12 ms·

This has been a long time coming. Back in the day, there was an inherent understanding that a stock price is supposed to reflect "the fundamentals" - present v

This has been a long time coming. Back in the day, there was an inherent understanding that a stock price is supposed to reflect "the fundamentals" - present value of the company + future earnings. And of course there was some amount of speculation around future earnings, but for the most part companies at least tried to be profitable. But if you look at the share price of like, Tesla - it's completely insane. There is no way your slice of the company is worth that much. The stock market has been behaving like a pyramid scheme, where everyone assumed there will be more money entering than leaving any given stock. Tech is a pretty egregious sector because of how many business models basically boil down to "we don't actually need to make money if we have a desirable stock". In the long run, I don't think we'll be worse off if the next generation of software companies actually focuses on making products people want to buy rather than play games with DAU and user acquisition and etc.

izzydata 5y ago
Over a long enough time frame the stock market and even the whole economy behaves like a pyramid scheme as it is dependent on new generations to be more people than the previous one.
- rapfaria 5y ago
  What about life becoming more efficient?
  - shimmy568 5y ago
    There is a limit, growth can't continue forever (especially the exponential growth we've been seeing). We've got to level off at some point
    - scollet 5y ago
      There is still an element of optimization which involves compressing the problem space. This might be why we see thin vertical segments, but they are way over-valued for the optimization they provide. I think VCs' expectations misalign with reality. They are the ones incentivising infinite growth.
    - maigret 5y ago
      Why not? Do you think the society will soon stop inventing new things? They are clear indicators that evolved societies are disconnecting their growth from the energy usage, and especially carbon emissions. With that new heights are possible. But besides this, yes, slow growth back like for most of humanity is also an option and probably not a bad one in the longer term. It’s a very bad option until we are depending on fossil fuels, because we need the money for the transition.
- Seattle3503 5y ago
  Only if there is no productivity growth.
- akira2501 5y ago
  That really only seems to be true when you allow unchecked mergers and acquisitions, because once you've eliminated competition continuing to grow the market through innovation is almost impossible. I'm not convinced this is some natural "tech" bubble. This feels like an M&A bubble to me.
  - deleted 5y ago
    [deleted]
- legitster 5y ago
  This isn't really true for the same reason that GDP per capita isn't a constant number.
- stjohnswarts 5y ago
  That isn't true. Otherwise when the wheels come off (recession/depression) then the market would never recover as it's "just a Ponzi scheme". there is real value in the market and until some communist or anarchist can provide a reasonable solution that doesn't depend on the general human being altruistic 100% of the time I'll just keep going with the market and count on avarice. I'll trust in the general sense of fairness that most humans seem to have even if they aren't altruistic.
- maigret 5y ago
  This is not true. The stock market is usually valued after the dividends it can pay over a certain number of years, somewhat between 10 and 20. It’s not infinite. If no further grow comes that’s it and the stock keeps it value and will keep paying dividends for the foreseeable time, and has for already 100 years. Sure investors ask for growth in their communication, but the actual thing they are asking for is a better performance than the rest of the market. You could say this bottoms out at 0 but recent event have shown that low negative interests are possible, because stashing cash has a physical cost. Many economies can still work well without population growth, other fail despite population growth. If that was the case that population dictates GDP, then investment choices would be very easy.
- david927 5y ago
  I think you're right but I don't think it has to be that way. Like others, up until a few years ago, I was a Keynesian. But then I realized that if you allow inflation you're not just "rewarding investment", but you're taking non-participation off the table -- and that's a big problem. Because then people participate in markets not based on value but because they have no choice. That means that you go from value investing to "growth investing" -- which is another name for pyramid scheme and people unironically saying that "the market always goes up."
  - smabie 5y ago
    Growth investing doesn't mean the market always goes up? It means that you buy stuff that you think will significantly grow in revenue in the future.
    - david927 5y ago
      Not how I understand it. That just means you're willing to tolerate a higher P/E for that stock. You still expect earnings will eventually cover the price. When you have 401(k) plans which essentially say, "Put your money in the 'market' and it will go up to beat inflation," or you outright say (as many do) that "the market will always go up over time," that's growth investing, and it's straight up a Ponzi scheme. You don't care about the earnings, you just expect to sell for a higher amount than you bought.
eftychis 5y ago
They never showed the fundamentals. There are famous money losses throughout the 20th century. [You can google the charts, or check Graham's book or the biography of Buffett, where he went around avoiding such traps or buying failing companies on the cheap and turning them around by cash infusion.] And of course the infamous example of the Tulip Bulb in 17th century. Companies need to take risk to innovate. A lot as you indicate, and I totally agree, take it too much and doom themselves by never figuring out how to be profitable. These days simply everything that innovates is "Tech." (Now it's turning similarly to sustainability.) How is Tesla "Tech?" It brands itself as that. By that thinking a lot of other automakers should -- and the autopilot doesn't cut it -- just people don't want to see Toyota stock as "Tech." The other thing with "Tech" is that if you don't keep pouring your revenue to take more risks until you dominate over others you will die. So fundamentally, all "Tech" stocks strive towards domination via innovation and growth. Amazon (book seller I know) spend the first part of this century with a pretty bad stock and getting tax credits by investing everything in itself and being cheap extremely aggressively. A lot of "Amazons" did not make it. P.S. If they gave me a 10 year put on Tesla on a sane price I would take it. Alas nobody is taking that bet on the cheap. P.S.2. The funny thing is it is a self full-filled prophesy. Tesla has the market capital to control debt to try a bunch of stuff until it makes it. P.S.3. Fundamentals can be used to increase dividends or do buybacks s.t. the stock price will stay/go up. That is the correlation. P.S.4/tl;dr: The stock market and any commodity market are pyramid schemes -- people get in to make money.
dgb23 5y ago
I don’t understand finance. But with tech I can often see from a mile if something might happen, I don’t have ideas, but I understand „this solves a problem“ or „this is high quality“ versus „this is made up“ or „someone else will do this better“. In my opinion the issue with the stock market is that it is often finance driven and too drawn away from the actual work that is being done and the actual needs and problems potential buyers have. And this problem is specifically worse in tech.
- me_me_mu_mu 5y ago
  It’s mostly based on feelings and perception imo.
anm89 5y ago
I wouldn't even call it an `understanding` more just a `reality`. Markets can stay irrational longer than you can stay solvent and the last 10 years have been an amazing case in point, but they can't stay irrational literally forever. There's a gravity to it. At some point whatever is inflating the values artificially is going to hit some kind of force against it and people are going to want the underlying cash flow. It would be the equivalent of a sort of financial perpetual motion machine if this never happened. I'd argue that's not an probability but something more like a law of physics and is actually literally constrained by the laws of physics (it requires continual population growth, consumption growth, and growth of energy use to keep some of these valuations rising)
martindbp 5y ago
Tesla made more money last quarter than Ford, GM and Toyota. Toyota made 10x the number of cars as Tesla. Tesla is growing vehicle production 50% YoY, while growing profit even faster (having barely hit economies of scale yet). Tesla has a backlog of orders approaching a year in many regions. Everyone else is losing money on their EVs and can't make them in volume production, can't find the batteries for them, because they started 10 years too late. That's the reason for Tesla's valuation, it's pretty simple. Whether you believe the competition will catch up, or Tesla will fail for some other reason is besides the point. I'm just trying to show that the current valuation is not "insane" given current trends, there's a very real logic to it and not (completely) FOMO. Correction: Toyota's earnings were higher than Tesla, it was operating income that was higher (remembered it wrong).
- bink 5y ago
  All of those things can be true and Tesla's stock can also be over-valued. A rapidly growing and popular company doesn't justify any arbitrary valuation.
  - freeflight 5y ago
    Indeed, which also begs the question; How much of that growth is driven by the over-valuation? Particularly as Musk is no stranger to using creative accounting techniques, and sheer speculation, to make his companies suddenly look more profitable [0] There's also him leveraging his other companies to create growth among each other. Like Starlink being a major customer for SpaceX. Which could either be really smart, or the making of a really impressive house of cards. [0] https://www.cnbc.com/2021/04/26/teslas-bitcoin-speculation-helped-boost-profits-this-quarter.html https://www.cnbc.com/2021/04/26/teslas-bitcoin-speculation-h...
- BeetleB 5y ago
  > Tesla made more money last quarter than Ford, GM and Toyota. Net income was higher for Toyota - almost double that of Tesla.
  - 5y ago
lamontcg 5y ago
I find it funny that crypto supporters will cite the fact that the stock market is acting like a pyramid scheme these days to justify the fact that crypto is no different. Yeah, that's not the defense of crypto that you think it is...
- paulpauper 5y ago
  yeah, crypto has much more volatility and worse returns compared to large cap stocks.
JoshCole 5y ago
> __completely__ insane. It isn't completely insane. First off, it isn't irrational to allocate an excessive amount of capital to sustainability. The meme that this level of provision is short-sighted is myopic to the extreme, because obviously over the long term it is failure to be sustainable, not being sustainable, which is myopic. Perhaps it is overvalued, but calling it completely insane goes a bit too far. Second, you are obviously right that the present value of their assets doesn't justify their current price, but it is hubris to try and claim that their is no future in which their revenues can justify their increased valuation. Think ahead to the future while skipping the steps to get there and we are obviously incredibly likely to exist in a world in which AI and automated labor is commonplace, in which energy is provided through renewable means, and in which transport from point to point is handled by electric vehicles. It is not __completely insane__ to think Tesla might play a large role in this future. It is quite reasonable to expect they would. Their present course has them explicitly targeting playing a very large role in that sort of future. They have been making progress and inroads in playing that role. They are on track to play that role and can play it if they execute successfully. Whether they do, that is another question, but whether the potential exists? It certainly seems to exist. A lot of times people point at automakers when they try to justify calling Tesla overvalued. The idea that Tesla wouldn't be larger than that industry is silly. That industry spent billions on building out manufacturing capabilities. They took on debt in order to create products which the market doesn't believe will be viable in the future. The projected value of those companies has to account for that and obviously they aren't going to be valued as highly as they might be if they weren't burdened with those liabilities. Perhaps you don't know this, but a few years back legacy automakers were struggling with dealers who would intentionally sabotage the ability to sell electric vehicles by giving test drives in vehicles which were intentionally left without charge. Perhaps you don't know this, but dealers have laws in place to protect them from car companies which force legacy car companies to use them despite the way the perverse incentives could spell the death of the ICE auto industry. There are real structural reasons to value these companies as being less able than Tesla to flourish. Thinking this is the case isn't completely insane.
abzolv 5y ago
If average Jane, who is not a raving Tesla fan, wants to spend circa $140K on an EV, and she has to choose between the Mercedes EQS 580 and the Tesla Model X, which one would you say is the no-brainer (better value for money)? https://www.mbusa.com/en/vehicles/class/eqs/sedan https://www.mbusa.com/en/vehicles/class/eqs/sedan https://www.tesla.com/modelx https://www.tesla.com/modelx That is the future of Tesla. Increasing competition by better products offered by manufacturers with far more experience in manufacturing vehicles, and far superior dealership, service, and parts networks.
- duped 5y ago
  Average Jane doesn't have $140k to spend on a vehicle
- JoshCole 5y ago
  Current price on your link is ~$100k not $140k. It was much more confusing to use the first site, but click through I found something that was also about $100k when you chose the budget options. Meanwhile, for all numbers that both Tesla and Mercedes list publicly the Model X has better numbers. For example, in horsepower and 0-60 the Tesla does better. For some numbers, the Tesla lists the number - like range - but the Mercedes doesn't. Declaring my bias: I think this is because they are much worse in range. Now looking up the numbers: 340 mile range for Mercedes. 350 for the Tesla. I was wrong. Tesla was only better, not much better. Clicking through to order takes several clicks for Mercedes. Along the way of the happy path toward immediate purchase an interstitial pops up and warns me that the price will be changed if I try to order because they don't have the supplies to service the order. Tesla by contrast just lets me order the car with a delivery date in January of next year. To say your post is deeply misleading as to who is obviously the no-brainer in value for money is an understatement.
  - JoshCole 5y ago
    Opened the Mercedes site again to check some more. Tesla allows escalation to ordering in two clicks. After more like seven clicks Mercedes was ready to let me 'save my build' rather than letting me order. They also still continually warn me: > Due to a worldwide shortage, semiconductor chips that are typically present in our vehicles are limited in supply. This has changed the availability of certain features. Vehicle pricing will vary and depends on the availability of certain features. Please verify with your dealer whether any feature is available in a particular vehicle. To learn more, please see your dealer. Whereas Tesla just lets me put in the order with delivery in January.
Muanh 5y ago
Tell me you know nothing about investing without telling me you know nothing about investing. Tesla is very undervalued ATM. Just look at their P/E, growth rate and PEG. Trailing is already below 100 and they are growing profits close to 100% annually.
shrimpx 5y ago
The standard explanation is that the market tends to price in future gains, and Tesla is seen as having far greater growth and market domination potential than the other brands with small P/E.
chmod600 5y ago
"the fundamentals... But if you look at the share price of like, Tesla - it's completely insane." What are the fundamentals of a dollar? Or a bitcoin? Or the Mona Lisa? Part of being an investor means accepting a certain social value to your investments. A lot of people want to be a part of the Tesla story. Maybe they buy a car, or maybe a share of stock. When that story stops being interesting, the PDV of cashflows will start to matter more. (By the way, PDV starts to be harder to pin down when people can't agree on what inflation even means, let alone what it will be in the future.)
- hnfong 5y ago
  The consumer price index sums up the fundamentals of a dollar pretty well I think.
jp42 5y ago
just want to add point that Tesla is not just the car company, they are into energy (battery, panels etc), AI, robotaxi etc areas as well, that could be one of the factor in higher valuation.
deleted 5y ago
[deleted]
qiskit 5y ago
> But if you look at the share price of like, Tesla - it's completely insane. So was the stock prices of amazon, google, etc. You don't expect companies that are opening new industries/businesses to trade like AT&T. You don't expect these companies to pay dividends. > Tech is a pretty egregious sector because of how many business models basically boil down to "we don't actually need to make money if we have a desirable stock". Tech companies are some of the most profitable companies in the world. Apple, google, amazon, facebook, etc print money. These companies make more cash profit that your companies with "fundamentals" make in revenue in a decade. > I don't think we'll be worse off if the next generation of software companies actually focuses on making products people want to buy rather than play games with DAU and user acquisition and etc. That happens in all industries. From finance to hospital equipment to real estate. If the bubble is popping, it isn't a tech bubble that's popping, it's an asset bubble that's popping.
Animats 5y ago
Back in the day, there was an inherent understanding that a stock price is supposed to reflect "the fundamentals" - present value of the company + future earnings. And of course there was some amount of speculation around future earnings, but for the most part companies at least tried to be profitable. Yes. And after each crash, people have to re-learn that.
- throwaway14356 5y ago
  to the moon and back
  - deleted 5y ago
    [deleted]
elihu 5y ago
I'm not any kind of stock valuation expert, but I figure a big part of Tesla's share price (and GME's for that matter) is just the natural market consequence of too many short positions and someone calling their bluff. The current valuation might not be rational, but that's beside the point. A lot of money was invested betting that Tesla would fail (or at least, the stock value would fall), and the consequence of them losing the bet is that they have to buy stock at whatever the price happens to be, thus driving it higher. I see it as just the market correcting itself, not some inherent bug in the system. (There's an argument that maybe allowing people to short stock in the first place is a regulatory bug.)
- illwrks 5y ago
  I like that idea, it's like a perverse deviation from the mean.

izzydata 5y ago

Over a long enough time frame the stock market and even the whole economy behaves like a pyramid scheme as it is dependent on new generations to be more people than the previous one.

rapfaria 5y ago
What about life becoming more efficient?
- shimmy568 5y ago
  There is a limit, growth can't continue forever (especially the exponential growth we've been seeing). We've got to level off at some point
  - scollet 5y ago
    There is still an element of optimization which involves compressing the problem space. This might be why we see thin vertical segments, but they are way over-valued for the optimization they provide. I think VCs' expectations misalign with reality. They are the ones incentivising infinite growth.
  - maigret 5y ago
    Why not? Do you think the society will soon stop inventing new things? They are clear indicators that evolved societies are disconnecting their growth from the energy usage, and especially carbon emissions. With that new heights are possible. But besides this, yes, slow growth back like for most of humanity is also an option and probably not a bad one in the longer term. It’s a very bad option until we are depending on fossil fuels, because we need the money for the transition.
Seattle3503 5y ago
Only if there is no productivity growth.
akira2501 5y ago
That really only seems to be true when you allow unchecked mergers and acquisitions, because once you've eliminated competition continuing to grow the market through innovation is almost impossible. I'm not convinced this is some natural "tech" bubble. This feels like an M&A bubble to me.
- deleted 5y ago
  [deleted]
legitster 5y ago
This isn't really true for the same reason that GDP per capita isn't a constant number.
stjohnswarts 5y ago
That isn't true. Otherwise when the wheels come off (recession/depression) then the market would never recover as it's "just a Ponzi scheme". there is real value in the market and until some communist or anarchist can provide a reasonable solution that doesn't depend on the general human being altruistic 100% of the time I'll just keep going with the market and count on avarice. I'll trust in the general sense of fairness that most humans seem to have even if they aren't altruistic.
maigret 5y ago
This is not true. The stock market is usually valued after the dividends it can pay over a certain number of years, somewhat between 10 and 20. It’s not infinite. If no further grow comes that’s it and the stock keeps it value and will keep paying dividends for the foreseeable time, and has for already 100 years. Sure investors ask for growth in their communication, but the actual thing they are asking for is a better performance than the rest of the market. You could say this bottoms out at 0 but recent event have shown that low negative interests are possible, because stashing cash has a physical cost. Many economies can still work well without population growth, other fail despite population growth. If that was the case that population dictates GDP, then investment choices would be very easy.
david927 5y ago
I think you're right but I don't think it has to be that way. Like others, up until a few years ago, I was a Keynesian. But then I realized that if you allow inflation you're not just "rewarding investment", but you're taking non-participation off the table -- and that's a big problem. Because then people participate in markets not based on value but because they have no choice. That means that you go from value investing to "growth investing" -- which is another name for pyramid scheme and people unironically saying that "the market always goes up."
- smabie 5y ago
  Growth investing doesn't mean the market always goes up? It means that you buy stuff that you think will significantly grow in revenue in the future.
  - david927 5y ago
    Not how I understand it. That just means you're willing to tolerate a higher P/E for that stock. You still expect earnings will eventually cover the price. When you have 401(k) plans which essentially say, "Put your money in the 'market' and it will go up to beat inflation," or you outright say (as many do) that "the market will always go up over time," that's growth investing, and it's straight up a Ponzi scheme. You don't care about the earnings, you just expect to sell for a higher amount than you bought.

eftychis 5y ago

They never showed the fundamentals. There are famous money losses throughout the 20th century. [You can google the charts, or check Graham's book or the biography of Buffett, where he went around avoiding such traps or buying failing companies on the cheap and turning them around by cash infusion.] And of course the infamous example of the Tulip Bulb in 17th century. Companies need to take risk to innovate. A lot as you indicate, and I totally agree, take it too much and doom themselves by never figuring out how to be profitable. These days simply everything that innovates is "Tech." (Now it's turning similarly to sustainability.) How is Tesla "Tech?" It brands itself as that. By that thinking a lot of other automakers should -- and the autopilot doesn't cut it -- just people don't want to see Toyota stock as "Tech." The other thing with "Tech" is that if you don't keep pouring your revenue to take more risks until you dominate over others you will die. So fundamentally, all "Tech" stocks strive towards domination via innovation and growth. Amazon (book seller I know) spend the first part of this century with a pretty bad stock and getting tax credits by investing everything in itself and being cheap extremely aggressively. A lot of "Amazons" did not make it. P.S. If they gave me a 10 year put on Tesla on a sane price I would take it. Alas nobody is taking that bet on the cheap. P.S.2. The funny thing is it is a self full-filled prophesy. Tesla has the market capital to control debt to try a bunch of stuff until it makes it. P.S.3. Fundamentals can be used to increase dividends or do buybacks s.t. the stock price will stay/go up. That is the correlation. P.S.4/tl;dr: The stock market and any commodity market are pyramid schemes -- people get in to make money.

dgb23 5y ago

I don’t understand finance. But with tech I can often see from a mile if something might happen, I don’t have ideas, but I understand „this solves a problem“ or „this is high quality“ versus „this is made up“ or „someone else will do this better“. In my opinion the issue with the stock market is that it is often finance driven and too drawn away from the actual work that is being done and the actual needs and problems potential buyers have. And this problem is specifically worse in tech.

me_me_mu_mu 5y ago
It’s mostly based on feelings and perception imo.

anm89 5y ago

I wouldn't even call it an `understanding` more just a `reality`. Markets can stay irrational longer than you can stay solvent and the last 10 years have been an amazing case in point, but they can't stay irrational literally forever. There's a gravity to it. At some point whatever is inflating the values artificially is going to hit some kind of force against it and people are going to want the underlying cash flow. It would be the equivalent of a sort of financial perpetual motion machine if this never happened. I'd argue that's not an probability but something more like a law of physics and is actually literally constrained by the laws of physics (it requires continual population growth, consumption growth, and growth of energy use to keep some of these valuations rising)

martindbp 5y ago

Tesla made more money last quarter than Ford, GM and Toyota. Toyota made 10x the number of cars as Tesla. Tesla is growing vehicle production 50% YoY, while growing profit even faster (having barely hit economies of scale yet). Tesla has a backlog of orders approaching a year in many regions. Everyone else is losing money on their EVs and can't make them in volume production, can't find the batteries for them, because they started 10 years too late. That's the reason for Tesla's valuation, it's pretty simple. Whether you believe the competition will catch up, or Tesla will fail for some other reason is besides the point. I'm just trying to show that the current valuation is not "insane" given current trends, there's a very real logic to it and not (completely) FOMO. Correction: Toyota's earnings were higher than Tesla, it was operating income that was higher (remembered it wrong).

bink 5y ago
All of those things can be true and Tesla's stock can also be over-valued. A rapidly growing and popular company doesn't justify any arbitrary valuation.
- freeflight 5y ago
  Indeed, which also begs the question; How much of that growth is driven by the over-valuation? Particularly as Musk is no stranger to using creative accounting techniques, and sheer speculation, to make his companies suddenly look more profitable [0] There's also him leveraging his other companies to create growth among each other. Like Starlink being a major customer for SpaceX. Which could either be really smart, or the making of a really impressive house of cards. [0] https://www.cnbc.com/2021/04/26/teslas-bitcoin-speculation-helped-boost-profits-this-quarter.html https://www.cnbc.com/2021/04/26/teslas-bitcoin-speculation-h...
BeetleB 5y ago
> Tesla made more money last quarter than Ford, GM and Toyota. Net income was higher for Toyota - almost double that of Tesla.
- 5y ago

lamontcg 5y ago

I find it funny that crypto supporters will cite the fact that the stock market is acting like a pyramid scheme these days to justify the fact that crypto is no different. Yeah, that's not the defense of crypto that you think it is...

paulpauper 5y ago
yeah, crypto has much more volatility and worse returns compared to large cap stocks.

JoshCole 5y ago

> __completely__ insane. It isn't completely insane. First off, it isn't irrational to allocate an excessive amount of capital to sustainability. The meme that this level of provision is short-sighted is myopic to the extreme, because obviously over the long term it is failure to be sustainable, not being sustainable, which is myopic. Perhaps it is overvalued, but calling it completely insane goes a bit too far. Second, you are obviously right that the present value of their assets doesn't justify their current price, but it is hubris to try and claim that their is no future in which their revenues can justify their increased valuation. Think ahead to the future while skipping the steps to get there and we are obviously incredibly likely to exist in a world in which AI and automated labor is commonplace, in which energy is provided through renewable means, and in which transport from point to point is handled by electric vehicles. It is not __completely insane__ to think Tesla might play a large role in this future. It is quite reasonable to expect they would. Their present course has them explicitly targeting playing a very large role in that sort of future. They have been making progress and inroads in playing that role. They are on track to play that role and can play it if they execute successfully. Whether they do, that is another question, but whether the potential exists? It certainly seems to exist. A lot of times people point at automakers when they try to justify calling Tesla overvalued. The idea that Tesla wouldn't be larger than that industry is silly. That industry spent billions on building out manufacturing capabilities. They took on debt in order to create products which the market doesn't believe will be viable in the future. The projected value of those companies has to account for that and obviously they aren't going to be valued as highly as they might be if they weren't burdened with those liabilities. Perhaps you don't know this, but a few years back legacy automakers were struggling with dealers who would intentionally sabotage the ability to sell electric vehicles by giving test drives in vehicles which were intentionally left without charge. Perhaps you don't know this, but dealers have laws in place to protect them from car companies which force legacy car companies to use them despite the way the perverse incentives could spell the death of the ICE auto industry. There are real structural reasons to value these companies as being less able than Tesla to flourish. Thinking this is the case isn't completely insane.

abzolv 5y ago

If average Jane, who is not a raving Tesla fan, wants to spend circa $140K on an EV, and she has to choose between the Mercedes EQS 580 and the Tesla Model X, which one would you say is the no-brainer (better value for money)? https://www.mbusa.com/en/vehicles/class/eqs/sedan https://www.mbusa.com/en/vehicles/class/eqs/sedan https://www.tesla.com/modelx https://www.tesla.com/modelx That is the future of Tesla. Increasing competition by better products offered by manufacturers with far more experience in manufacturing vehicles, and far superior dealership, service, and parts networks.

duped 5y ago
Average Jane doesn't have $140k to spend on a vehicle
JoshCole 5y ago
Current price on your link is ~$100k not $140k. It was much more confusing to use the first site, but click through I found something that was also about $100k when you chose the budget options. Meanwhile, for all numbers that both Tesla and Mercedes list publicly the Model X has better numbers. For example, in horsepower and 0-60 the Tesla does better. For some numbers, the Tesla lists the number - like range - but the Mercedes doesn't. Declaring my bias: I think this is because they are much worse in range. Now looking up the numbers: 340 mile range for Mercedes. 350 for the Tesla. I was wrong. Tesla was only better, not much better. Clicking through to order takes several clicks for Mercedes. Along the way of the happy path toward immediate purchase an interstitial pops up and warns me that the price will be changed if I try to order because they don't have the supplies to service the order. Tesla by contrast just lets me order the car with a delivery date in January of next year. To say your post is deeply misleading as to who is obviously the no-brainer in value for money is an understatement.
- JoshCole 5y ago
  Opened the Mercedes site again to check some more. Tesla allows escalation to ordering in two clicks. After more like seven clicks Mercedes was ready to let me 'save my build' rather than letting me order. They also still continually warn me: > Due to a worldwide shortage, semiconductor chips that are typically present in our vehicles are limited in supply. This has changed the availability of certain features. Vehicle pricing will vary and depends on the availability of certain features. Please verify with your dealer whether any feature is available in a particular vehicle. To learn more, please see your dealer. Whereas Tesla just lets me put in the order with delivery in January.

Muanh 5y ago

Tell me you know nothing about investing without telling me you know nothing about investing. Tesla is very undervalued ATM. Just look at their P/E, growth rate and PEG. Trailing is already below 100 and they are growing profits close to 100% annually.

shrimpx 5y ago

The standard explanation is that the market tends to price in future gains, and Tesla is seen as having far greater growth and market domination potential than the other brands with small P/E.

chmod600 5y ago

"the fundamentals... But if you look at the share price of like, Tesla - it's completely insane." What are the fundamentals of a dollar? Or a bitcoin? Or the Mona Lisa? Part of being an investor means accepting a certain social value to your investments. A lot of people want to be a part of the Tesla story. Maybe they buy a car, or maybe a share of stock. When that story stops being interesting, the PDV of cashflows will start to matter more. (By the way, PDV starts to be harder to pin down when people can't agree on what inflation even means, let alone what it will be in the future.)

hnfong 5y ago
The consumer price index sums up the fundamentals of a dollar pretty well I think.

jp42 5y ago

just want to add point that Tesla is not just the car company, they are into energy (battery, panels etc), AI, robotaxi etc areas as well, that could be one of the factor in higher valuation.

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qiskit 5y ago

> But if you look at the share price of like, Tesla - it's completely insane. So was the stock prices of amazon, google, etc. You don't expect companies that are opening new industries/businesses to trade like AT&T. You don't expect these companies to pay dividends. > Tech is a pretty egregious sector because of how many business models basically boil down to "we don't actually need to make money if we have a desirable stock". Tech companies are some of the most profitable companies in the world. Apple, google, amazon, facebook, etc print money. These companies make more cash profit that your companies with "fundamentals" make in revenue in a decade. > I don't think we'll be worse off if the next generation of software companies actually focuses on making products people want to buy rather than play games with DAU and user acquisition and etc. That happens in all industries. From finance to hospital equipment to real estate. If the bubble is popping, it isn't a tech bubble that's popping, it's an asset bubble that's popping.

Animats 5y ago

Back in the day, there was an inherent understanding that a stock price is supposed to reflect "the fundamentals" - present value of the company + future earnings. And of course there was some amount of speculation around future earnings, but for the most part companies at least tried to be profitable. Yes. And after each crash, people have to re-learn that.

throwaway14356 5y ago
to the moon and back
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elihu 5y ago

I'm not any kind of stock valuation expert, but I figure a big part of Tesla's share price (and GME's for that matter) is just the natural market consequence of too many short positions and someone calling their bluff. The current valuation might not be rational, but that's beside the point. A lot of money was invested betting that Tesla would fail (or at least, the stock value would fall), and the consequence of them losing the bet is that they have to buy stock at whatever the price happens to be, thus driving it higher. I see it as just the market correcting itself, not some inherent bug in the system. (There's an argument that maybe allowing people to short stock in the first place is a regulatory bug.)

illwrks 5y ago
I like that idea, it's like a perverse deviation from the mean.