34 ms·

For the record, their market cap is also greater than "Australia's Woodside Petroleum, Chevron, Exxon Mobil, Imperial Oil, Royal Dutch Shell, Shell Energy North

For the record, their market cap is also greater than "Australia's Woodside Petroleum, Chevron, Exxon Mobil, Imperial Oil, Royal Dutch Shell, Shell Energy North America, Canadian Natural Resources, ConocoPhillips and French group Total [combined]" [1], so they're also valued kind of crazy compared to energy companies...and that was in January 2021 before the most recent spike. Sure, part of that is faith in renewables. But in any fair comparison their stock price is still a little confusing. [1] https://www.tesmanian.com/blogs/tesmanian-blog/teslas-market-cap-exceeds-the-total-value-of-a-number-of-oil-and-gas-companies-that-s-p-may-downgrade https://www.tesmanian.com/blogs/tesmanian-blog/teslas-market...

TearsInTheRain 5y ago
They are also an innovation engine. You have to value all of the things they havent created yet but will.
- cinntaile 5y ago
  What part of their market cap is unrealized tech dreams and what part is substance, in the traditional value investor sense, in your opinion?
  - trhway 5y ago
    Tesla price to revenue is 20x - a pretty normal for a tech company.
    - listenallyall 5y ago
      Tech companies generally sell software or ad space with near-zero marginal costs. Tesla does not.
      - trhway 5y ago
        Not really. The modern tech companies, FAANG, and many doing SaaS, etc. consume highly expensive labor and consume it while not linear, yet still in some significant correlation to the revenue, thus one can see that they have kind of significant marginal costs. While Tesla's marginal costs will more and more will be dominated by the R&D.
  - vineyardmike 5y ago
    >unrealized tech dreams and what part is substance, in the traditional value investor sense Companies like Tesla are not for traditional value investors. Bonds and boring stocks or ETFs serve that purpose.
    - cinntaile 5y ago
      That's just evading the question.
- Bombthecat 5y ago
  I uhhh you are kidding right? Sounds like those metaverse crypto scams...
AtlasBarfed 5y ago
I might be a bit crazy, but you just mentioned a slate of companies that absolutely have no future at their current scale. Sure this won't happen overnight... But my theory with petroleum is that it has so many HUGE economies of scale built into its production that a demand collapse will send it into a rapid tailspin. A small version of this happened in the Dakotas when the Saudis started dumping oil to get it under a price, and the North Dakota oil industry collapsed. That was due to intentional oversupply, not necessarily due to collapsed demand. But so much of the oil market is now pretty expensive extraction: tar sands, shale oil, fracking, deep offshore. The easy stuff is gone. That to me means that the industry rests on a certain price, and if it falls under that, the industry can't sustain it. I think the big thing in this reverse economies of scale, where costs rise as the industry shrinks (and absorbs writeoffs) is that finance, already somewhat intimidated by the growing pressure to divest from fossil fuels, will rapidly abandon it once it becomes extremely risky due to collapsing demand and massive migrations of transportation modes to electric. It's all vague decade-away prognostication, but you'll start hearing the violins playing for oil companies when some combination of this happens: - charging infrastructure builds out (2 years to catch the current Tesla supercharger, probably another 5 years to get some semblance of every-50-miles availability) - LFP chemistry hits a power density of somewhere around 200-250wh/kg (LFP is really cheap and has far less materials restrictions from cobalt) (probably in 1-2 years for mass production) - various solid state technologies hit production (looks unlikely for 5 years) - EV drivetrain cost (battery, motors, cooling, case, management systems, etc) drops to 2/3 of ICE (probably another 4 years) - a carbon tax, a more substantial EV subsidy The floor will rapidly fall. I'm not saying Tesla isn't insanely valued. But the grim reaper is coming for all those oil companies.
- tappio 5y ago
  We are so dependent on fossil fuels that I'm slightly more sceptical. Over 90% of global energy is created with fossil fuels. We often get fooled about the electricity sector which is something like 1/3 renewables. But electricity is only 30% of fossil fuel consumption. Even if the share of electricity increases to 40% because of ev's and we produce 80% with renewables, we still have ~70% that requires fossil fuel production. That 70% is not that easy to replace -- we are talking about manufacturing, logistics, agriculture, mining, etc. Getting rid of coal only increases oil and gas demand. I'm not sure what is the percentage of consumer sales for any if those companies mentioned, but I suspect that even if it was 0 it would not drastically affect anything but profits. Oil will be less profitable -- yes, but it will be widely used as long as energy required to mine it is less than what is produced. It is unfortunate, but these companies are on a very good long term business (hard to say really because I don't know what are the global untapped oil reserves). Manufacturing components to produce renewables require a lot of fossil fuels as well. We are not yet at the point where we can create new renewables without using fossil fuels. I'm not saying the floor will not fall, but I'm afraid that if the floor falls we are in quite big trouble, and it is not because if the EV market.
grecy 5y ago
With many developed countries passing laws to ban the sales of petrol and diesel passenger cars by 2030 or 2035, do all the companies you mention actually have a strong future of growth? Do you want to buy stocks in companies that have a strong future of growth, or who have always made a lot of money doing one thing, and expect to keep making money doing that same old thing, even though it's clearly not going to last. While they're not going to die overnight, I suspect they're not going to be worth all that much by 2050, and ~nothing by 2075.
deleted 5y ago
[deleted]
azinman2 5y ago
So if they’re so big now, why can they throw more weight around than energy companies in terms of getting rid of the fossil fuel lobby?
- jjeaff 5y ago
  Because market cap is just the crazy value investors have attributed to the company. It doesn't mean the company is any bigger or smaller.
  - chii 5y ago
    But it means their cost of capital can be lower - for example, by issuing new shares to capture some of that high market cap. Then they can expand much easier than a competitor who cannot get such good rates for new share issuance.
- ZeroGravitas 5y ago
  They kind of can. Example: the australian PM who repealed their carbon tax, is now working with his coal baron buddy on a green hydrogen plant. He's now calling for a ... brace for the irony ... carbon tax to help his new business. edit: correcting myself, getting two PMs mixed up, Turnbull scrapped new Carbon Tax plans while PM, under pressure from Abbot (who he replaced as PM), who in turn had scrapped an existing carbon tax. Still demonstrates the slow shift of the well-connected politicians to follow the money.
roguas 5y ago
Well people can short Tesla. I heard this under evaluation among solo traders. But Tesla is having a lot of money in crypto afaik. So it often may seem, their profit in cryptos increases their total val.
dangus 5y ago
One way to explain this is that “goodwill” is an intangible that shows up on the balance sheet, which must always be balanced. Assets = Liabilities + equity. Goodwill is on the asset side of the equation. Basically, Tesla stock owners consider the company to have ambiguous secret sauce of the right employees, IP, brand recognition/reputation that makes it more valuable than its current on-paper business activity. Or, it’s just a stock that they believe they can find buyers for – a belief which has been proven to so far be true.

TearsInTheRain 5y ago

They are also an innovation engine. You have to value all of the things they havent created yet but will.

cinntaile 5y ago
What part of their market cap is unrealized tech dreams and what part is substance, in the traditional value investor sense, in your opinion?
- trhway 5y ago
  Tesla price to revenue is 20x - a pretty normal for a tech company.
  - listenallyall 5y ago
    Tech companies generally sell software or ad space with near-zero marginal costs. Tesla does not.
    - trhway 5y ago
      Not really. The modern tech companies, FAANG, and many doing SaaS, etc. consume highly expensive labor and consume it while not linear, yet still in some significant correlation to the revenue, thus one can see that they have kind of significant marginal costs. While Tesla's marginal costs will more and more will be dominated by the R&D.
- vineyardmike 5y ago
  >unrealized tech dreams and what part is substance, in the traditional value investor sense Companies like Tesla are not for traditional value investors. Bonds and boring stocks or ETFs serve that purpose.
  - cinntaile 5y ago
    That's just evading the question.
Bombthecat 5y ago
I uhhh you are kidding right? Sounds like those metaverse crypto scams...

AtlasBarfed 5y ago

I might be a bit crazy, but you just mentioned a slate of companies that absolutely have no future at their current scale. Sure this won't happen overnight... But my theory with petroleum is that it has so many HUGE economies of scale built into its production that a demand collapse will send it into a rapid tailspin. A small version of this happened in the Dakotas when the Saudis started dumping oil to get it under a price, and the North Dakota oil industry collapsed. That was due to intentional oversupply, not necessarily due to collapsed demand. But so much of the oil market is now pretty expensive extraction: tar sands, shale oil, fracking, deep offshore. The easy stuff is gone. That to me means that the industry rests on a certain price, and if it falls under that, the industry can't sustain it. I think the big thing in this reverse economies of scale, where costs rise as the industry shrinks (and absorbs writeoffs) is that finance, already somewhat intimidated by the growing pressure to divest from fossil fuels, will rapidly abandon it once it becomes extremely risky due to collapsing demand and massive migrations of transportation modes to electric. It's all vague decade-away prognostication, but you'll start hearing the violins playing for oil companies when some combination of this happens: - charging infrastructure builds out (2 years to catch the current Tesla supercharger, probably another 5 years to get some semblance of every-50-miles availability) - LFP chemistry hits a power density of somewhere around 200-250wh/kg (LFP is really cheap and has far less materials restrictions from cobalt) (probably in 1-2 years for mass production) - various solid state technologies hit production (looks unlikely for 5 years) - EV drivetrain cost (battery, motors, cooling, case, management systems, etc) drops to 2/3 of ICE (probably another 4 years) - a carbon tax, a more substantial EV subsidy The floor will rapidly fall. I'm not saying Tesla isn't insanely valued. But the grim reaper is coming for all those oil companies.

tappio 5y ago
We are so dependent on fossil fuels that I'm slightly more sceptical. Over 90% of global energy is created with fossil fuels. We often get fooled about the electricity sector which is something like 1/3 renewables. But electricity is only 30% of fossil fuel consumption. Even if the share of electricity increases to 40% because of ev's and we produce 80% with renewables, we still have ~70% that requires fossil fuel production. That 70% is not that easy to replace -- we are talking about manufacturing, logistics, agriculture, mining, etc. Getting rid of coal only increases oil and gas demand. I'm not sure what is the percentage of consumer sales for any if those companies mentioned, but I suspect that even if it was 0 it would not drastically affect anything but profits. Oil will be less profitable -- yes, but it will be widely used as long as energy required to mine it is less than what is produced. It is unfortunate, but these companies are on a very good long term business (hard to say really because I don't know what are the global untapped oil reserves). Manufacturing components to produce renewables require a lot of fossil fuels as well. We are not yet at the point where we can create new renewables without using fossil fuels. I'm not saying the floor will not fall, but I'm afraid that if the floor falls we are in quite big trouble, and it is not because if the EV market.

grecy 5y ago

With many developed countries passing laws to ban the sales of petrol and diesel passenger cars by 2030 or 2035, do all the companies you mention actually have a strong future of growth? Do you want to buy stocks in companies that have a strong future of growth, or who have always made a lot of money doing one thing, and expect to keep making money doing that same old thing, even though it's clearly not going to last. While they're not going to die overnight, I suspect they're not going to be worth all that much by 2050, and ~nothing by 2075.

deleted 5y ago

[deleted]

azinman2 5y ago

So if they’re so big now, why can they throw more weight around than energy companies in terms of getting rid of the fossil fuel lobby?

jjeaff 5y ago
Because market cap is just the crazy value investors have attributed to the company. It doesn't mean the company is any bigger or smaller.
- chii 5y ago
  But it means their cost of capital can be lower - for example, by issuing new shares to capture some of that high market cap. Then they can expand much easier than a competitor who cannot get such good rates for new share issuance.
ZeroGravitas 5y ago
They kind of can. Example: the australian PM who repealed their carbon tax, is now working with his coal baron buddy on a green hydrogen plant. He's now calling for a ... brace for the irony ... carbon tax to help his new business. edit: correcting myself, getting two PMs mixed up, Turnbull scrapped new Carbon Tax plans while PM, under pressure from Abbot (who he replaced as PM), who in turn had scrapped an existing carbon tax. Still demonstrates the slow shift of the well-connected politicians to follow the money.

roguas 5y ago

Well people can short Tesla. I heard this under evaluation among solo traders. But Tesla is having a lot of money in crypto afaik. So it often may seem, their profit in cryptos increases their total val.

dangus 5y ago

One way to explain this is that “goodwill” is an intangible that shows up on the balance sheet, which must always be balanced. Assets = Liabilities + equity. Goodwill is on the asset side of the equation. Basically, Tesla stock owners consider the company to have ambiguous secret sauce of the right employees, IP, brand recognition/reputation that makes it more valuable than its current on-paper business activity. Or, it’s just a stock that they believe they can find buyers for – a belief which has been proven to so far be true.