles in a day, and they never cannot fully recharge over night. Once the lightbulb went on about the reality of this, my other neighbor got their own Model 3. It was, for me, seeing one of the general pool of customers switch over from "only gas is okay" to "this could work for me." And that was instructive. Given the volume ramp reported by Tesla, I would not be surprised if this "conversion" experience were happening at an accelerating pace.

avrionov 6y ago

Tesla stock price is high, but compared to the other car manufacturers they look quite good: - Tesla increased their revenue in a year where Toyota and VW saw a significant decline in their revenue. - Tesla can produce 1M electric cars at the end of this year. - Ford, BMW, MBZ, GM, and Fiat are not going to produce any meaningful number of electric cars this year. - Japanese car manufacturers are completely missing (They have great hybrid models, but not pure BEVs). - The only serious competition is the Chinese manufacturers, VW and Hyundai / Kia. VW will have to deal with the cannibalization of their own business by BEVs. Same with Hyundai / Kia. - Tesla is taking business not only from auto manufacturers, but also from dealerships, gas stations, and insurance (this is a very small part, but it will increase). - Most of the Tesla killers failed to make a significant dent. I don't expect 2021 to be the year of the Tesla killer, although there is a slight possibility that ID.3 and ID.4 will sell enough to endanger Tesla.

11thEarlOfMar 6y ago
>> VW will have to deal with the cannibalization of their own business Great point. Tesla revenue will grow substantially, VW et al will maintain sales, except for the portion of their sales lost to Tesla. Also, it's a major capital investment for VW that they otherwise wouldn't have to make. This is one of several reasons why it's not meaningful to compare their stock prices.