4 ms·

> Not a fun day to be a Tesla shareholder Only if you're fickle and lack conviction. People are talking a lot about "is Tesla at a fair valuation" and I person

by bitops 13y ago

> Not a fun day to be a Tesla shareholder Only if you're fickle and lack conviction. People are talking a lot about "is Tesla at a fair valuation" and I personally believe that it's impossible to know what a fair valuation is until a few more years have elapsed. I could reasonably see Tesla bouncing back to $300/share over the next 18 months or staying at or around $200. The current drops are more likely related to general market unease and opportunism rather than anything endemically wrong with Tesla. Also, with "momentum" stocks I'm sure some people got in looking to make a quick buck and also some people are surely taking advantage of the general shutdown-related cacophony to short the stock so they can buy it at lower prices (I would). Fluctuations like this illustrate why one of the most important qualities an investor can have is patience. If you're trying to get rick quick, you'll be in trouble. But if you invest in solid companies that you understand, you should do well. Provided you do your homework, of course. I'll reiterate Peter Lynch's excellent advice from "One Up on Wall Street" - if the stock drops but the fundamentals still make sense, stick around to see how the story develops.

foobarqux 13y ago
You talk about fundamental value and then throw out a $200-300 share price. What valuation methodology could possibly come up with that absurd number?
- marvin 13y ago
  The correct stock market value of a company is the discounted sum of all its future earnings. This number is impossible to calculate, but investors can estimate it with probabilistic models (a discounted cash flow model, taking into account the probabilities of different scenarios). E.g. a simplification of such a model would be to create some plausible-looking probability histogram for the "fundamental" value of the company in 10 years. Many investors believe there is a significant probability that Tesla will be worth >100 billion in 10-15 years, i.e. one of the world's major automakers (perhaps one of the largest) due to a global shift to electric vehicles and its 5-year head start and patent moat. It's probably worth noting that multiple major analysts have performed such a DCF analysis and arrived at a number in this ballpark. Under these assumptions, a $200-300 share price isn't absurd. I can agree it's speculative and extrapolating a lot. But on the other hand a $40 price as some analysts are calling for, is IMHO more absurd since it ignores some very likely growth prospects. If companies were always valued on "fundamental" value, buying growth stocks would be guaranteed to make you a massive, market-beating return.
  - foobarqux 13y ago
    Can you pointed me to one of these "major analysts" who has come up with $200-300 fundamental value along with a detailed explanation of how they came to that number?
    - marvin 13y ago
      Short answer, no. I don't have access to the actual reports since they are reserved for paying customers, but prominently Deutsche Bank ($200), Northland Capital Markets ($230) and Global Equities ($225) all have price targets considerably higher than the current market price. All of these companies stake their reputation on being right, as most professional analysts do. http://www.streetinsider.com/rating_history.php?q=TSLA http://www.streetinsider.com/rating_history.php?q=TSLA If you have access to analyst reports, the one from Deutsche Bank is probably the one to look at. The best source I can find is this video from August before the recent PT upgrade, but there was an interview somewhere where Dan Galves goes into more detail about the DCF model they are using. http://www.cnbc.com/id/100946446 http://www.cnbc.com/id/100946446 http://www.streetinsider.com/Analyst+Comments/Tesla+Motors+%28TSLA%29+Target+Raised+to+$200+at+Deutsche+Bank%3B+Analyst+Sees+Limited+Negative+Catalysts/8701745.html http://www.streetinsider.com/Analyst+Comments/Tesla+Motors+%... Main point being, there are people with a solid economics background who disagree with your claim of absurdity. You're of course welcome to put your money where your mouth is and short; Tesla was for reference the most-shorted stock on the NASDAQ at $30/share.
      - foobarqux 13y ago
        Price is not the same thing as value and analysts are usually wrong (search for the studies). The important thing in a valuation are the assumptions: You can come up with any number you like, the reader has to decide whether they agree with how you got there. Here is a justified valuation of $67. Tell me what assumptions are wrong how how that would yield a value of >$200. http://aswathdamodaran.blogspot.ca/2013/09/valuation-of-week-1-tesla-test.html http://aswathdamodaran.blogspot.ca/2013/09/valuation-of-week...
        13y ago

by bitops 13y ago

foobarqux 13y ago

You talk about fundamental value and then throw out a $200-300 share price. What valuation methodology could possibly come up with that absurd number?

marvin 13y ago
The correct stock market value of a company is the discounted sum of all its future earnings. This number is impossible to calculate, but investors can estimate it with probabilistic models (a discounted cash flow model, taking into account the probabilities of different scenarios). E.g. a simplification of such a model would be to create some plausible-looking probability histogram for the "fundamental" value of the company in 10 years. Many investors believe there is a significant probability that Tesla will be worth >100 billion in 10-15 years, i.e. one of the world's major automakers (perhaps one of the largest) due to a global shift to electric vehicles and its 5-year head start and patent moat. It's probably worth noting that multiple major analysts have performed such a DCF analysis and arrived at a number in this ballpark. Under these assumptions, a $200-300 share price isn't absurd. I can agree it's speculative and extrapolating a lot. But on the other hand a $40 price as some analysts are calling for, is IMHO more absurd since it ignores some very likely growth prospects. If companies were always valued on "fundamental" value, buying growth stocks would be guaranteed to make you a massive, market-beating return.
- foobarqux 13y ago
  Can you pointed me to one of these "major analysts" who has come up with $200-300 fundamental value along with a detailed explanation of how they came to that number?
  - marvin 13y ago
    Short answer, no. I don't have access to the actual reports since they are reserved for paying customers, but prominently Deutsche Bank ($200), Northland Capital Markets ($230) and Global Equities ($225) all have price targets considerably higher than the current market price. All of these companies stake their reputation on being right, as most professional analysts do. http://www.streetinsider.com/rating_history.php?q=TSLA http://www.streetinsider.com/rating_history.php?q=TSLA If you have access to analyst reports, the one from Deutsche Bank is probably the one to look at. The best source I can find is this video from August before the recent PT upgrade, but there was an interview somewhere where Dan Galves goes into more detail about the DCF model they are using. http://www.cnbc.com/id/100946446 http://www.cnbc.com/id/100946446 http://www.streetinsider.com/Analyst+Comments/Tesla+Motors+%28TSLA%29+Target+Raised+to+$200+at+Deutsche+Bank%3B+Analyst+Sees+Limited+Negative+Catalysts/8701745.html http://www.streetinsider.com/Analyst+Comments/Tesla+Motors+%... Main point being, there are people with a solid economics background who disagree with your claim of absurdity. You're of course welcome to put your money where your mouth is and short; Tesla was for reference the most-shorted stock on the NASDAQ at $30/share.
    - foobarqux 13y ago
      Price is not the same thing as value and analysts are usually wrong (search for the studies). The important thing in a valuation are the assumptions: You can come up with any number you like, the reader has to decide whether they agree with how you got there. Here is a justified valuation of $67. Tell me what assumptions are wrong how how that would yield a value of >$200. http://aswathdamodaran.blogspot.ca/2013/09/valuation-of-week-1-tesla-test.html http://aswathdamodaran.blogspot.ca/2013/09/valuation-of-week...
      - 13y ago