
Tesla races past $100B in market valuation - nerdkid93
https://www.reuters.com/article/us-tesla-stocks/tesla-races-past-100-billion-in-market-valuation-idUSKBN1ZL24Z
======
nerdkid93
I for the life of me cannot figure out what could possibly justify this
valuation for Tesla. Sure, their cars are pretty great, they have a ravid
fanbase, and they have a pretty entertaining CEO who excels at driving
interest in the company. They would need to execute perfectly and deliver more
cars to customers than Volkswagen in a few years to justify such a valuation
right now, and I just don't see that happening for quite some time.

~~~
donogh
Tesla is the Apple of the auto industry. They are getting stellar customer
satisfaction ratings, which is translating into brand loyalty[1]. They've
built an ecosystem between their above-average EV hardware, industry-leading
software (with frequent improvements), and a top-notch charging network.

I can see some automakers matching them on hardware, but they have a huge lead
in software. Traditional car manufacturers update software at a glacial pace
and, aside from Mercedes' recent voice control system, I haven't seen anything
come close.

Also, Musk is right: no one else has even come close to matching the 2012
Model S. Tesla's lead is starting to look unassailable (in the medium term).

Not to mention their foothold in China, which can only get stronger with the
introduction of a Chinese-designed model.

[1] [https://cleantechnica.com/2019/01/09/tesla-has-the-
highest-c...](https://cleantechnica.com/2019/01/09/tesla-has-the-highest-
customer-loyalty-of-all-car-brands/)

~~~
ec109685
One thing Tesla doesn’t have is the lock in that Apple has. If you are using
iPhoto, iWatch and iMessage, switching to another manufacturer is hugely
disruptive.

I totally agree that Tesla’s software chops are light years ahead.

~~~
bearcobra
SuperCharging seems to be the play to build up some lock in. Not sure how
successful it will be, but I can definitely see it encouraging repeat
purchases

~~~
cptskippy
I would disagree. Tesla's Supercharger originated years before the industry
settled on the CCS Connectors and well before CCS Combo connectors came about.
At it's inception it was technically superior to anything available.

When the EU settled on Combo 2, Tesla started shipping Model 3s with it as
well as updating Superchargers.

The US market is a very different environment than Europe and still hasn't
adopted a common standard. The 2020 Nissan Leaf ships with J1772 and CHAdeMO
options which are incompatible with the CCS Combo 1 other automakers are
shipping. That means a charging station needs to have at least 2 different
connectors, 3 if it wants to offer the fastest possible charging because while
J1772 chargers are compatible with CCS equipped cars, CCS Chargers are not
backward compatible with J1772 vehicles.

Tesla owners are not locked into Superchargers and are able to charge at other
chargers via adapters. All Teslas in the US come with a J1772 adapter, and you
can purchase a CHAdeMO adapter.

Superchargers are also generally located along highways to facilitate long
road trips, something most other EVs are incapable of even if the
infrastructure existed.

Tesla sold more EVs in the US in 2019 than all other auto manufacturers
combined. The next two best selling EVs (Leaf and Bolt) don't even share a
common connector. Building out a charging network that's compatible with other
EVs would only serve to benefit their competition. As it stands the
Supercharger is a nonbinding value add for any Tesla owner.

------
nabla9
All I see is verbal narratives that don't justify the price. Just saying that
Tesla is good company, grows fast, has advantage, is not enough. Everything
can be overvalued.

Narratives without numbers are just as valid for $100B valuation as they are
for $500B or $1 Trillion.

Has any Tesla investor done the investor math justifying the price compared
against SP500 Index Fund for 6% total return for example.

Even if Tesla's revenue and profit margin equal Toyota 10 years from now, I
can't see it being worth $100B today. Permanently higher product margins and
no viable competition?

~~~
Voloskaya
> Has any Tesla investor done the investor math justifying the price compared
> agaomst SP500 Index Fund for 6% total return for example.

Come on, no one does this for any stock. No stock has a value exactly in-line
with math would tell you. Stocks like Amazon have been completely overvalued
(as compared to what math tells you) for close to 20 years. If you haven't yet
learned that stock markets are based more around hype and emotions than math,
don't invest.

------
rb808
So about the same as Ford, GM and FiatChrysler combined. Crazy times. Wow even
Uber market cap is higher than each of those three. Feels like 1999.

~~~
0xB31B1B
WRT Uber, market seems to value recurring revenue streams higher than non
recurring streams (ie average customer buys a new car every 7 years, likely
from different manufacturers, but an Uber customer uses the product a few
times per month). Auto makers could be valued more highly if they can sell
subscriptions to something.

~~~
ccheney
Tesla recently started billing $10/mo for internet service[1] (might be at a
break-even price). They've also started to release in-app DLC ($2k) that makes
your car accelerate quicker[2]

[1]
[https://www.tesla.com/support/connectivity](https://www.tesla.com/support/connectivity)

[2] [https://electrek.co/2019/12/18/tesla-acceleration-boost-
upgr...](https://electrek.co/2019/12/18/tesla-acceleration-boost-upgrade-
leaks-model-3/)

~~~
mediaman
Most of the major auto makers are trying to sell various tack-on services to
get that ARR honey. Car-based internet is one of them.

It's tough though: most people don't care about car based internet when their
phone already has it.

It doesn't feel like anyone has yet found a recurring revenue stream for
vehicles that has met any actual demand.

~~~
davidgould
I did not purchase the GM connectivity because it didn't provide any value,
the features were lame or useless and it was no loss not having them after the
trial period ended.

The Tesla connectivity is really part of the whole car experience and I would
probably be willing to pay quite a bit more, I was surprised by how reasonable
the price was.

------
aynyc
I don't know how to value a stock, but after riding in my friend's Tesla a few
times on road trips. I seriously doubt I'll buy a ICE car ever again unless
for specific purposes (mini-van). I know 10 people who owns Tesla, the 6 or so
friends I've spoken about it feel the same way as I do. If this keeps up, I
think Tesla's stock price is under valued.

~~~
njarboe
The Model-X is really like a mini-van. High price, but similar functionality.
Seats five adults + two kids. Maybe Tesla will drop the price over time. I
think Elon Musk built it as the car he would want to take his family around
in. He later said he regretted building that model as it took too long to
develop and set back introducing the model three by a year or two.

~~~
aynyc
Don't the kids seats face backwards?

~~~
gangstead
That was an option initially for Model S. Two backwards facing jump seats for
kids. They don't appear to offer that anymore, probably hoping you'll by an X
instead. X has 2 regular forward facing seats in the third row.

~~~
njarboe
Or maybe Elon Musk wanted to be able to fit his whole family in the S and when
the X came out that was no longer needed.

------
coder1001
Given the expected improvements in battery efficiency over time and the brand
Tesla built for itself as THE company to buy from if you want an EV, I would
say Tesla's best days are yet to come.

~~~
muzika
Spot on.

------
yalogin
The biggest advantage they have is their supercharging network. Every
manufacturer is focusing on ADAS and electric cars but no one is focusing on
the network. That is their biggest advantage and the only reason to buy a
Tesla, granted their cars are great but without the network it’s just an
expensive commute car.

~~~
pretendscholar
Something I've never understood is why you would want your auto manufacturer
to own energy stations. Why wouldn't you just leave that up to the gas
stations?

~~~
Dirlewanger
I have incredibly little faith in industries to establish standards nowadays.
Every car manufacturer will eventually make their own charging network, all
with their own proprietary connectors. Any aftermarket connector to try and
work for all of them will be sued out of existence.

------
dcchambers
I am ready for an electric vehicle - but I can't get over how much I dislike
the interior of the Model 3 and Y. I hate the single-giant-touchscreen
interface they have settled on. I get it, it's cheap for them to produce _and_
it looks 'futuristic.' I firmly believe physical knobs and buttons are better
for most things in a car. The Model S and Model X are better, but they're
pretty much out of my price range.

I also want a proper SUV/truck - the Model X/Y don't cut it, and don't get me
started on the cybertruck...

~~~
_Microft
I'm convinced that the Model 3 interior is already designed for a self-driving
future. The screen is meant to show movies not gauges.

~~~
dcchambers
I agre with you - but after seeing the progress of self-driving vehicles over
the last few years, I think we're still many years away from 100% hands-off,
sleep-in-the-back-seat self-driving vehicles.

It's been a very quick ramp up to 90% self-driving capability, but the last
10% is going to take a lot longer than people realize.

------
totalZero
All the people who had the balls to sell TSLA short have already gotten hurt
in the come-up, and although everyone thinks this market as a whole is going
to correct soon, nobody wants to take the risk of calling a top.

So yeah, expect the name with 14%+ short interest to keep rallying in this
market, for the near term.

One thing I do wonder about is how the roll-off of tax credits will affect
their US sales.

~~~
nabla9
Is there any hard data showing that someone significant amount of short
selling is caused by speculation and it's not hedging?

Short selling is used used as a hedge against downside risk of a long
position. It's reasonable strategy for big investors who have huge stake on
Tesla to short sell to manage the risk.

>A "short sell against the box" is also known as "shorting against the box."
Sellers use this technique when they do not actually want to close out their
position on a stock. The strategy is generally used by investors who believe
the stock is due for a fall in price, but do not wish to sell because they
believe the fall is temporary and the stock will rebound quickly.

[https://www.investopedia.com/terms/s/sellagainstthebox.asp](https://www.investopedia.com/terms/s/sellagainstthebox.asp)

~~~
jotakami
Short selling, by definition, means you don’t own the stock when you sell it.
Investors with huge stakes in Tesla would just sell, not short sell.

Buying a put option would be how big investors manage downside risk, or
possibly selling covered calls.

~~~
nabla9
Short selling against stock you own is called short sell against the box.

>A "short sell against the box" is also known as "shorting against the box."
Sellers use this technique when they do not actually want to close out their
position on a stock. The strategy is generally used by investors who believe
the stock is due for a fall in price, but do not wish to sell because they
believe the fall is temporary and the stock will rebound quickly.

[https://www.investopedia.com/terms/s/sellagainstthebox.asp](https://www.investopedia.com/terms/s/sellagainstthebox.asp)

------
kgwgk
The article doesn’t mention (or I’ve missed it) the short squeeze aspect which
is definitely one of the drivers.

[https://investorplace.com/2020/01/play-tesla-stock-short-
squ...](https://investorplace.com/2020/01/play-tesla-stock-short-squeeze/)

~~~
dougmany
from that link: >“We are encouraged by Tesla’s execution and think it deserves
to be among the world’s most valuable auto companies, and is perhaps the most
important auto company in the world given its EV leadership. However, we think
investors will be presented with more attractive opportunities to own the
stock in the future,” Jonas said.

It's that "opportunities to own the stock in the future part" that got me.
People just want to own the stock. Tesla has gotten big enough so it is pretty
unlikely to fail. Customers love the product, there are several "it is the
future" features. People want to own a part of that. I don't think many people
are selling because of that. Even if it is really expensive right now.

~~~
kgwgk
> Tesla has gotten big enough so it is pretty unlikely to fail. Customers love
> the product, there are several "it is the future" features. People want to
> own a part of that.

Wasn't that also true eight months ago? The stock was trading then at $180
rather than $590.

~~~
grey-area
The market is often irrational and inefficient.

~~~
kgwgk
Of course!

------
sillysaurusx
If you're wondering what could possibly justify $100B, think in terms of "What
if Tesla put all the other car companies out of business?"

This isn't as unlikely as it seems:
[https://twitter.com/whyvert/status/1219288360096694273](https://twitter.com/whyvert/status/1219288360096694273)

Trucking revenue was $700B in 2017. There's a lot of room to grow.

~~~
notJim
He's comparing the most popular car from Tesla to some of the least-popular
cars from the other manufacturers. Audi sold 200k cars in 2019, but they were
SUVs, not sedans. I would guess the Model 3 sales will crater when the Model Y
comes out.

~~~
sillysaurusx
I wonder how we'd generate a fairer graph. Is the data available anywhere?
(Ideally the raw data of sales by manufacturer bucketed by vehicle type.)

------
hnarn
Beyond the expected comments about Tesla being the iPod of the auto industry,
I personally feel like these types of valuations during the beginning of an
economical slowdown can be judged by the duck test. If it looks like a bubble,
and sounds like a bubble, it will probably pop like a bubble. Unfortunately,
most of the time this opinion will be grouped together with "Tesla haters", of
which I'm definitely not one. I love Tesla and I want them to succeed, but
runaway valuations based on hopes and dreams are normal in a bubble, and when
you look around I see a lot more factors saying "yes" than those saying "no"
when I wonder if this is another tech bubble or not. When valuations will
level out though, noone knows.

~~~
riantogo
What makes you think it is runaway valuation? And could that same reasoning be
applied to Google, Amazon, Apple if we go back in time when they were just
finding their footing?

As someone who drives a model 3 on autopilot everyday I would say the stock is
rather underpriced.

------
SergeAx
If you check out some of the automotive AI companies, you will see half a
dozen names like Nuro, Aurora, Momenta, TuSimple, Pony, Zoox. There are more
in the neigbourhood with tech like lidars, computer vision and so on.

Those companies has literally NOTHING beyond software and early prototypes,
but they still are valued at _billions_ of dollars each. So, compared to them,
what should be a valuation of a profitable company with large scale
production, foothold in China, massive and ever growing real life datasets and
so on and so on?

~~~
JohnJamesRambo
Probably less than the combined valuation of GM and Ford when each sells an
order of magnitude more cars than Tesla.

[https://www.goodcarbadcar.net/2019-u-s-auto-sales-figures-
by...](https://www.goodcarbadcar.net/2019-u-s-auto-sales-figures-by-brand/)

Even if we consider that a stock valuation indicates what we THINK a company
might be worth in the far far future it doesn’t make sense.

~~~
SergeAx
This is exactly my point: you are valuing TSLA as a car maker, and I along
with the market prefer to value it as tech company.

~~~
JohnJamesRambo
What is tech about it? Cars and batteries aren’t software you can easily make
endless clones of and sell over and over again.

~~~
SergeAx
Actually, lot of Tesla cars is software, it is wastly superior to anything on
the market right now, and it is worth to mention they are updating it quite
frequently. Also there are datasets, like I said.

------
rvz
Given that they previously had a surprise profit in the last quarter, there is
also a degree of risk in what happens in the next quarter as they have been
unprofitable for years despite huge revenues.

Normally, I would stay away from throwing money at anything that is at an all
time high (ATH) and would sell now or close to less than the ATH price at this
point before it starts to dive with a wave of sellers.

------
sjg007
I dunno. I want a Tesla as my next car and a lot of folks have said similarly.
I am tired of getting gas every 2 weeks or so and I am really tired of oil
changes. If I can charge at home and at work that seems to be just right. I'd
probably still have a bigger gas family hauler but day to day a Tesla.

~~~
karkisuni
Unless your commute is >50 miles one-way, there's no need to charge at work
unless its incredibly convenient. I use a standard wall plug to charge my
Model 3 at home and still I'm back to full in under 12 hours after work. If
you want to bring that down to 2 hours, you can get an RV plug or a home EV
charger installed.

If there's always an open charger at work, go for it, but I think people still
overestimate how often they'll need to charge.

------
andrewmcwatters
Book value, for reference, is closer to $32-ish dollars a share.

------
heedlessly3
How is Tesla worth more than Ford? Their F-150 alone outsells all Tesla models
combined

~~~
quantdev
Future profitability is how equities are priced. Ford is expected to not be
(very) profitable while Tesla is. Number of units sold is irrelevant.

~~~
heedlessly3
Tesla has a much greater chance of collapsing. Their operating and net incomes
are negative. Meanwhile Ford is rolling in money.

------
omegant
The valuation started climbing the second half of the year after the good
production and sales numbers were published. But it had already plateaud, then
the China megafactory presentation happened and the little dance that Elon
made, seemed to help grab some attention there. This is enterely my
(completely ignorant) guess, but it wouldn’t surprise me in the least, if most
of the recent shares buyers were chinese. Is there any way to look were the
buy orders are coming from?

------
maxdo
Key answer is margin , their margin is high , traditional Automakers - low .
With things like cyber truck , the gap is getting bigger.

~~~
alharith
My speculation (and this is all speculation at the end of the day to some
degree) is I also think the success of other companies impact each other, such
as the recent successful SpaceX abort test. For homework one night I will run
an analysis showing the rise and fall of Tesla and SpaceX stock over each
other mapped to positive news. I am hypothesizing there is a correlation.

~~~
jotakami
SpaceX is not publicly traded, so there’s no stock price to use for such an
analysis

~~~
alharith
My company is also not publicly traded, but rest assured investors and
analysts still attach a valuation to it.

------
_ph_
Just looking at the current revenue, the valuation of Tesla seems increadible
high. But there are quite a few reasons for the optimism connected to Tesla.

Tesla by a fair margin owns the market for electric cars. So anyone who thinks
that electric cars are the future, should expect Tesla to do quite well. All
big car companies are trying to keep up with Tesla in electric car tech and
additionally, if the transition comes, are burdened with a lot of production
facilities for ICE cars.

Tesla is also much more than just cars, they have their own charging
infrastructure, battery manufacturing, might play a big role in cell
manufacturing going forward and are getting important in the energy sector,
which might overtake the car business one day.

Also, Tesla is growing exponentially. This gives a lot of growth fantasy, that
they might get to the size of Amazon one day, which would mean a multiple of
stock value compared today.

But most importantly, and that is the reason they have such a strong support
amongst their current and potential customers: they keep innovating. A bit
like Apple of the old, if they announce a new product, prepare to see
something really new. While traditional car manufacturers keep iterating on
their products, Tesla has completely new things, just think of the Cybertruck.
Which other car annoucement got that much press coverage as the Cybertruck?
Also, the Semi could get huge.

There are also some very technical factors driving the recent raise of the
stock: there have been quite a few good, if not great news (Q4 sales numbers,
Gigafactory 3 operating within 1 year of the building start, Gigafactory 4
planned). Then there is still a huge amount of stock shorted, so while it not
might be a full short squeeze, the shorts need to cover the stocks they
shorted. Finally, Tesla might join the S&P 500, which means, that a lot of
institutions have to buy Tesla stock, which will drive it up further, at least
short-time.

------
cestith
This is near the market valuation on IBM.
[https://seekingalpha.com/article/4318281-ibm-turnaround-
is](https://seekingalpha.com/article/4318281-ibm-turnaround-is)

Watch for some adjustments when people take (legal or publicity) action over
troublesome app and website design.

[https://twitter.com/tedstein/status/1144270122959417346](https://twitter.com/tedstein/status/1144270122959417346)

[https://twitter.com/tedstein/status/1219406746868953088](https://twitter.com/tedstein/status/1219406746868953088)

------
cedivad
I would just like to point out this is 75% of Bitcoin's market cap, and at
this point I'm not sure what the bubble is anymore. Maybe both? Or maybe TSLA
proves BTC's demand could have been genuine?

Graph:
[https://twitter.com/cedivad/status/1220032154912088064](https://twitter.com/cedivad/status/1220032154912088064)

------
richycaat
I think it's great more technology will come from it

------
lowdose
Is Tesla using image recognition to make a driver profile of every number
plate Tesla detects in the wild?

~~~
TheGallopedHigh
Why would they do that?

~~~
lowdose
Would that be a big part of the solution to the self driving car puzzle?

~~~
zlynx
Shared across the entire state of California: "037-ADD brakes randomly for
squirrels."

