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Not at all. P/E just dropped by half. Given the growing economies of scale and the two giant factories being built in Europe and Texas and more soon, the sky is

Not at all. P/E just dropped by half. Given the growing economies of scale and the two giant factories being built in Europe and Texas and more soon, the sky is the limit. You can ignore FSD and still easily project a $4,000 target by 2026. I highly recommend this short thread https://teslamotorsclub.com/tmc/threads/tesla-valuation-based-on-5-year-outlook.234307/ https://teslamotorsclub.com/tmc/threads/tesla-valuation-base... (by a TMC member who's been highly reliable over the years). Disclosure: have been invested in TSLA for more than a decade now.

adventured 5y ago
Easily project a ~$4.3 trillion market cap in five years for an automaker that's already comically overvalued and has typical auto industry margins and nowhere near enough growth to get there. Fascinating. Plotting ~$60 billion in earnings and a 70+ PE ratio in five years. To do that they'll merely need $500b-$600b in sales (a couple trillion in sales across the next five years). And everyone in the developed world has to buy a Tesla within the next five years. Hilarious. All from the Model 3, which is the only thing they have to carry the entire company to those levels. The Model S and Model X certainly aren't going to move the $633b market cap needle beyond where it's already at, nor will solar (look at what the top solar companies are worth), nor will batteries (look at what the world's largest battery businesses are worth), nor will the big rig (look at what the top big rig segments are worth to other automakers). The article has some gigantic caveats given the obscene forecast, like this one: "the Cybertruck launch will need to go well" - understatement of the century. The Cybertruck is going to flop, after it initially sells well. Ford and the other traditional truck manufacturers will dominate electric trucks, because they're going to sell their customers the trucks those customers actually want to buy, not impractical gimmicks. Musk already knows it's going to ultimately flop, he has begun preparing the market for that outcome. If Tesla owned the entire auto market globally in five years, it wouldn't be worth half that $4.3t forecast. That's every car, truck and big rig sold everywhere on earth. Add up the value of all other automakers, now or five years ago, or ten years ago. The fantasy projection dissolves instantly when you shine light on it. It'll be a small miracle if Tesla is able to maintain their present valuation while pushing earnings up to $20b in five years, that will require extraordinary market-conquering continued growth across all product lines. They have to become akin to another Toyota in five years just to do that. I'll bookmark this ridiculous forecast and we can revisit it in a few years.
- TigeriusKirk 5y ago
  You make good points, but I still wouldn't take that side of the bet. TSLA price has been divorced from reality for years and it's entirely unpredictable when and how that will end.
  - adventured 5y ago
    There's a bit divorced from reality, and there's implausible. Amazon was a bit divorced from reality as well for most of its history. They had extraordinary continued sales growth to fuel that divorce, to underpin those high expectations, along with a quasi segment monopoly. That held up for a time. However it began to stall as online retail growth rates began to falter (look at Amazon's stock from 2011-2015, nice but nothing crazy while still carrying a ridiculous multiple; that's the result of retail profit & margin reality setting in). And then they started publishing AWS results and its software-like margins, and eventually the hyper margin ad business; kaboom goes the stock, due to that earnings growth and its forward expectations. What's the Tesla AWS / Ad explosion? There isn't one. They don't have a business like that, where they'll get to print monopoly-like software profits. Amazon blazed a new path with AWS that they got to own as they went. Tesla has to take auto share from companies like BMW, Toyota, Honda, Hyundai, Daimler, VW, Ford, GM, etc. as they go (to say nothing of the Chinese EV makers that will eventually dominate that domestic market and gradually push outward globally). Entirely different context. Tesla is an increasingly boring automaker, nothing more. EVs are just vehicles, they don't come with 4x or 6x the margins of ICE vehicles that Mercedes or BMW produce. The best case scenario, realistically, is that Tesla becomes Toyota or Daimler. That will be an astounding outcome, to get there and then hold that ground against that much competition. There's no AWS business coming to save their valuation. Batteries are not a stellar business, the solar business sucks big time (just look at the solar companies, their earnings and their market values), and the big rig business is also not at all spectacular. Tesla also is not going to own the luxury market, they're horrible at making luxury vehicles. Daimler & Co will continue to dominate luxury vehicles. Tesla had its shot, a huge headstart, at conquering luxury EVs and entirely failed to put a big enough stake into the ground, they're out of time (look at what their high-end segment of sales is worth today or yesterday, it's a pittance despite the huge headstart; they've done a terrible job there). The Cybertruck isn't going to take over the truck market. What's left? The Model 3 has to conquer planet Earth in four to five years. Everyone has to buy one. It's not going to happen. I defended Tesla for most of a decade on this forum. When a lot of people here said Tesla would never produce the Model 3 at scale, I argued against that skepticism across numerous threads over and over again; it was obvious it could be done. There's a difference between recognizing Tesla wasn't going to go bankrupt a few years ago for example (an easy argument I took up across numerous threads), and buying into really really crazy forecasts that are well outside of the realm of believable. There's being objective about what's actually likely, plausible, and just frothing at the mouth on bubble kool-aid.
1123581321 5y ago
P/E dropping sharply to a number that is still “normal” or higher is what is meant by good numbers being priced in.
- colinmhayes 5y ago
  P/E of 160 is nowhere near normal.
  - 1123581321 5y ago
    “or higher” was the part of the comment referencing Tesla’s P/E ratio. Normal was in quotes because there’s no prescribed value for an appropriate earnings per share, just historical averages and popular economic models.
  - Seanambers 5y ago
    50% YoY growth for the next several years is not normal either. I think most agree that the pricing can seem unreasonably high, but plug the numbers into a spreadsheet and see where you end up. Basically the market believes that Tesla is to become one of the big players in the auto industry.
    - colinmhayes 5y ago
      Tesla is worth more than all the other automakers combined. They'll have to be much more than a car maker to accomplish what this valuation requires.
      - Seanambers 5y ago
        Other OEMS are loaded with debt which reflects in their valuation, if measured in Enterprise value Tesla vs OEMS- the numbers doesn't give so much headroom as you suggest. But yes, right now their valuation is a bit high, but reflect on this ; Tesla is in a net cash position, have already the infrastructure and technology to make electric cars. They now have to replicate/duplicate, create new models and markets, but they have a very solid footing within the EV space. The other OEMS is laden with debt which was used to build outdated factories and invested in technologies which suddenly have a payback period in the singles, instead of decades - and they still must invest heavily into EVs to maintain their market share and service their debt. The incumbent OEMS are having to run the gauntlet of the valley of death; Falling demand for gas/diesel while at the same time investing heavily into EV production. While beeing loaded up with debt.
Gatsky 5y ago
I think this is possible, but not likely. Historically companies with such high valuations and extreme popularity don't perform well in the long term. If you got in 10 years ago you've done exceptionally well of course. There is a lot of competition in electric vehicles coming. There is no reason to think that the EV industry will be materially different to the ICEV industry in terms of competition, margins and company performance when the dust settles. At the end of the day the market is the same, convincing people to spend many 10s of thousands on a complicated machine. The huge asset price inflation that has happened over Amazon's history is also not going to continue. Additionally there are some major risks to Tesla's trajectory. One is China deciding to freeze out an American EV company. Another is something happening to Elon Musk, which will cause a stampede of retail investors out the door.
- rcMgD2BwE72F 5y ago
  >There is a lot of competition in electric vehicles coming. There is no reason to think that the EV industry will be materially different to the ICEV industry in terms of competition, margins and company performance when the dust settles. At the end of the day the market is the same, convincing people to spend many 10s of thousands on a complicated machine. How do you explain Apple's shares of profits in the phone industry, then?

adventured 5y ago

Easily project a ~$4.3 trillion market cap in five years for an automaker that's already comically overvalued and has typical auto industry margins and nowhere near enough growth to get there. Fascinating. Plotting ~$60 billion in earnings and a 70+ PE ratio in five years. To do that they'll merely need $500b-$600b in sales (a couple trillion in sales across the next five years). And everyone in the developed world has to buy a Tesla within the next five years. Hilarious. All from the Model 3, which is the only thing they have to carry the entire company to those levels. The Model S and Model X certainly aren't going to move the $633b market cap needle beyond where it's already at, nor will solar (look at what the top solar companies are worth), nor will batteries (look at what the world's largest battery businesses are worth), nor will the big rig (look at what the top big rig segments are worth to other automakers). The article has some gigantic caveats given the obscene forecast, like this one: "the Cybertruck launch will need to go well" - understatement of the century. The Cybertruck is going to flop, after it initially sells well. Ford and the other traditional truck manufacturers will dominate electric trucks, because they're going to sell their customers the trucks those customers actually want to buy, not impractical gimmicks. Musk already knows it's going to ultimately flop, he has begun preparing the market for that outcome. If Tesla owned the entire auto market globally in five years, it wouldn't be worth half that $4.3t forecast. That's every car, truck and big rig sold everywhere on earth. Add up the value of all other automakers, now or five years ago, or ten years ago. The fantasy projection dissolves instantly when you shine light on it. It'll be a small miracle if Tesla is able to maintain their present valuation while pushing earnings up to $20b in five years, that will require extraordinary market-conquering continued growth across all product lines. They have to become akin to another Toyota in five years just to do that. I'll bookmark this ridiculous forecast and we can revisit it in a few years.

TigeriusKirk 5y ago
You make good points, but I still wouldn't take that side of the bet. TSLA price has been divorced from reality for years and it's entirely unpredictable when and how that will end.
- adventured 5y ago
  There's a bit divorced from reality, and there's implausible. Amazon was a bit divorced from reality as well for most of its history. They had extraordinary continued sales growth to fuel that divorce, to underpin those high expectations, along with a quasi segment monopoly. That held up for a time. However it began to stall as online retail growth rates began to falter (look at Amazon's stock from 2011-2015, nice but nothing crazy while still carrying a ridiculous multiple; that's the result of retail profit & margin reality setting in). And then they started publishing AWS results and its software-like margins, and eventually the hyper margin ad business; kaboom goes the stock, due to that earnings growth and its forward expectations. What's the Tesla AWS / Ad explosion? There isn't one. They don't have a business like that, where they'll get to print monopoly-like software profits. Amazon blazed a new path with AWS that they got to own as they went. Tesla has to take auto share from companies like BMW, Toyota, Honda, Hyundai, Daimler, VW, Ford, GM, etc. as they go (to say nothing of the Chinese EV makers that will eventually dominate that domestic market and gradually push outward globally). Entirely different context. Tesla is an increasingly boring automaker, nothing more. EVs are just vehicles, they don't come with 4x or 6x the margins of ICE vehicles that Mercedes or BMW produce. The best case scenario, realistically, is that Tesla becomes Toyota or Daimler. That will be an astounding outcome, to get there and then hold that ground against that much competition. There's no AWS business coming to save their valuation. Batteries are not a stellar business, the solar business sucks big time (just look at the solar companies, their earnings and their market values), and the big rig business is also not at all spectacular. Tesla also is not going to own the luxury market, they're horrible at making luxury vehicles. Daimler & Co will continue to dominate luxury vehicles. Tesla had its shot, a huge headstart, at conquering luxury EVs and entirely failed to put a big enough stake into the ground, they're out of time (look at what their high-end segment of sales is worth today or yesterday, it's a pittance despite the huge headstart; they've done a terrible job there). The Cybertruck isn't going to take over the truck market. What's left? The Model 3 has to conquer planet Earth in four to five years. Everyone has to buy one. It's not going to happen. I defended Tesla for most of a decade on this forum. When a lot of people here said Tesla would never produce the Model 3 at scale, I argued against that skepticism across numerous threads over and over again; it was obvious it could be done. There's a difference between recognizing Tesla wasn't going to go bankrupt a few years ago for example (an easy argument I took up across numerous threads), and buying into really really crazy forecasts that are well outside of the realm of believable. There's being objective about what's actually likely, plausible, and just frothing at the mouth on bubble kool-aid.

1123581321 5y ago

P/E dropping sharply to a number that is still “normal” or higher is what is meant by good numbers being priced in.

colinmhayes 5y ago
P/E of 160 is nowhere near normal.
- 1123581321 5y ago
  “or higher” was the part of the comment referencing Tesla’s P/E ratio. Normal was in quotes because there’s no prescribed value for an appropriate earnings per share, just historical averages and popular economic models.
- Seanambers 5y ago
  50% YoY growth for the next several years is not normal either. I think most agree that the pricing can seem unreasonably high, but plug the numbers into a spreadsheet and see where you end up. Basically the market believes that Tesla is to become one of the big players in the auto industry.
  - colinmhayes 5y ago
    Tesla is worth more than all the other automakers combined. They'll have to be much more than a car maker to accomplish what this valuation requires.
    - Seanambers 5y ago
      Other OEMS are loaded with debt which reflects in their valuation, if measured in Enterprise value Tesla vs OEMS- the numbers doesn't give so much headroom as you suggest. But yes, right now their valuation is a bit high, but reflect on this ; Tesla is in a net cash position, have already the infrastructure and technology to make electric cars. They now have to replicate/duplicate, create new models and markets, but they have a very solid footing within the EV space. The other OEMS is laden with debt which was used to build outdated factories and invested in technologies which suddenly have a payback period in the singles, instead of decades - and they still must invest heavily into EVs to maintain their market share and service their debt. The incumbent OEMS are having to run the gauntlet of the valley of death; Falling demand for gas/diesel while at the same time investing heavily into EV production. While beeing loaded up with debt.

Gatsky 5y ago

I think this is possible, but not likely. Historically companies with such high valuations and extreme popularity don't perform well in the long term. If you got in 10 years ago you've done exceptionally well of course. There is a lot of competition in electric vehicles coming. There is no reason to think that the EV industry will be materially different to the ICEV industry in terms of competition, margins and company performance when the dust settles. At the end of the day the market is the same, convincing people to spend many 10s of thousands on a complicated machine. The huge asset price inflation that has happened over Amazon's history is also not going to continue. Additionally there are some major risks to Tesla's trajectory. One is China deciding to freeze out an American EV company. Another is something happening to Elon Musk, which will cause a stampede of retail investors out the door.

rcMgD2BwE72F 5y ago
>There is a lot of competition in electric vehicles coming. There is no reason to think that the EV industry will be materially different to the ICEV industry in terms of competition, margins and company performance when the dust settles. At the end of the day the market is the same, convincing people to spend many 10s of thousands on a complicated machine. How do you explain Apple's shares of profits in the phone industry, then?