5 ms·

> Tesla's revenue growth is not much bigger than Alphabet's or Apple's - and these are companies with orders of magnitude more revenue and profit. I'm not that

by runako 5y ago

> Tesla's revenue growth is not much bigger than Alphabet's or Apple's - and these are companies with orders of magnitude more revenue and profit. I'm not that big of a Tesla bull, but you have to remember that stocks trade on forward expectations. The trillion $+ market cap companies basically have saturated their primary markets. Microsoft is not likely to find another billion desktop PCs onto which to sell a US-priced Windows/Office suite anytime soon. By contrast, if you buy the Tesla story, they are really just getting started. > Auto manufacturing is not suddenly going to become the most profitable business in the world. I tend to agree with this. However, it's worth noting that Tesla's margin profile is significantly different than all legacy automakers. Their gross margin is ~30%, which is within striking distance of AMD's. And Tesla is still sub-scale for the auto industry. EVs are a different beast than traditional ICE vehicles, so margins will initially be better on EVs for all EV manufacturers.

ahahahahah 5y ago
> but you have to remember that stock trade on forward expectations. Great insight, except that you are just repeating the start of the whole discussion, literally from the first line of this thread: > I want to point out that companies are valued based on their future and projected growth, not how much they are worth today.
- runako 5y ago
  What did you hope to add to the discussion with this comment?
danans 5y ago
> EVs are a different beast than traditional ICE vehicles, so margins will initially be better on EVs for all EV manufacturers. Please explain. This runs counter to the common understanding that unless a manufacturer scales up their battery production significantly, their profit margins on EVs are lower due to the high cost of the batteries. The California compliance EVs were sold at a per-unit loss. Tesla shook this up by targeting and marketing to the luxury market, where they could charge a premium. Many smaller scale non-luxury manufacturers have pretty lackluster EV offerings (looking at you, Subaru).
- Animats 5y ago
  Margins will initially be better on EVs for all EV manufacturers. Right now, where there's an electric and a gasoline powered version of a comparable model, the electric version seems to cost about US$10K more. See Ford F-150, Chevy Bolt, BMW iX. That needs to stop.
  - runako 5y ago
    > the electric version seems to cost about US$10K more Disagree. F-150 Lightning XLT is ~$5k more than the ICE equivalent, which means it costs less after the tax credit. (I'm not sure the baseline model is the same as the baseline ICE F-150.) The Bolt and iX are essentially compliance/concept vehicles that don't have ICE editions, so you can't say they cost more than their comparable models. Once those two get real EV strategies, we will be able to make direct comparisons between e.g. the Chevy Tahoe and the Chevy Tahoe EV.
    - nwienert 5y ago
      They are consistently 10k more, see the id.4 or Mach E for better comparisons.
      - runako 5y ago
        Neither of those have ICE versions (and did not have ICE versions in any recent years), so you can make up any number and say the EV versions are $X more expensive. There may be some premium, but arguably some of that is the manufacturers targeting a consumer price net of tax subsidy ($7,500+).
- runako 5y ago
  EVs have fewer parts overall, and therefore should require fewer manufacturing hours, among other efficiencies. But more straightforwardly, look at Tesla's margins as an object proof. Their gross margin is 50% higher than Toyota's, and Tesla is still sub-scale for an auto manufacturer. I would expect any EVs shipped in any meaningful volume to realize similar margin gains versus ICE vehicles. > The California compliance EVs were sold at a per-unit loss. Those cars were never intended to be a real line of business. My measure of when a legacy automaker decides to make a "real" EV is when they attach their existing brand equity to an EV. The Chevy Bolt fails this test, as do the BMW EVs. I think this distinction is important because automakers have the capability to sell vehicles that they do not intend to be part of their strategy or scale to meet demand. The California compliance EVs also obviously fail this test. The Ford F-150 Lightning is a real EV, as is the Mustang Mach-E and the Volvo XC40. I don't believe Subaru has even announced a real EV yet, as the Solterra does not count. We will know Subaru is serious when they deliver an Impreza EV; until then, I consider all their EV offerings as compliance vehicles.
baq 5y ago
stocks like tesla trade on dealer gamma. fundamentals don't matter at all. if you're an investor, stay away. if you're a trader, go with the flow.
long_time_gone 5y ago
> Microsoft is not likely to find another billion desktop PCs onto which to sell a US-priced Windows/Office suite anytime soon. Which is why Microsoft pivoted to additional revenue streams years ago. XBox, Azure, GitHub, SQL Server, LinkedIn, the Surface line, and more.
- runako 5y ago
  What's great about this reply is that the pivot to (in particular) Azure is exactly what has changed the narrative and thereby driven the most recent growth in the stock.
manquer 5y ago
MS valuation to some extent is basis their ability to sell more Azure. Cloud is still growing very very fast. It is also noteworthy that MS is getting good growth in Windows license revenues too as they have opened up a subscription model, lot piracy in the consumer/SMB markets have reduced especially in developing economies. They are not getting billion new users, but a lot of newly paying users with consistent recurring subscription revenue stream they are now generating .
mbesto 5y ago
> Microsoft is not likely to find another billion desktop PCs onto which to sell a US-priced Windows/Office suite anytime soon. Microsoft is already heavily diversified. Big difference.
- runako 5y ago
  Not material since they have saturated there initial markets, per the narrative. But sub in Apple of you prefer.
  - skinnymuch 5y ago
    I mean the money Apple makes on wearables (AirPods + watch), iPads, and possibly growing Mac sales because of the M chip are all huge. Their services segment keeps growing at a massive pace too. Sure none of these are as big as the iPhone. But if Apple only did the iPhone as hardware, they would be no where close to their current valuation. None of the big 5 tech companies are close to tapping out. Any or all of them could be worth another $1T in a couple years and it wouldn’t be that crazy.
    - runako 5y ago
      I agree that none of the biggest tech companies are in danger of tapping out anytime soon. But in terms of narrative, Microsoft was the PC company and Apple is the iPhone company (it took years for them to shake off the funk of being the iPod company in the face of saturating that market) and so forth. Narrative-wise the comparison looks like this: Apple gets >50% of its direct sales from the iPhone, and likely a meaningful percentage of its wearables and services revenue is levered to iPhone sales (AirPods and Fitness+ being examples). Probably 60%+ of Apple sales is tied to iPhone at this point. The mobile market is essentially saturated, so growth will taper there going forward. All the other products are nice, but they are a minority of revenue. To sustainably grow at 20%, Apple has to find a brand new category that is worth $40B, and they have to do that every year. (By way of comparison, that's about as big as Tesla. Apple needs to find a new Tesla worth of revenue every year.) So that's the narrative on Apple. By comparison, the shift to EVs is at the very beginning of its ramp, with ~7% of global sales being EVs. So Tesla has many years to grow at very large rates (40%, 50%, etc.) before it arrives at saturation. They don't have to find any new categories (adding a truck doesn't count as a new category for narrative purposes), they can basically keep doing what they are doing and add SKUs in their existing line of business and grow along with the market, which is growing really fast. They don't have to find giant new categories every year, so in some ways the business problem in front of them is more straightforward. That's the Tesla narrative. Tesla has a great narrative for the future, and that helps drive the stock price.

by runako 5y ago

ahahahahah 5y ago

> but you have to remember that stock trade on forward expectations. Great insight, except that you are just repeating the start of the whole discussion, literally from the first line of this thread: > I want to point out that companies are valued based on their future and projected growth, not how much they are worth today.

runako 5y ago
What did you hope to add to the discussion with this comment?

danans 5y ago

> EVs are a different beast than traditional ICE vehicles, so margins will initially be better on EVs for all EV manufacturers. Please explain. This runs counter to the common understanding that unless a manufacturer scales up their battery production significantly, their profit margins on EVs are lower due to the high cost of the batteries. The California compliance EVs were sold at a per-unit loss. Tesla shook this up by targeting and marketing to the luxury market, where they could charge a premium. Many smaller scale non-luxury manufacturers have pretty lackluster EV offerings (looking at you, Subaru).

Animats 5y ago
Margins will initially be better on EVs for all EV manufacturers. Right now, where there's an electric and a gasoline powered version of a comparable model, the electric version seems to cost about US$10K more. See Ford F-150, Chevy Bolt, BMW iX. That needs to stop.
- runako 5y ago
  > the electric version seems to cost about US$10K more Disagree. F-150 Lightning XLT is ~$5k more than the ICE equivalent, which means it costs less after the tax credit. (I'm not sure the baseline model is the same as the baseline ICE F-150.) The Bolt and iX are essentially compliance/concept vehicles that don't have ICE editions, so you can't say they cost more than their comparable models. Once those two get real EV strategies, we will be able to make direct comparisons between e.g. the Chevy Tahoe and the Chevy Tahoe EV.
  - nwienert 5y ago
    They are consistently 10k more, see the id.4 or Mach E for better comparisons.
    - runako 5y ago
      Neither of those have ICE versions (and did not have ICE versions in any recent years), so you can make up any number and say the EV versions are $X more expensive. There may be some premium, but arguably some of that is the manufacturers targeting a consumer price net of tax subsidy ($7,500+).
runako 5y ago
EVs have fewer parts overall, and therefore should require fewer manufacturing hours, among other efficiencies. But more straightforwardly, look at Tesla's margins as an object proof. Their gross margin is 50% higher than Toyota's, and Tesla is still sub-scale for an auto manufacturer. I would expect any EVs shipped in any meaningful volume to realize similar margin gains versus ICE vehicles. > The California compliance EVs were sold at a per-unit loss. Those cars were never intended to be a real line of business. My measure of when a legacy automaker decides to make a "real" EV is when they attach their existing brand equity to an EV. The Chevy Bolt fails this test, as do the BMW EVs. I think this distinction is important because automakers have the capability to sell vehicles that they do not intend to be part of their strategy or scale to meet demand. The California compliance EVs also obviously fail this test. The Ford F-150 Lightning is a real EV, as is the Mustang Mach-E and the Volvo XC40. I don't believe Subaru has even announced a real EV yet, as the Solterra does not count. We will know Subaru is serious when they deliver an Impreza EV; until then, I consider all their EV offerings as compliance vehicles.

baq 5y ago

stocks like tesla trade on dealer gamma. fundamentals don't matter at all. if you're an investor, stay away. if you're a trader, go with the flow.

long_time_gone 5y ago

> Microsoft is not likely to find another billion desktop PCs onto which to sell a US-priced Windows/Office suite anytime soon. Which is why Microsoft pivoted to additional revenue streams years ago. XBox, Azure, GitHub, SQL Server, LinkedIn, the Surface line, and more.

runako 5y ago
What's great about this reply is that the pivot to (in particular) Azure is exactly what has changed the narrative and thereby driven the most recent growth in the stock.

manquer 5y ago

MS valuation to some extent is basis their ability to sell more Azure. Cloud is still growing very very fast. It is also noteworthy that MS is getting good growth in Windows license revenues too as they have opened up a subscription model, lot piracy in the consumer/SMB markets have reduced especially in developing economies. They are not getting billion new users, but a lot of newly paying users with consistent recurring subscription revenue stream they are now generating .

mbesto 5y ago

> Microsoft is not likely to find another billion desktop PCs onto which to sell a US-priced Windows/Office suite anytime soon. Microsoft is already heavily diversified. Big difference.

runako 5y ago
Not material since they have saturated there initial markets, per the narrative. But sub in Apple of you prefer.
- skinnymuch 5y ago
  I mean the money Apple makes on wearables (AirPods + watch), iPads, and possibly growing Mac sales because of the M chip are all huge. Their services segment keeps growing at a massive pace too. Sure none of these are as big as the iPhone. But if Apple only did the iPhone as hardware, they would be no where close to their current valuation. None of the big 5 tech companies are close to tapping out. Any or all of them could be worth another $1T in a couple years and it wouldn’t be that crazy.
  - runako 5y ago
    I agree that none of the biggest tech companies are in danger of tapping out anytime soon. But in terms of narrative, Microsoft was the PC company and Apple is the iPhone company (it took years for them to shake off the funk of being the iPod company in the face of saturating that market) and so forth. Narrative-wise the comparison looks like this: Apple gets >50% of its direct sales from the iPhone, and likely a meaningful percentage of its wearables and services revenue is levered to iPhone sales (AirPods and Fitness+ being examples). Probably 60%+ of Apple sales is tied to iPhone at this point. The mobile market is essentially saturated, so growth will taper there going forward. All the other products are nice, but they are a minority of revenue. To sustainably grow at 20%, Apple has to find a brand new category that is worth $40B, and they have to do that every year. (By way of comparison, that's about as big as Tesla. Apple needs to find a new Tesla worth of revenue every year.) So that's the narrative on Apple. By comparison, the shift to EVs is at the very beginning of its ramp, with ~7% of global sales being EVs. So Tesla has many years to grow at very large rates (40%, 50%, etc.) before it arrives at saturation. They don't have to find any new categories (adding a truck doesn't count as a new category for narrative purposes), they can basically keep doing what they are doing and add SKUs in their existing line of business and grow along with the market, which is growing really fast. They don't have to find giant new categories every year, so in some ways the business problem in front of them is more straightforward. That's the Tesla narrative. Tesla has a great narrative for the future, and that helps drive the stock price.