Disclaimer: I am a Tesla shareholder and an ardent supporter of Musk. Forgive the hyperbole below, if any.
But will it justify its stock price?
No amount of metrics can or will justify a company like Tesla's current stock price. At this juncture, you are mostly getting into a wild ride. I state this for the following reasons:
1. Tesla is not a car company. Not anymore. It's an energy company. So all comparisons to existing car companies are void. You need to make new comparisons with energy companies. But then, there is no energy company like Tesla. Exxon is probably a good comparison but heck by that measure, Tesla is super cheap.
2. Tesla is run by a Maverick CEO. Admittedly, none of the car or energy company CEOs fit that bill. Tillerson probably came close but he is not with Exxon anymore. What Musk can or will do, is hard to predict. Simply put, there isn't enough data to support such predictions. Tesla's past has been very volatile. So basically it's very hard to model Musk's future plans. He has started digging tunnels now.
One can just go wild imagining the possibilities for Tesla.
They could become a utility company. They could be the storage backbone of many utility companies.
The supercharger network in itself can be highly valuable. Imagine if all cars were to go electric and Musk strikes a deal with all the automakers to make their cars compatible with the supercharger network.
We are just getting started with Tesla and it's super difficult to put a future value on them. Even a 12 month projection is pretty hard.
So analysts are doing the best they can. Draw projections based on tangible raw numbers. Gigafactory growth and Model 3 growth. This growth will not be linear by any measure. So expect dips in the stock price accordingly.
Parent post is about why using numbers is not necessarily correct because those numbers are based on assumptions that are not valid in Tesla's case.
As an investor but not a fan of Tesla, I share his view. "Maverick CEO" just means that he's unpredictable and has made several major pivots before, so expecting Tesla to follow the trajectory of existing car manufacturers is quite imperceptive.
>Parent post is about why using numbers is not necessarily correct because those numbers are based on assumptions that are not valid in Tesla's case.
And my post is about how these things are just said, without any evidence. I thought this is a forum of critical thinkers? And yet we have people saying that "well, it's not really a car company" or "but Elon!" trumps actual data.
>so expecting Tesla to follow the trajectory of existing car manufacturers is quite imperceptive
This isn't about the path to get there. At the end of the day, cars are cars, and Tesla isn't the only one building EVs now. To think that they are going to, somehow, have margins in the multiples of existing companies in both the automobile, solar or battery business requires explanation. "Elon is unpredictable" isn't one.
Tesla is as much a car company as GM, BMW, Honda, and Toyota. >90% of Tesla's revenue is from selling cars. They certainly have aspirations to be more, but they aren't there yet.
Of course, most of the revenue today is generated from selling cars. But we were talking about the value of the company. And this includes expected _future_ returns. And, obviously, Tesla has more than just aspirations. They have built a large part of the Gigafactory already.
Honda certainly is not a car company - but much more than this as well. This was not a good example for your case.
Same with GM. I am not sure if your intention was to list companies that are much more than car companies? You were just making my case.
> Of course, most of the revenue today is generated from selling cars. But we were talking about the value of the company.
You were talking about what Tesla is. Despite its aspirations, Tesla is a car company right now.
> I am not sure if your intention was to list companies that are much more than car companies?
That was my intention. The discussion was about how we can't compare Tesla to GM or Honda because Tesla "isn't a car company". My point is that those other companies are not either, and so that is not an argument to reject the comparisons out-of-hand.
>No amount of metrics can or will justify a company like Tesla's current stock price.
And this is incorrect. It's very easy to model things like "What if every person on the planet buys a Model S every year at X price and X margins.", and create a valuation model from there. Then make more reasonable projections.
This dismissal of numbers here is disturbing. Believe it or not, Tesla isn't the most original company ever to grace the earth; it has to do business in the business world like everyone else.
And here's the thing: TSLA is priced to become one of the biggest car companies on the planet. Anything short of that, from an investment standpoint, is a failure. If Tesla achieves that..your returns will be mediocre, even though the company has been wildly successful. What is the difficulty in understanding that?
Scaling a car company is incredibly difficult. For example recalls and design issues are less of an issue for a low volume/high margin car like the Model S which, has been plagued with flaws leading to expensive fixes like titanium battery shields.
If I were a Tesla stockholder, I'd want Tesla to focus harder on manufacturing and scaling production of electric cars instead self-driving technology.
The conventional wisdom in the auto industry now is that in a few years any vehicle without good level 4 autonomous technology won't be salable. There's not much point in scaling production if your sales fall off a cliff in 10 years because GM or Daimler beat you on the technology side.
But will it justify its stock price?
No amount of metrics can or will justify a company like Tesla's current stock price. At this juncture, you are mostly getting into a wild ride. I state this for the following reasons:
1. Tesla is not a car company. Not anymore. It's an energy company. So all comparisons to existing car companies are void. You need to make new comparisons with energy companies. But then, there is no energy company like Tesla. Exxon is probably a good comparison but heck by that measure, Tesla is super cheap.
2. Tesla is run by a Maverick CEO. Admittedly, none of the car or energy company CEOs fit that bill. Tillerson probably came close but he is not with Exxon anymore. What Musk can or will do, is hard to predict. Simply put, there isn't enough data to support such predictions. Tesla's past has been very volatile. So basically it's very hard to model Musk's future plans. He has started digging tunnels now.
One can just go wild imagining the possibilities for Tesla.
They could become a utility company. They could be the storage backbone of many utility companies.
The supercharger network in itself can be highly valuable. Imagine if all cars were to go electric and Musk strikes a deal with all the automakers to make their cars compatible with the supercharger network.
We are just getting started with Tesla and it's super difficult to put a future value on them. Even a 12 month projection is pretty hard.
So analysts are doing the best they can. Draw projections based on tangible raw numbers. Gigafactory growth and Model 3 growth. This growth will not be linear by any measure. So expect dips in the stock price accordingly.