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Wow, third-most-popular luxury brand - truly a ranking befitting the world's most valuable auto manufacturer. This insane speculative bubble has to end at some

Wow, third-most-popular luxury brand - truly a ranking befitting the world's most valuable auto manufacturer. This insane speculative bubble has to end at some point, right? I feel like the world is falling apart having watched it go on for so long and metastasize into an ever-expanding horde of MLM-like cryptocurrencies without even a pretense of justification for existing beyond "buy low, sell high!" - maybe I just don't have enough life experience to put all of this into context.

totalZero 5y ago
It's "buy high, don't sell" these days.
somewhereoutth 5y ago
It ends when interest rates revert to mean. However governments know this will cause pain, so are minded to keep the printing presses rolling a little longer.
halfmatthalfcat 5y ago
That or you’re not seeing the value Tesla providing in 10+ years.
- missedthecue 5y ago
  Even if Tesla provides insane value in ten years, to get in line with traditional/historical manufacturing company valuations while justifying their current valuation, that would necessitate something like $70 billion in free cash flow per year. So in other words, if Tesla does everything right, executes perfectly on a global scale, suffers no major hiccups, and they grow their annual free cash flow by tens of thousands of percent from their current position, they'll finally justify their valuation and your ten year return from a current investment in Tesla will be 0%, not adjusted for inflation. The bull case from here is thinking that Tesla's valuation will permanently stay in the upper atmosphere for decades to come, but at some point, the growth rates slow. There are only so many automobile purchasers on our planet, not to mention the competition which is picking up. My bet is that Tesla does not get to $70B in FCF by 2030. I also don't think the market will give them a 30x sales valuation forever, especially as their growth rates eventually begin to slow. They've already saturated Europe and are heavy into the Chinese market, and of course, their US + Canada market penetration goes without saying. Maybe Tesla goes back to a normal valuation via a $3T market cap, giving current holders a great return (so long as they cash out at the peak). Who knows. But long term, I don't see how they justify their present $1T market cap, and as Ben Graham famously (and rightly) quipped, in the short term, the market is a voting machine. In the long term, it's a weighing machine. EVs are "in" right now, and they're getting lots of votes, but in ten years, EV manufacturing will be as boring as ICE car manufacturing is today and the industry's valuations will be weighed on its own merits.
  - chrisseaton 5y ago
    > with traditional/historical manufacturing company valuations Maybe people aren’t valuing it using these models? Why’s your model the right one and theirs the wrong one?
    - missedthecue 5y ago
      By traditional, I mean the methods people have used to appraise companies for hundreds of years. i.e., I'm predicting that given enough time, Tesla will revert to the mean, because literally every other publicly traded company that's ever existed has done this. Sure, maybe Tesla will be the first company since the 1600s to avoid this. After all, the only modeling data anyone doing anything has is historical data. But that's a hell of a gamble to make if you're a Tesla shareholder.
      - chrisseaton 5y ago
        > because literally every other publicly traded company that's ever existed has done this Wait you think there’s a model which perfectly predicts every company’s valuation ever? Why aren’t you using it to make a fortune?
        missedthecue 5y ago
        "Eventually return to the mean, given a long enough time frame" means that you should invest in index funds, which I do. It's not a ticker prediction algorithm that one can game or rinse/repeat for massive short term profits.
        TomVDB 5y ago
        That's one of those classic disingenuous gotcha comments. The fact that there's a pretty common way to value public companies doesn't mean that you can make a fortune with it, because it sweeps aside the importance of time. Have you never heard of Keynes' classic "The markets can remain irrational longer than you can remain solvent" ?
- SlipperySlope 5y ago
  Tesla by 2030 will be the leading world auto manufacturer. It will be the leading robot manufacturer. It will be the the largest robotaxi supplier. It will be the the largest energy company. By 2030 it will not have returned to the mean market earnings or revenue multiple because its path to the technological singularity is super exponential. By 2025 this notion will be popular opinion and not shocking.
somethoughts 5y ago
My new mental model to understand high PE, high speculative stocks and crypto is attempt to understand and quantify the actual amount of active floated shares in circulation that are being actively traded/exchanged daily. If founders and early investors are mostly HODLing the majority of shares then the actual active shares in circulation can be quite low. Basically a bunch of retail traders are trading at the periphery and perhaps overpaying. The overpayment by retail traders is then applied to the entire lot of outstanding shares. Ideally there'd be a way to see the number of unique shares trading hands. Currently the only publicly/freely available info is about the number of shares traded per day - but this could really just be the same shares being traded over an over. True price discovery is not occurring across the entire lot of outstanding shares. True valuation of Tesla will only be possible once the founders own less than 1% of outstanding shares. For example Tim Cook as the current steward of Apple leadership and Laurene Powell Jobs only own about 0.02% and 0.8% of Apple as compared to Elon Musk who owns about 15-20% (its dropping daily of course).

totalZero 5y ago

It's "buy high, don't sell" these days.

somewhereoutth 5y ago

It ends when interest rates revert to mean. However governments know this will cause pain, so are minded to keep the printing presses rolling a little longer.

halfmatthalfcat 5y ago

That or you’re not seeing the value Tesla providing in 10+ years.

missedthecue 5y ago
Even if Tesla provides insane value in ten years, to get in line with traditional/historical manufacturing company valuations while justifying their current valuation, that would necessitate something like $70 billion in free cash flow per year. So in other words, if Tesla does everything right, executes perfectly on a global scale, suffers no major hiccups, and they grow their annual free cash flow by tens of thousands of percent from their current position, they'll finally justify their valuation and your ten year return from a current investment in Tesla will be 0%, not adjusted for inflation. The bull case from here is thinking that Tesla's valuation will permanently stay in the upper atmosphere for decades to come, but at some point, the growth rates slow. There are only so many automobile purchasers on our planet, not to mention the competition which is picking up. My bet is that Tesla does not get to $70B in FCF by 2030. I also don't think the market will give them a 30x sales valuation forever, especially as their growth rates eventually begin to slow. They've already saturated Europe and are heavy into the Chinese market, and of course, their US + Canada market penetration goes without saying. Maybe Tesla goes back to a normal valuation via a $3T market cap, giving current holders a great return (so long as they cash out at the peak). Who knows. But long term, I don't see how they justify their present $1T market cap, and as Ben Graham famously (and rightly) quipped, in the short term, the market is a voting machine. In the long term, it's a weighing machine. EVs are "in" right now, and they're getting lots of votes, but in ten years, EV manufacturing will be as boring as ICE car manufacturing is today and the industry's valuations will be weighed on its own merits.
- chrisseaton 5y ago
  > with traditional/historical manufacturing company valuations Maybe people aren’t valuing it using these models? Why’s your model the right one and theirs the wrong one?
  - missedthecue 5y ago
    By traditional, I mean the methods people have used to appraise companies for hundreds of years. i.e., I'm predicting that given enough time, Tesla will revert to the mean, because literally every other publicly traded company that's ever existed has done this. Sure, maybe Tesla will be the first company since the 1600s to avoid this. After all, the only modeling data anyone doing anything has is historical data. But that's a hell of a gamble to make if you're a Tesla shareholder.
    - chrisseaton 5y ago
      > because literally every other publicly traded company that's ever existed has done this Wait you think there’s a model which perfectly predicts every company’s valuation ever? Why aren’t you using it to make a fortune?
      - missedthecue 5y ago
        "Eventually return to the mean, given a long enough time frame" means that you should invest in index funds, which I do. It's not a ticker prediction algorithm that one can game or rinse/repeat for massive short term profits.
      - TomVDB 5y ago
        That's one of those classic disingenuous gotcha comments. The fact that there's a pretty common way to value public companies doesn't mean that you can make a fortune with it, because it sweeps aside the importance of time. Have you never heard of Keynes' classic "The markets can remain irrational longer than you can remain solvent" ?
SlipperySlope 5y ago
Tesla by 2030 will be the leading world auto manufacturer. It will be the leading robot manufacturer. It will be the the largest robotaxi supplier. It will be the the largest energy company. By 2030 it will not have returned to the mean market earnings or revenue multiple because its path to the technological singularity is super exponential. By 2025 this notion will be popular opinion and not shocking.

somethoughts 5y ago

My new mental model to understand high PE, high speculative stocks and crypto is attempt to understand and quantify the actual amount of active floated shares in circulation that are being actively traded/exchanged daily. If founders and early investors are mostly HODLing the majority of shares then the actual active shares in circulation can be quite low. Basically a bunch of retail traders are trading at the periphery and perhaps overpaying. The overpayment by retail traders is then applied to the entire lot of outstanding shares. Ideally there'd be a way to see the number of unique shares trading hands. Currently the only publicly/freely available info is about the number of shares traded per day - but this could really just be the same shares being traded over an over. True price discovery is not occurring across the entire lot of outstanding shares. True valuation of Tesla will only be possible once the founders own less than 1% of outstanding shares. For example Tim Cook as the current steward of Apple leadership and Laurene Powell Jobs only own about 0.02% and 0.8% of Apple as compared to Elon Musk who owns about 15-20% (its dropping daily of course).