3 ms·

It's not about revenue, it's about valuation. The revenue can be whatever you want, the valuation determines long run returns. Tesla could be priced at 20x PE

It's not about revenue, it's about valuation. The revenue can be whatever you want, the valuation determines long run returns. Tesla could be priced at 20x PE or 100x PE and be the same company. Your returns will be vastly different between the two scenarios. OPs point, which is pretty obviously objectively true, is that valuations far exceeded future yields by any fundamental valuation metric. Tech has been valued as if every company will be a pseudo Monopoly like the FAANG companies, which is very unlikely to be true

BobbyJo 4y ago
I mostly agree, I just feel the need that valuation metrics rely on past values, which aren't as useful depending on the company you're talking about. If a company has net income X, but a new high margin product launching next month that could easily double or triple that, their P/E will look ridiculous but , in fact, be quite reasonable.
- adam_arthur 4y ago
  The reason to use past values is because they're known. Anything anticipating the future is speculation, and relies on many assumptions. Check analyst earnings estimates for S&P companies for 2008 and you may be surprised what you find. I fully believe Tesla can be the number one auto maker, and get self driving working to a sufficient extent to be marketable. But what's the upside? A few X at most. To me that risk/reward is pretty awful... many more attractive companies selling at 1x PS and fast growth/smaller market cap that can go up 10x easily over a few years
01100011 4y ago
Talk to a Tesla zealot and this is the story: Tesla masters self-driving and their robotaxis take over global transportation leading to complete and unending dominance. It's almost as if none of them has ever run a business or even studied history. It's best not to try to reason with them at this point. Just smile and walk away. Over time they'll figure it out.

BobbyJo 4y ago

I mostly agree, I just feel the need that valuation metrics rely on past values, which aren't as useful depending on the company you're talking about. If a company has net income X, but a new high margin product launching next month that could easily double or triple that, their P/E will look ridiculous but , in fact, be quite reasonable.

adam_arthur 4y ago
The reason to use past values is because they're known. Anything anticipating the future is speculation, and relies on many assumptions. Check analyst earnings estimates for S&P companies for 2008 and you may be surprised what you find. I fully believe Tesla can be the number one auto maker, and get self driving working to a sufficient extent to be marketable. But what's the upside? A few X at most. To me that risk/reward is pretty awful... many more attractive companies selling at 1x PS and fast growth/smaller market cap that can go up 10x easily over a few years

01100011 4y ago

Talk to a Tesla zealot and this is the story: Tesla masters self-driving and their robotaxis take over global transportation leading to complete and unending dominance. It's almost as if none of them has ever run a business or even studied history. It's best not to try to reason with them at this point. Just smile and walk away. Over time they'll figure it out.