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While the Bull case has not been proven for Tesla, The Bear case is laughably bad at this point.

DSingularity 5y ago
The possibility massive overvaluations across tech shouldn’t be totally discounted. Yeah, you might miss out doubling your money in the next five years if you sit out but you could also avoid halving your money in the next 30 years. It all depends on what kind of investor you are and where you are in your financial planning. At some point growth stocks have to stop being growth stocks.
- scottiebarnes 5y ago
  > At some point growth stocks have to stop being growth stocks. Debatable. AMZN would like to have a word
  - sroussey 5y ago
    Last downturn for tech, AMZN dropped over 80%
tjr225 5y ago
Laughably bad? Ford sold just about as much, if not more, F150s in 2021 and that’s just one of their models. Taken into even the slightest context Tesla could seem massively overvalued- and I say that as someone who likes their product.
- 8jy89hui 5y ago
  I keep seeing this a Tesla vs. Ford qualitative comparison, so here is a more quantitative comparison: Ford's 2020 Q4 report [0] indicates a sales rate of ~2M cars / yr. The entire Ford truck brand sold around 1.1 M trucks [0] that year (2020) and 1.2 the year before (2019). Fordauthority.com (who may or may not be authoritative...) says that Ford is/was running slightly worse sales this year than last year [1]. However I don't think Ford has published their numbers for 2021 yet. Personal Opinion: Given Tesla's ramp of ~70%/yr, is it not absurd to think that Tesla will pass Ford's truck sales numbers within the next year and all of Ford's sales numbers within the next 2-3 years. (This is assuming lack of innovation on Ford's part. If Ford innovates with e-trucks then it will probably take a lot longer for Tesla to catch up) [0]: https://media.ford.com/content/dam/fordmedia/North%20America/US/2021/01/06/ford-sales-release-dec2020.pdf https://media.ford.com/content/dam/fordmedia/North%20America... [1]: https://fordauthority.com/2021/10/ford-motor-company-sales-numbers-figures-results-september-2021-usa/ https://fordauthority.com/2021/10/ford-motor-company-sales-n...
- hw 5y ago
  Valuation is forward looking and taking into account future growth as well with gigafactories coming online. Plenty of people had the same valuation argument and comparing sales vs other automakers 2 years ago but look where the company and valuations are now Ford is also years behind in battery and fsd tech. That being said, they need to match / best expectations handily to retain these valuations
- panick21_ 5y ago
  That such an terrible comparison. I mean seriously, the whole car industry is transitioning fundamentally both in terms of EV and in terms of technology including self driving. Just looking at past sales numbers and ignoring these transition is insane. Transitioning millions of vehicles to EV is an incredibly hard task and has massive cost and massive constraints do to battery, battery materials and chip availability. I'm not gone say Tesla is not 'overvalued' but just saying F-150 sells a lot therefore Tesla is overvalued is bad argument.
  - tjr225 5y ago
    I agree. My response is to indicate that it isn’t laughably bad to be bearish on Tesla. Read the comment.
hervature 5y ago
The Bull case is pretty straightforward. There are ~80-100M cars produced every year. Tesla's market cap is ~40% of the total automotive industry. So either they have to 40x their production to match their current market cap or drastically eat into another industry. People like to propose two different possibilities - self driving and energy. Personally, I think self driving will be a race to the bottom. As soon as one person figures it out, they might have one year before others are able to do it. Aside from that, I think it is pretty clear that Tesla is going to lose that race regardless as the money in self driving is having an autonomous fleet. Waymo doesn't need to make the cars or have gigafactories. As for being the energy provider of the future, as much as people love to hate energy companies, Chevron is not going to roll over so easily. They love oil because it makes money. As soon as it stops making money, they are much better positioned to transform their infrastructure into charging stations than Tesla is to bootstrap that side of their business. At this point, it is obvious Tesla will be a profitable car company moving forward but I still think they are more likely to end up as another Mercedes-Benz (Daimler market cap is 80B) than eating the automotive industry plus another industry.
- gallerdude 5y ago
  10 years ago, you could have said that the existing auto industry was better positioned to electrify their existing vehicles than Tesla is to bootstrap their own electric cars out of nothing - but here we are.
  - alphabettsy 5y ago
    It seems like more an issue of desire than ability though right? The existing auto makers were not making any effort so it feels weird to make a comparison. Not that they’re making an effort they’ve proven they can make electric cars. The only thing they’re missing imo is the ubiquitous supercharger network.
  - cycomanic 5y ago
    Pretty much every exponential curve in reality is really a sigmoid. So extrapolating on exponential growth works until it doesn't.
likpok 5y ago
The bear case is that Tesla merely becomes the worlds number 1 electric car manufacturer but does not become the worlds only electric car manufacturer. Right now Tesla's market cap is about 10x that of Ford, on a third to half the revenue (2021 numbers aren't available, I'm estimating based on Q1/2/3). Tesla was about 2x as profitable as ford in q3 2021, but that varies a lot quarter-to-quarter. It was generally around 10% though. Instead of car companies, consider a similarly sized company in market cap, Meta. Meta has 85 billion in revenue and a 30% (!) profit margin. For Tesla to grow into its cap it needs to massively increase both its scale and its profitability. It'd need to more than double its revenue while also doubling its margins. New sources of revenue for tesla are going to be moving downmarket, which makes profit margins hard in a manufacturing business. Tesla has nice cars but it has a lot of competitors with deep sales teams and manufacturing excellence (consider other comments in this thread: Tesla cars have bad fit and finish for how expensive they are and lack a lot of standard features). Tesla is clearly going to continue to be a big car manufacturer but its current valuation requires that it become staggeringly gigantic.
panick21_ 5y ago
These cases are not static. As the stock price goes up, you have to reevaluate both of these in regards to the new price. Certainty the old Bear case from a couple of years ago has been crushed. Remember when people said they could never make 5k Model 3s a weak and would never figure out mass manufacturing? However since then the Stock price went up quite a bit. As a long time investor I still believe in a Bull case, but its certainty harder to justify.

The possibility massive overvaluations across tech shouldn’t be totally discounted. Yeah, you might miss out doubling your money in the next five years if you sit out but you could also avoid halving your money in the next 30 years. It all depends on what kind of investor you are and where you are in your financial planning. At some point growth stocks have to stop being growth stocks.

scottiebarnes 5y ago
> At some point growth stocks have to stop being growth stocks. Debatable. AMZN would like to have a word
- sroussey 5y ago
  Last downturn for tech, AMZN dropped over 80%

tjr225 5y ago

Laughably bad? Ford sold just about as much, if not more, F150s in 2021 and that’s just one of their models. Taken into even the slightest context Tesla could seem massively overvalued- and I say that as someone who likes their product.

8jy89hui 5y ago
I keep seeing this a Tesla vs. Ford qualitative comparison, so here is a more quantitative comparison: Ford's 2020 Q4 report [0] indicates a sales rate of ~2M cars / yr. The entire Ford truck brand sold around 1.1 M trucks [0] that year (2020) and 1.2 the year before (2019). Fordauthority.com (who may or may not be authoritative...) says that Ford is/was running slightly worse sales this year than last year [1]. However I don't think Ford has published their numbers for 2021 yet. Personal Opinion: Given Tesla's ramp of ~70%/yr, is it not absurd to think that Tesla will pass Ford's truck sales numbers within the next year and all of Ford's sales numbers within the next 2-3 years. (This is assuming lack of innovation on Ford's part. If Ford innovates with e-trucks then it will probably take a lot longer for Tesla to catch up) [0]: https://media.ford.com/content/dam/fordmedia/North%20America/US/2021/01/06/ford-sales-release-dec2020.pdf https://media.ford.com/content/dam/fordmedia/North%20America... [1]: https://fordauthority.com/2021/10/ford-motor-company-sales-numbers-figures-results-september-2021-usa/ https://fordauthority.com/2021/10/ford-motor-company-sales-n...
hw 5y ago
Valuation is forward looking and taking into account future growth as well with gigafactories coming online. Plenty of people had the same valuation argument and comparing sales vs other automakers 2 years ago but look where the company and valuations are now Ford is also years behind in battery and fsd tech. That being said, they need to match / best expectations handily to retain these valuations
panick21_ 5y ago
That such an terrible comparison. I mean seriously, the whole car industry is transitioning fundamentally both in terms of EV and in terms of technology including self driving. Just looking at past sales numbers and ignoring these transition is insane. Transitioning millions of vehicles to EV is an incredibly hard task and has massive cost and massive constraints do to battery, battery materials and chip availability. I'm not gone say Tesla is not 'overvalued' but just saying F-150 sells a lot therefore Tesla is overvalued is bad argument.
- tjr225 5y ago
  I agree. My response is to indicate that it isn’t laughably bad to be bearish on Tesla. Read the comment.

hervature 5y ago

The Bull case is pretty straightforward. There are ~80-100M cars produced every year. Tesla's market cap is ~40% of the total automotive industry. So either they have to 40x their production to match their current market cap or drastically eat into another industry. People like to propose two different possibilities - self driving and energy. Personally, I think self driving will be a race to the bottom. As soon as one person figures it out, they might have one year before others are able to do it. Aside from that, I think it is pretty clear that Tesla is going to lose that race regardless as the money in self driving is having an autonomous fleet. Waymo doesn't need to make the cars or have gigafactories. As for being the energy provider of the future, as much as people love to hate energy companies, Chevron is not going to roll over so easily. They love oil because it makes money. As soon as it stops making money, they are much better positioned to transform their infrastructure into charging stations than Tesla is to bootstrap that side of their business. At this point, it is obvious Tesla will be a profitable car company moving forward but I still think they are more likely to end up as another Mercedes-Benz (Daimler market cap is 80B) than eating the automotive industry plus another industry.

gallerdude 5y ago
10 years ago, you could have said that the existing auto industry was better positioned to electrify their existing vehicles than Tesla is to bootstrap their own electric cars out of nothing - but here we are.
- alphabettsy 5y ago
  It seems like more an issue of desire than ability though right? The existing auto makers were not making any effort so it feels weird to make a comparison. Not that they’re making an effort they’ve proven they can make electric cars. The only thing they’re missing imo is the ubiquitous supercharger network.
- cycomanic 5y ago
  Pretty much every exponential curve in reality is really a sigmoid. So extrapolating on exponential growth works until it doesn't.

likpok 5y ago

The bear case is that Tesla merely becomes the worlds number 1 electric car manufacturer but does not become the worlds only electric car manufacturer. Right now Tesla's market cap is about 10x that of Ford, on a third to half the revenue (2021 numbers aren't available, I'm estimating based on Q1/2/3). Tesla was about 2x as profitable as ford in q3 2021, but that varies a lot quarter-to-quarter. It was generally around 10% though. Instead of car companies, consider a similarly sized company in market cap, Meta. Meta has 85 billion in revenue and a 30% (!) profit margin. For Tesla to grow into its cap it needs to massively increase both its scale and its profitability. It'd need to more than double its revenue while also doubling its margins. New sources of revenue for tesla are going to be moving downmarket, which makes profit margins hard in a manufacturing business. Tesla has nice cars but it has a lot of competitors with deep sales teams and manufacturing excellence (consider other comments in this thread: Tesla cars have bad fit and finish for how expensive they are and lack a lot of standard features). Tesla is clearly going to continue to be a big car manufacturer but its current valuation requires that it become staggeringly gigantic.

panick21_ 5y ago

These cases are not static. As the stock price goes up, you have to reevaluate both of these in regards to the new price. Certainty the old Bear case from a couple of years ago has been crushed. Remember when people said they could never make 5k Model 3s a weak and would never figure out mass manufacturing? However since then the Stock price went up quite a bit. As a long time investor I still believe in a Bull case, but its certainty harder to justify.