3 ms·

>It seems like people often tend to ignore the fact that Tesla makes really solid cars Most Tesla fans tend to ignore the fact that building a solid car doesn'

>It seems like people often tend to ignore the fact that Tesla makes really solid cars Most Tesla fans tend to ignore the fact that building a solid car doesn't mean the company should be valued at a bajillion dollars. Stern's Prof. Damodaran (of online valuation course fame) believes "the value per share estimate... [of] Tesla is between $110 and $115 per share." He might not be right, but at least his model is based on real-world projections and shows the magnitude of optimism/hype behind Tesla's share price. There's a lot of talk about about Tesla being a startup or a tech company. In reality, they're a car company (albeit one that's doing a few things better/differently), and need to be looked at in that context.

marvin 12y ago
Plenty of DCF models predict a Tesla share price which is higher than today's closing price. The problem is that they necessarily must rely to a heavy degree on assumptions about the future. Given that any realistic DCF model of Tesla needs to be probabilistic to some degree (measure different scenarios against each other) and that a company's true market value is still the unknown present-value adjusted sum of all its future earnings, we are still going to see massive disagreement about Tesla's correct valuation in the years ahead. Contemptuous comments about bajillion-dollar valuations and hype don't provide any value to this discussion. If you're arguing from authority, it's also worth pointing out that Damodaran was uncertain about his valuation in the comment thread after his latest valuation of Tesla.
- hnnewguy 12y ago
  >Contemptuous comments about bajillion-dollar valuations and hype don't provide any value to this discussion. The OP asked why the stock was down, and whether this was a buying opportunity. I offered perspective that it might not be, based on the analysis of someone respected in the field. I understand that DCF models can produce any numbers you wish (as does Prof. Damordaran; says so right in the article). But there's his model and there's his numbers, based mainly off assumptions that Tesla builds cars. Tell me, what value did your comment add to the discussion? If I sound "contemptuous", it's because the hype and fandom is tiring. Read the comments in this thread ("Tesla <3") or on Prof. Damodaran's article ("You can't vaue Tesla unless you've driven one!").
  - marvin 12y ago
    Morgan Stanley's latest DCF arrived at $320/share, Goldman Sachs's arrived at $200, for instance. If your goal was to contribute by providing a contrarian view, that is fair enough and I might have misread the tone of your comment. I am merely pointing out that it is not just noveau riche kids and hype train riders who figure that Tesla is a good investment even at the current price - I figure that this is an interesting point, since my impression is that the financial press says the opposite.
- 001sky 12y ago
  Given that any realistic DCF model of Tesla needs to be probabilistic to some degree (measure different scenarios against each other) and that a company's true market value is still the unknown present-value adjusted sum of all its future earnings, we are still going to see massive disagreement about Tesla's correct valuation in the years ahead. Contemptuous comments about bajillion-dollar valuations and hype don't provide any value to this discussion. This sentiment is mis-placed. Markets don't "argue" over prices. And DCF's don't set valuations based on measured anything. The DCF is there to simply inform the prejudices of market partcipants. The utility of DCfs is simply to get some insight into people's predudices. This is arguably more helpful than simply pretending that any single set of prejudices is more or less {correct, useful, interesting}.
michaelbuckbee 12y ago
I feel like Tesla is a car company only because that's the only way that they can prove to the rest of the industry that their technical innovations work. I always kind of thought that the 'real money' for them wouldn't be in making cars, but licensing their tech to all of the larger automakers.
_delirium 12y ago
There's a lot of talk about about Tesla being a startup or a tech company. In reality, they're a car company (albeit one that's doing a few things better/differently), and need to be looked at in that context. I've been thinking about this a bit lately, more generally. My impression is that what counts as a "tech startup" in the past few years is more of a cultural question than a business, technological, or economic question. Now whether that's a good or bad thing is another question. There is something to the cultural resemblance, though I worry that it's papering over pretty significant differences, which might in some cases be more important than the cultural similarities. Tech startups are, to some extent, just those new companies that culturally use the language of, and interact with, the social milieu of the startup scene. One has to have a general interest in technology, but it can range from deep to very superficial. Tech startups can be wholly based on developing novel technology; or their level of technology might not extend much further than "has an Android app". They could be bootstrapped capital-light companies, or capital-intensive companies in traditional industries. What seems to matter to the classification is more of a style or culture or attitude. They aren't really distinguished by using technology, because everyone does that now. They aren't even distinguished by technology being their "thing", because many companies seen as tech startups culturally are actually pretty light on the technology— e.g. AirBnB doesn't really use technology more than any other travel-industry player does... they're mostly a new-business-model play, which happens to deploy the business model through a website, because nearly everything in travel has gone through a website for 10+ years now. My guess is that we'll start to differentiate again a bit more in the coming years, based on more structural and less cultural factors.

marvin 12y ago

Plenty of DCF models predict a Tesla share price which is higher than today's closing price. The problem is that they necessarily must rely to a heavy degree on assumptions about the future. Given that any realistic DCF model of Tesla needs to be probabilistic to some degree (measure different scenarios against each other) and that a company's true market value is still the unknown present-value adjusted sum of all its future earnings, we are still going to see massive disagreement about Tesla's correct valuation in the years ahead. Contemptuous comments about bajillion-dollar valuations and hype don't provide any value to this discussion. If you're arguing from authority, it's also worth pointing out that Damodaran was uncertain about his valuation in the comment thread after his latest valuation of Tesla.

hnnewguy 12y ago
>Contemptuous comments about bajillion-dollar valuations and hype don't provide any value to this discussion. The OP asked why the stock was down, and whether this was a buying opportunity. I offered perspective that it might not be, based on the analysis of someone respected in the field. I understand that DCF models can produce any numbers you wish (as does Prof. Damordaran; says so right in the article). But there's his model and there's his numbers, based mainly off assumptions that Tesla builds cars. Tell me, what value did your comment add to the discussion? If I sound "contemptuous", it's because the hype and fandom is tiring. Read the comments in this thread ("Tesla <3") or on Prof. Damodaran's article ("You can't vaue Tesla unless you've driven one!").
- marvin 12y ago
  Morgan Stanley's latest DCF arrived at $320/share, Goldman Sachs's arrived at $200, for instance. If your goal was to contribute by providing a contrarian view, that is fair enough and I might have misread the tone of your comment. I am merely pointing out that it is not just noveau riche kids and hype train riders who figure that Tesla is a good investment even at the current price - I figure that this is an interesting point, since my impression is that the financial press says the opposite.
001sky 12y ago
Given that any realistic DCF model of Tesla needs to be probabilistic to some degree (measure different scenarios against each other) and that a company's true market value is still the unknown present-value adjusted sum of all its future earnings, we are still going to see massive disagreement about Tesla's correct valuation in the years ahead. Contemptuous comments about bajillion-dollar valuations and hype don't provide any value to this discussion. This sentiment is mis-placed. Markets don't "argue" over prices. And DCF's don't set valuations based on measured anything. The DCF is there to simply inform the prejudices of market partcipants. The utility of DCfs is simply to get some insight into people's predudices. This is arguably more helpful than simply pretending that any single set of prejudices is more or less {correct, useful, interesting}.

michaelbuckbee 12y ago

I feel like Tesla is a car company only because that's the only way that they can prove to the rest of the industry that their technical innovations work. I always kind of thought that the 'real money' for them wouldn't be in making cars, but licensing their tech to all of the larger automakers.

_delirium 12y ago

There's a lot of talk about about Tesla being a startup or a tech company. In reality, they're a car company (albeit one that's doing a few things better/differently), and need to be looked at in that context. I've been thinking about this a bit lately, more generally. My impression is that what counts as a "tech startup" in the past few years is more of a cultural question than a business, technological, or economic question. Now whether that's a good or bad thing is another question. There is something to the cultural resemblance, though I worry that it's papering over pretty significant differences, which might in some cases be more important than the cultural similarities. Tech startups are, to some extent, just those new companies that culturally use the language of, and interact with, the social milieu of the startup scene. One has to have a general interest in technology, but it can range from deep to very superficial. Tech startups can be wholly based on developing novel technology; or their level of technology might not extend much further than "has an Android app". They could be bootstrapped capital-light companies, or capital-intensive companies in traditional industries. What seems to matter to the classification is more of a style or culture or attitude. They aren't really distinguished by using technology, because everyone does that now. They aren't even distinguished by technology being their "thing", because many companies seen as tech startups culturally are actually pretty light on the technology— e.g. AirBnB doesn't really use technology more than any other travel-industry player does... they're mostly a new-business-model play, which happens to deploy the business model through a website, because nearly everything in travel has gone through a website for 10+ years now. My guess is that we'll start to differentiate again a bit more in the coming years, based on more structural and less cultural factors.