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I'm still a bear on the valuation as it is. You can believe the company will be successful and still think it's grossly overvalued.

skohan 5y ago
I think Tesla will be successful, but the current valuation seems to assume that every IC car on the road will be replaced by a Tesla in the next 10 years. I think Ford and Toyota are going to figure out how to be tesla a lot sooner than Tesla is going to figure out how to be Ford and Toyota.
- kaesar14 5y ago
  The math barely works out even if they were to sell half the new cars sold every year. Tesla bulls are insane.
  - panick21_ 5y ago
    I simply believe in their continued innovation. They have great strategy their current strategy makes them dominate in a number of industries that are all gone grow massively. And they have consistently made the right decisions. People on HN might not like their approach to development of Self-Driving but they have invested a huge amount in deep neural nets and all the infrastructure around, including their own chips. They might well be able to sell access to that chip for example. Tesla is deep into batteries already and is building a huge team including research and vertically integration into the machines, mining, precurser production and so on. That expertise can eventually be used in a number of ways. I believe Tesla in a few years will seriously go after electric flight. I believe they have the talent to pull that off, maybe in cooperation with SpaceX. Its the logical next step. They have one of the world leading materials development departments as well, shared with SpaceX. They have the electronics, software talent and manufacturing to go into many other industries as well. I simply believe in their execution and strategy in the long term. People said they were crazy to make their own cars, they should just go to a contract manufacturer. But then they wouldn't have 30% margin right now. This kind of story will repeat itself.
  - colinmhayes 5y ago
    Tesla valuation only makes sense if they become a huge player in batteries/other household electronic devices and keep their dominant car margins while gaining market share.
    - rcMgD2BwE72F 5y ago
      >if they become a huge player in batteries They're already number one, worldwide, and by far. >keep their dominant car margins while gaining market share. They're doing both at the same time.
      - colinmhayes 5y ago
        It's certainly possible, just seems unlikely now that other car makers are releasing electric cars that are actually good.
      - ac29 5y ago
        > They're already number one, worldwide, and by far. Source? The only info I can find in a quick search shows they have the largest single factory, but other manufacturers are larger in aggregate, and Telsa is only a small part of the overall market: https://www.statista.com/statistics/1246713/largest-lithium-ion-battery-factories-worldwide/ https://www.statista.com/statistics/1246713/largest-lithium-... edit: here's a better source, showing them not even number one for Electric Vehicles https://spectrum.ieee.org/the-top-10-ev-battery-makers https://spectrum.ieee.org/the-top-10-ev-battery-makers
        rcMgD2BwE72F 5y ago
        lol, CATL's first customer is Tesla. LG is also a major Tesla supplier. Idem for Pana and Samsung. Even BYD is expected to sell their cells to Tesla (under review as we speak). These players are fighting for Tesla's contracts, and Tesla will keep buying all their batteries while adding their own production capacity (search for "project roadrunner"). What matters is 'who has access to the end customers' and to the best tech. Tesla has so much demand from grid operator that they can easily buy all the supply. They're just limited by their own production / assembly / installation capacity.
  - rcMgD2BwE72F 5y ago
    A company with 50% of revenue growth, 30% of automotive gross margin, almost unlimited demand (99% of global auto sales are still non-EV and Tesla's brand is just starting to become familiar), still zero ad spending, huge new markets like solar generation and stationary storage where they continue to have a massive lead in technology... Can you name one company in such a position? Tesla price-to-earning ration based on Q3 2021 income is 147, and dropping like a stone. Looks cheap to me.
- MisterPea 5y ago
  Well, unless the new verticals take off as well. Tesla Solar, Battery, Car Insurance and Car Financing off the top of my head. Musk even said insurance could be 30%-40% of Tesla's auto business
  - henrikschroder 5y ago
    The problem with those insane bull cases is that the various "verticals" are mutually exclusive because they cannibalize each other. If they ever deliver on the promises of FSD, cars will become safer, which will diminish accidents which will diminish insurance payout which will diminish revenue which will diminish insurance profits, because it's an extremely regulated business where profit margins are regulated. If they deliver on the robotaxi promise, why would anyone buy a car themselves when they can just robotaxi everywhere? If the cars make money, why would Tesla sell the cars to people in the first place?!? And if they own all their cars, how would they make money off of insurance? The only reasonable future is that making money off your robotaxi Tesla is a pipedream, which means you can't count on that argument to drive sales. For insurance to win, FSD has to fail. But for sales to soar, FSD has to win.
  - arcticbull 5y ago
    Liberty Mutual is a $16B business, Panasonic is a $30B business and financing profits and revenues are usually included in car company valuations - certainly in VW's case. Even a successful entry into both those businesses would be 45B, or 5% of Tesla's current market cap.
- coliveira 5y ago
  I think what stock holders really believe is that Mr EM can continue to bullshit his way into higher and higher valuations by promising more than what he can do. It has worked up to this point, and with a high enough stock price, it becomes a self fulfilling prophecy.
  - penjelly 5y ago
    agreed. musk promises the moon and often doesn't deliver and always delivers late if at all. some examples of crazy promises: - humanoid robots - profitable tunnels/loop - rocket propelled cars - a semi - a truck - a network of cars that that can generate income for you passively by driving themselves around as a taxi service - cars that drive themselves that are safer then human drivers ... im not saying Tesla isn't successful and never delivers but it does seem exponential what musk promises and while i think it's possible, managing all these massive projects is probably too much for the company. the humanoid robots thing for me really make me feel like he's just feeding investor hysteria. (i was a former musk fanboy)
    - coliveira 5y ago
      And to continue the cycle, he uses the crazy valuation to get more capital and deliver a small part of what he promises, starting the cycle again. It is a hype-enabled bubble that nobody knows when will stop.
    - skohan 5y ago
      I had the same reaction to the humanoid robot announcement. Totally impractical, but a great excuse for investors to throw money at Tesla on the assumption that they will "solve the labor shortage" in a frothy environment where FOMO is enough to drive stock prices.
    - panick21_ 5y ago
      > - humanoid robots They literally started work on this a few months ago and didn't announce a product. Are they not allowed to do research? Seems pretty clear that one of the reason for this is recruitment, they explicitly said so. As an investor I don't expect any profit from this anytime soon. > - profitable tunnels/loop The literally just signed a huge deal to expand the Loop in Las Vegas. They successfully bid on a number of other projects as well. They are testing their next generation tunneling machine. That is not Tesla btw. different company. > - rocket propelled cars Its really just air-pressure release valve. Its not as crazy as it sound. It will happen eventually but only for a maybe a few 100 cars. Again, not really all that relevant, just like most Hypercar products by big car companies. I think it will happen in a couple year but its basically just a 'look we are better then you' project. - a semi Why is that crazy? They haven't done it because they are limited on battery and chips. They can currently grow without inducing more products. Each Semi would mean 4 less Model Y. They are working on the Semi and related Mega chargers. They have multible test vehicles on the roads. They just recently set up a bunch of Mega chargers in Nevada. - a truck Again, they are setting up a factory and battery factory next to it. This is clearly going to happen and when it does it will be at large volume. A vehicle program being a few month delayed isn't really special. > - cars that drive themselves I don't think it will happen anytime soon but Tesla is at the forefront of making it happen in the general case that is enough for me. This doesn't really seem crazy, other car companies have cars, trucks and semi in their lineup as well.
- rcMgD2BwE72F 5y ago
  > I think Tesla will be successful, but the current valuation seems to assume that every IC car on the road will be replaced by a Tesla in the next 10 years. Their P/E at Q3 level of profit is 147. That's quite small for a company growing at more than 50% and whose margin keep improving. Also, the addressable market for vehicles, solar and stationary storage is almost limitless. We're not even talking FSD, where their lead continues to increase vs competitors (most are stopping their research, cf. BMW and Mercedes). >I think Ford and Toyota are going to figure out how to be tesla a lot sooner than Tesla is going to figure out how to be Ford and Toyota. Tesla keeps increasing its technology vs Ford in all the main areas (battery, power trains, casting, electronics, self-driving, but also market that Ford does not even pretend to serve such as energy generation and grid storage). Toyota is completely lost. They invest far less in EV than Tesla and the gap continues to increase. They only focus on PHEV, which people aren't interested in when they have become familiar with EV (see Norway, where climate does not even favor BEV). They'll try to do something with hydrogen only because the Japanese government will subsidize them for that.
  - Hypx_ 5y ago
    Hydrogen will ultimately disrupt BEVs into oblivion. This is the obvious disruption event that no one is seeing.
  - kaesar14 5y ago
    Where do you get a P/E of 147 from?
  - arcticbull 5y ago
    P/E according to Google Finance is 452.73 vs Toyota at 9.6 They would have to see 50% YoY growth for 6 more years to reach the same number of deliveries as Toyota alone let alone the entire car market.
    - verdverm 5y ago
      That's assuming you only count their auto division. They are entering into other major industries (utilities, insurance, and robotics)
- omgwtfbyobbq 5y ago
  I don't think it's that bad. Their current price to sales ratio is ~6x less than a mature company like Amazon. https://ycharts.com/companies/AMZN/ps_ratio https://ycharts.com/companies/AMZN/ps_ratio https://ycharts.com/companies/TSLA/ps_ratio https://ycharts.com/companies/TSLA/ps_ratio To reach the same price to sales ratio they would need to go from ~250,000 vehicles/quarter to ~1,500,000 vehicles/quarter, which is ~44% of US sales. https://www.cnbc.com/2021/09/30/us-auto-sales-forecast-to-plummet-in-third-quarter-as-chip-shortage-plagues-industry.html https://www.cnbc.com/2021/09/30/us-auto-sales-forecast-to-pl... Realistically, Tesla sells a lot of cars overseas, so this price more likely represents them hitting ~20% of US sales. The energy side increasing volume with in-house cell manufacturing and/or supplying other OEMs could also change where they need to be with vehicle deliveries to hit a PS ratio in line with established companies.
adoxyz 5y ago
This is where I'm at. I love my Tesla. I think the company makes amazing cars and has a very bright future, but the stock price and valuation is too high. If they manage to execute flawlessly on everything they want to do then the current valuation might make sense, but as it stands, in my opinion, I don't think the stock is worth it. On the short time horizon (1-3 years) though, I don't see the stock dipping though either because $TSLA =/= Tesla company.
- marvin 5y ago
  It's funny to keep seeing people post this exact same comment regarding Tesla's valuation, on every single earnings report since 2012. I mean, it's obviously going to come true at some point following a stock price growth to S&P500-dominating levels. It's always been richly valued and that is as true today as ever. The laws of physics prevent this from continuing forever, and the likelihood is great that there will be a correction downwards at some point, perhaps dramatic. But it's a bit farcical to read this almost word-for-word identical opinion again and again and again and again, starting from a point in time where the stock price was 0.5% of what it is today.
  - dlp211 5y ago
    It's almost like markets can remain irrational for extended periods of time.
  - adoxyz 5y ago
    Having followed Tesla since almost the beginning and being in and out of TSLA for the last 5 years I can say that the current stock price is a tad high for me. I can't speak for others. Tesla has been targeted by many people for almost its entire existence claiming they're frauds, their tech doesn't work, they won't be able to scale. They've proven most of those people wrong and continue to be an awesome success. But again I think the current stock price is absurd and very hard to justify.

skohan 5y ago

I think Tesla will be successful, but the current valuation seems to assume that every IC car on the road will be replaced by a Tesla in the next 10 years. I think Ford and Toyota are going to figure out how to be tesla a lot sooner than Tesla is going to figure out how to be Ford and Toyota.

kaesar14 5y ago
The math barely works out even if they were to sell half the new cars sold every year. Tesla bulls are insane.
- panick21_ 5y ago
  I simply believe in their continued innovation. They have great strategy their current strategy makes them dominate in a number of industries that are all gone grow massively. And they have consistently made the right decisions. People on HN might not like their approach to development of Self-Driving but they have invested a huge amount in deep neural nets and all the infrastructure around, including their own chips. They might well be able to sell access to that chip for example. Tesla is deep into batteries already and is building a huge team including research and vertically integration into the machines, mining, precurser production and so on. That expertise can eventually be used in a number of ways. I believe Tesla in a few years will seriously go after electric flight. I believe they have the talent to pull that off, maybe in cooperation with SpaceX. Its the logical next step. They have one of the world leading materials development departments as well, shared with SpaceX. They have the electronics, software talent and manufacturing to go into many other industries as well. I simply believe in their execution and strategy in the long term. People said they were crazy to make their own cars, they should just go to a contract manufacturer. But then they wouldn't have 30% margin right now. This kind of story will repeat itself.
- colinmhayes 5y ago
  Tesla valuation only makes sense if they become a huge player in batteries/other household electronic devices and keep their dominant car margins while gaining market share.
  - rcMgD2BwE72F 5y ago
    >if they become a huge player in batteries They're already number one, worldwide, and by far. >keep their dominant car margins while gaining market share. They're doing both at the same time.
    - colinmhayes 5y ago
      It's certainly possible, just seems unlikely now that other car makers are releasing electric cars that are actually good.
    - ac29 5y ago
      > They're already number one, worldwide, and by far. Source? The only info I can find in a quick search shows they have the largest single factory, but other manufacturers are larger in aggregate, and Telsa is only a small part of the overall market: https://www.statista.com/statistics/1246713/largest-lithium-ion-battery-factories-worldwide/ https://www.statista.com/statistics/1246713/largest-lithium-... edit: here's a better source, showing them not even number one for Electric Vehicles https://spectrum.ieee.org/the-top-10-ev-battery-makers https://spectrum.ieee.org/the-top-10-ev-battery-makers
      - rcMgD2BwE72F 5y ago
        lol, CATL's first customer is Tesla. LG is also a major Tesla supplier. Idem for Pana and Samsung. Even BYD is expected to sell their cells to Tesla (under review as we speak). These players are fighting for Tesla's contracts, and Tesla will keep buying all their batteries while adding their own production capacity (search for "project roadrunner"). What matters is 'who has access to the end customers' and to the best tech. Tesla has so much demand from grid operator that they can easily buy all the supply. They're just limited by their own production / assembly / installation capacity.
- rcMgD2BwE72F 5y ago
  A company with 50% of revenue growth, 30% of automotive gross margin, almost unlimited demand (99% of global auto sales are still non-EV and Tesla's brand is just starting to become familiar), still zero ad spending, huge new markets like solar generation and stationary storage where they continue to have a massive lead in technology... Can you name one company in such a position? Tesla price-to-earning ration based on Q3 2021 income is 147, and dropping like a stone. Looks cheap to me.
MisterPea 5y ago
Well, unless the new verticals take off as well. Tesla Solar, Battery, Car Insurance and Car Financing off the top of my head. Musk even said insurance could be 30%-40% of Tesla's auto business
- henrikschroder 5y ago
  The problem with those insane bull cases is that the various "verticals" are mutually exclusive because they cannibalize each other. If they ever deliver on the promises of FSD, cars will become safer, which will diminish accidents which will diminish insurance payout which will diminish revenue which will diminish insurance profits, because it's an extremely regulated business where profit margins are regulated. If they deliver on the robotaxi promise, why would anyone buy a car themselves when they can just robotaxi everywhere? If the cars make money, why would Tesla sell the cars to people in the first place?!? And if they own all their cars, how would they make money off of insurance? The only reasonable future is that making money off your robotaxi Tesla is a pipedream, which means you can't count on that argument to drive sales. For insurance to win, FSD has to fail. But for sales to soar, FSD has to win.
- arcticbull 5y ago
  Liberty Mutual is a $16B business, Panasonic is a $30B business and financing profits and revenues are usually included in car company valuations - certainly in VW's case. Even a successful entry into both those businesses would be 45B, or 5% of Tesla's current market cap.
coliveira 5y ago
I think what stock holders really believe is that Mr EM can continue to bullshit his way into higher and higher valuations by promising more than what he can do. It has worked up to this point, and with a high enough stock price, it becomes a self fulfilling prophecy.
- penjelly 5y ago
  agreed. musk promises the moon and often doesn't deliver and always delivers late if at all. some examples of crazy promises: - humanoid robots - profitable tunnels/loop - rocket propelled cars - a semi - a truck - a network of cars that that can generate income for you passively by driving themselves around as a taxi service - cars that drive themselves that are safer then human drivers ... im not saying Tesla isn't successful and never delivers but it does seem exponential what musk promises and while i think it's possible, managing all these massive projects is probably too much for the company. the humanoid robots thing for me really make me feel like he's just feeding investor hysteria. (i was a former musk fanboy)
  - coliveira 5y ago
    And to continue the cycle, he uses the crazy valuation to get more capital and deliver a small part of what he promises, starting the cycle again. It is a hype-enabled bubble that nobody knows when will stop.
  - skohan 5y ago
    I had the same reaction to the humanoid robot announcement. Totally impractical, but a great excuse for investors to throw money at Tesla on the assumption that they will "solve the labor shortage" in a frothy environment where FOMO is enough to drive stock prices.
  - panick21_ 5y ago
    > - humanoid robots They literally started work on this a few months ago and didn't announce a product. Are they not allowed to do research? Seems pretty clear that one of the reason for this is recruitment, they explicitly said so. As an investor I don't expect any profit from this anytime soon. > - profitable tunnels/loop The literally just signed a huge deal to expand the Loop in Las Vegas. They successfully bid on a number of other projects as well. They are testing their next generation tunneling machine. That is not Tesla btw. different company. > - rocket propelled cars Its really just air-pressure release valve. Its not as crazy as it sound. It will happen eventually but only for a maybe a few 100 cars. Again, not really all that relevant, just like most Hypercar products by big car companies. I think it will happen in a couple year but its basically just a 'look we are better then you' project. - a semi Why is that crazy? They haven't done it because they are limited on battery and chips. They can currently grow without inducing more products. Each Semi would mean 4 less Model Y. They are working on the Semi and related Mega chargers. They have multible test vehicles on the roads. They just recently set up a bunch of Mega chargers in Nevada. - a truck Again, they are setting up a factory and battery factory next to it. This is clearly going to happen and when it does it will be at large volume. A vehicle program being a few month delayed isn't really special. > - cars that drive themselves I don't think it will happen anytime soon but Tesla is at the forefront of making it happen in the general case that is enough for me. This doesn't really seem crazy, other car companies have cars, trucks and semi in their lineup as well.
rcMgD2BwE72F 5y ago
> I think Tesla will be successful, but the current valuation seems to assume that every IC car on the road will be replaced by a Tesla in the next 10 years. Their P/E at Q3 level of profit is 147. That's quite small for a company growing at more than 50% and whose margin keep improving. Also, the addressable market for vehicles, solar and stationary storage is almost limitless. We're not even talking FSD, where their lead continues to increase vs competitors (most are stopping their research, cf. BMW and Mercedes). >I think Ford and Toyota are going to figure out how to be tesla a lot sooner than Tesla is going to figure out how to be Ford and Toyota. Tesla keeps increasing its technology vs Ford in all the main areas (battery, power trains, casting, electronics, self-driving, but also market that Ford does not even pretend to serve such as energy generation and grid storage). Toyota is completely lost. They invest far less in EV than Tesla and the gap continues to increase. They only focus on PHEV, which people aren't interested in when they have become familiar with EV (see Norway, where climate does not even favor BEV). They'll try to do something with hydrogen only because the Japanese government will subsidize them for that.
- Hypx_ 5y ago
  Hydrogen will ultimately disrupt BEVs into oblivion. This is the obvious disruption event that no one is seeing.
- kaesar14 5y ago
  Where do you get a P/E of 147 from?
- arcticbull 5y ago
  P/E according to Google Finance is 452.73 vs Toyota at 9.6 They would have to see 50% YoY growth for 6 more years to reach the same number of deliveries as Toyota alone let alone the entire car market.
  - verdverm 5y ago
    That's assuming you only count their auto division. They are entering into other major industries (utilities, insurance, and robotics)
omgwtfbyobbq 5y ago
I don't think it's that bad. Their current price to sales ratio is ~6x less than a mature company like Amazon. https://ycharts.com/companies/AMZN/ps_ratio https://ycharts.com/companies/AMZN/ps_ratio https://ycharts.com/companies/TSLA/ps_ratio https://ycharts.com/companies/TSLA/ps_ratio To reach the same price to sales ratio they would need to go from ~250,000 vehicles/quarter to ~1,500,000 vehicles/quarter, which is ~44% of US sales. https://www.cnbc.com/2021/09/30/us-auto-sales-forecast-to-plummet-in-third-quarter-as-chip-shortage-plagues-industry.html https://www.cnbc.com/2021/09/30/us-auto-sales-forecast-to-pl... Realistically, Tesla sells a lot of cars overseas, so this price more likely represents them hitting ~20% of US sales. The energy side increasing volume with in-house cell manufacturing and/or supplying other OEMs could also change where they need to be with vehicle deliveries to hit a PS ratio in line with established companies.

adoxyz 5y ago

This is where I'm at. I love my Tesla. I think the company makes amazing cars and has a very bright future, but the stock price and valuation is too high. If they manage to execute flawlessly on everything they want to do then the current valuation might make sense, but as it stands, in my opinion, I don't think the stock is worth it. On the short time horizon (1-3 years) though, I don't see the stock dipping though either because $TSLA =/= Tesla company.

marvin 5y ago
It's funny to keep seeing people post this exact same comment regarding Tesla's valuation, on every single earnings report since 2012. I mean, it's obviously going to come true at some point following a stock price growth to S&P500-dominating levels. It's always been richly valued and that is as true today as ever. The laws of physics prevent this from continuing forever, and the likelihood is great that there will be a correction downwards at some point, perhaps dramatic. But it's a bit farcical to read this almost word-for-word identical opinion again and again and again and again, starting from a point in time where the stock price was 0.5% of what it is today.
- dlp211 5y ago
  It's almost like markets can remain irrational for extended periods of time.
- adoxyz 5y ago
  Having followed Tesla since almost the beginning and being in and out of TSLA for the last 5 years I can say that the current stock price is a tad high for me. I can't speak for others. Tesla has been targeted by many people for almost its entire existence claiming they're frauds, their tech doesn't work, they won't be able to scale. They've proven most of those people wrong and continue to be an awesome success. But again I think the current stock price is absurd and very hard to justify.