Understanding Tesla's Current Stock Valuation

[DwightFrye]

This is a well reasoned, easy to follow explanation by Rob Mauer on his Tesla Daily YouTube channel of why Tesla's stock valuation bit the big one a couple of days ago after the Q1 2023 earnings. And what to expect over the next year or two.

It definitely isn't a stock for day traders or those faint of heart. When I saw the 9.75% drop the other day I said a word that got my mouth washed out with soap when I was 3 years old. But if you can sit tight I'm still convinced that it will be a good retirement income source. Elon's plan appears to be to slash prices to capture market share while continuing to improve production methods to drive down costs and expand and/or build new factories to meet that coming demand. This means lower short term profits. Which the investor community doesn't like.

I am approaching age 68 and don't need the TSLA money. Yet. But I wish to be able to tap it when I am 70. I'm cautiously optimistic as they say. And pretty confident that they will have a substantial revenue stream from their other products in addition to their vehicle sales.

 

[joekingcorvette]

I bought some Tesla stock a few years ago and really tired of the frantic dips every time Elon put a comment on the news or twitter. I broke even with it and would not want to get too aggressive with buying lot's of it. I hope you do well! I do not believe 2 years will accumulate much with all the day traders and profit takers. I think it's more of a 10 year growth that might make you some money.

 

[alarmguy]

If you believe any of this, why not just buy bit coin? It's the same thing. Laughable, one and a half years ago the stock peaked at over $400 a share, today it is $165.

Really? One cant find a better performing company out of all the companies and stocks in the world?
To this day, Tesla makes vehicles like all the other vehicle makers in the world and for some reason, dreamers think this company deserves to sell at FIFTY times earnings, it was 100 times earnings and sliced in half.
Other companies selling the same product all over the world stock ranges from 4 to 10 times earnings. What makes Tesla so special, they dont even have ICE products, just EVs that every manufacturer in the world is about to hit the market with.

Right now it's all speculation on a hope and dream that an internet based new car company with only one type of propulsion and no car dealerships is worth more than all these other companies.
Nothing at all wrong with speculation, not at all, but understand speculation for what it is and only allot a small portion of a portfolio that you can afford to lose.

Tesla, unlike other companies one might speculate in, ex. prospects of a cancer drug or treatment.
Tesla hasn't invented anything, just an electric motor and battery system to put in a vehicle. Same all all the other vehicle makers many times larger then Tesla so why people think its worth buying the stock at fifty times earnings is beyond me. Some bought their stock at close to 100 times earnings and lost 50% of their investment.

Will Tesla still be worth 50 times earnings in 5 years or will it be 5 times earnings? They do not have a unique product, it's just a car company. Their profits already being squeezed by the competition and the competition is jsut getting warmed up. If it wasnt for Tesla's price cuts to stay competitive and the huge taxpayer funded credits being given out things would be even worse for them then they are.

I WHAT TO ASK THIS GUY, OR CAN WE LOOK THIS UP?
What was this guy saying when Tesla's stock price got sliced in half to its current level and people lost their life savings in Tesla?
This guy talks like Tesla has a unique product. They are nothing more than the latest fad in blue jeans. They do not make a product that is unique to the world.

IF this is your thing, that is great, money is made by dreamers, and people lose their life savings in dreams. IN this case, Tesla doesnt have a unique product that no one else already has.

Last year people thought this company was worth 100 times earnings, this year only 50 times earnings. I think they will be down to earth will be maybe 15 times earnings. Time will tell.

Keep in mind there is a YouTube video for whatever side of a discussion anyone is on that sounds just as good.
A suggestion I would make is to use common sense and ask what does this company do that no other company can do or does?
What product does this company make that no one else does?
To me, everyone makes cars, and have for well over 100 years.

 

[JeffKeryk]

Some people think stock price is the company’s value. They are 2 different things. Stock prices is investor’s bet for short to long stock value. TSLA is a roller coaster, for sure. Stock prices, for all companies, tend to follow business cycles. Teslas are the only profitable EVs made today. They cut prices numerous times this year, yet margins are still, what, 2x or 3x GM, Ford, etc.

Tesla is held to lofty results. They continue to take market share from premium vehicles on down. The price drops are squeezing already struggling companies. The Cybertruk is scheduled to start deliveries later this year (Elon time); they have incredible backlog. Then there is the Model 3 Highland, and Monterrey will build the everyman’s Tesla.

All the while other car companies lose $$ on every EV and cannot manage their supply chain.
I am holding my TSLA for the long term. Picking dates is not my strategy. Is it for you? That’s your call.

If you want to see how TSLA has performed over time, I suggest you compute the stock’s linear regression curve over time.

 

[demarpaint]

Delete.

 

[GON]

Some people think stock price is the company’s value. They are 2 different things. Stock prices is investor’s bet for short to long stock value. TSLA is a roller coaster, for sure. Stock prices, for all companies, tend to follow business cycles. Teslas are the only profitable EVs made today. They cut prices numerous times this year, yet margins are still, what, 2x or 3x GM, Ford, etc.

Tesla is held to lofty results. They continue to take market share from premium vehicles on down. The price drops are squeezing already struggling companies. The Cybertruk is scheduled to start deliveries later this year (Elon time); they have incredible backlog. Then there is the Model 3 Highland, and Monterrey will build the everyman’s Tesla.

All the while other car companies lose $$ on every EV and cannot manage their supply chain.
I am holding my TSLA for the long term. Picking dates is not my strategy. Is it for you? That’s your call.

If you want to see how TSLA has performed over time, I suggest you compute the stock’s linear regression curve over time.

I don't own any stocks, and won't. My speculation with TSLA is they are not a vehicle manufacturer, they are a technology company that holds many critical patents. TSLA will be generating revenues down the line via licenses and royalties. Kind of like how NVDA makes a modest amount of money selling the graphic chips. But NVDA makes it big money in getting reoccurring revenues from the sales of video games, and other software/ applications.

I sense all the world's automakers will be having to license TSLA technology sooner or later to compete. But just speculation on my part.

 

[PWMDMD]

I don't own any stocks, and won't. My speculation with TSLA is they are not a vehicle manufacturer, they are a technology company that holds many critical patents. TSLA will be generating revenues down the line via licenses and royalties. Kind of like how NVDA makes a modest amount of money selling the graphic chips. But NVDA makes it big money in getting reoccurring revenues from the sales of video games, and other software/ applications.

I sense all the world's automakers will be having to license TSLA technology sooner or later to compete. But just speculation on my part.

I don’t hold any individual stocks. Just index funds and precisely for this reason - it mitigates risk.

 

[JeffKeryk]

I don’t hold any individual stocks. Just index funds and precisely for this reason - it mitigates risk.

I have a few individual stocks that I manage. Or should I say sit on... The rest is in the Schwab Wealth Advisory portfolio. We do discuss my individual stocks, but they know better than to argue with me as the performance has been, let’s just say, stellar.
I believe a balanced portfolio has the index funds you speak of and a few risky choices as well. But that’s just me.

 

[PWMDMD]

I have a few individual stocks that I manage. Or should I say sit on... The rest is in the Schwab Wealth Advisory portfolio. We do discuss my individual stocks, but they know better than to argue with me as the performance has been, let’s just say, stellar.
I believe a balanced portfolio has the index funds you speak of and a few risky choices as well. But that’s just me.

The riskiest I get is QQQ and RQI.

 

[alarmguy]

I don't own any stocks, and won't. My speculation with TSLA is they are not a vehicle manufacturer, they are a technology company that holds many critical patents. TSLA will be generating revenues down the line via licenses and royalties. Kind of like how NVDA makes a modest amount of money selling the graphic chips. But NVDA makes it big money in getting reoccurring revenues from the sales of video games, and other software/ applications.

I sense all the world's automakers will be having to license TSLA technology sooner or later to compete. But just speculation on my part.

I get it, maybe you will be right.
My problem though is, what technology would they license?
Electric vehicle production is in full swing around the world. Tesla has borrowed technology from other companies and gave those companies free access to their technology but all this doesnt matter as EV production is happening all around the world so my question would be in Tesla's financial statements where is the massive profit from licensing?

This below is one TINY example of what I am posting above and I am NOT in anyway discounting anyone buying a stock for speculation.
https://electrek.co/2015/11/10/a-nu...nts-and-it-has-some-interesting-implications/

And another, this is only after 5 minutes of research on this subject.

Here is the source=
https://www.tesla.com/legal/additional-resources#patent-pledge

Regardless of what I posted above, the key question for me would be, where is the licensing profits in Tesla's quarterly report that was just released 4/19/23
I did not look for it, I just ask hard questions *LOL*

 

[bullwinkle]

When Toyota gets serious about EVs, as opposed to hybrids & hydrogen pipe dreams, they're going to blow Tesla out of the water! Toyota was the first, and arguably the best, manufacturer to build hybrids-they WILL apply that tech to EVs eventually. Unless they know something about EVs that no one else does, er, wants to admit...

 

[UncleDave]

If you believe any of this, why not just buy bit coin? It's the same thing. Laughable, one and a half years ago the stock peaked at over $400 a share, today it is $165.

Really? One cant find a better performing company out of all the companies and stocks in the world?
To this day, Tesla makes vehicles like all the other vehicle makers in the world and for some reason, dreamers think this company deserves to sell at FIFTY times earnings, it was 100 times earnings and sliced in half.
Other companies selling the same product all over the world stock ranges from 4 to 10 times earnings. What makes Tesla so special, they dont even have ICE products, just EVs that every manufacturer in the world is about to hit the market with.

Right now it's all speculation on a hope and dream that an internet based new car company with only one type of propulsion and no car dealerships is worth more than all these other companies.
Nothing at all wrong with speculation, not at all, but understand speculation for what it is and only allot a small portion of a portfolio that you can afford to lose.

Tesla, unlike other companies one might speculate in, ex. prospects of a cancer drug or treatment.
Tesla hasn't invented anything, just an electric motor and battery system to put in a vehicle. Same all all the other vehicle makers many times larger then Tesla so why people think its worth buying the stock at fifty times earnings is beyond me. Some bought their stock at close to 100 times earnings and lost 50% of their investment.

Will Tesla still be worth 50 times earnings in 5 years or will it be 5 times earnings? They do not have a unique product, it's just a car company. Their profits already being squeezed by the competition and the competition is jsut getting warmed up. If it wasnt for Tesla's price cuts to stay competitive and the huge taxpayer funded credits being given out things would be even worse for them then they are.

I WHAT TO ASK THIS GUY, OR CAN WE LOOK THIS UP?
What was this guy saying when Tesla's stock price got sliced in half to its current level and people lost their life savings in Tesla?
This guy talks like Tesla has a unique product. They are nothing more than the latest fad in blue jeans. They do not make a product that is unique to the world.

IF this is your thing, that is great, money is made by dreamers, and people lose their life savings in dreams. IN this case, Tesla doesnt have a unique product that no one else already has.

Last year people thought this company was worth 100 times earnings, this year only 50 times earnings. I think they will be down to earth will be maybe 15 times earnings. Time will tell.

Keep in mind there is a YouTube video for whatever side of a discussion anyone is on that sounds just as good.
A suggestion I would make is to use common sense and ask what does this company do that no other company can do or does?
What product does this company make that no one else does?
To me, everyone makes cars, and have for well over 100 years.

You didn't make any money on the way up or down correct?

 

[alarmguy]

When Toyota gets serious about EVs, as opposed to hybrids & hydrogen pipe dreams ...

Maybe Toyota will be right and you wrong?
It maybe smart to think outside the box to think rechargeable battery cars are going to take over the world in a world with limited electricity.

Currently regarding pipe dreams, there isnt enough power in the USA to replace 20% of the vehicles on the road with rechargeable EVs
If the day ever comes that there is 25 years down the road, you are going to wish you could go back to gas as the cost for electric will be astronomical

 

[alarmguy]

There are many companies in this world regarding patents. As far as cars and trucks, well, that cats has been out of the bag for 100 years.
Even self driving vehicles other companies already exist.
It's just a car or truck, no matter who makes it.

https://www.wfaa.com/article/money/...exas/287-e38b1f1f-3c74-4c8b-8b17-afac07ca22d7

 

[CKN]

Yet Tesla is one of the top selling sedans globally-but they are not an automaker. OK-sure.

 

[DwightFrye]

If the stock market were predictable there would be a lot of trillionaires in the country.TSLA is the only individual stock in my portfolio. Just as easily as it went from $400 to $165 in a year and a half, it could go back up to $400 by 2025. Or not.

GON is correct that Tesla is not just an automaker, they are a technology company with several different product lines. Their competitors for the most part are not. Tesla has or will have revenue streams from their insurance, solar, cell phones, energy storage systems and software licensing coming in over the next decade. All of those factor into the company valuation.

I agree that Toyota may be Tesla's biggest competitor but every day that they sit around indecisive and without a full on major commitment to the EV category, it becomes more expensive to try and catch up. While Tesla, even with their lower profits (at the current time) still has very substantial money to invest in expansion and vital R&D. None of their competitors do.

For those people who "lost their life savings" from investing in Tesla at its peak, I have little sympathy. Making large financial decisions based upon greed or emotion rarely works out well. Unless you are extremely lucky.

 

[Sedin26]

I hope folks who invest in Tesla do so as part of a well-diversified portfolio. The stock could do anything - relying on it for retirement is foolish.

It’s definitely not for me, as I prefer companies that have been paying consistent and rising dividends for decades. I don’t feel comfortable investing in technology companies at this point.

 

[alarmguy]

Let's be realistic. We have people pumping a stock at times in its past selling for up to and near 100 times its earnings that is 90+ (NINTY) more times earnings than everyone else in the world that makes automobiles.
Some call it "greed" for investing in Tesla and losing half their investment? Yet still promote the stock?

I find that confusing. With that said, I too have no sympathy but for another reason, why would anyone purchase an automobile stock based on a hope and prayer. The stock already ran up to 90 times earnings, hopefully most dumped it by then. if you didnt chances are you will never see that insane behavior or valuation again. The problem here is the media pumping this stock and Joe Public thinking he is getting into the next big thing.

Tesla stock is done, in five years time you will be wishing that you invested in something else. If you didnt invest years ago before the run up, once a stock runs like Tesla has, and backs down 50% in an industry at no more than 10 times earnings, you best be looking for another stock at this point.

To compare this company to the largest automaker in the world is crazy. Tesla has a very limited line of automobiles. That is all this is, an automobile company selling, now that the stock is down over 50% for still 50 times earnings, in a market of automobile makers that sell at 4 to 10 times earnings.

On the contary this stock is perfect for day traders and short term traders, just as bitcoin is. It's not for long term investing UNLESS this is part of a well diversified portfolio and Tesla is the speculation part of that portfolio.
It's just a car.
AS far as it's other ventures they dont come close to justifying the price of the stock.

Full disclosure = my point of view but that means nothing, other than I have been right for the past year, in the future year I could be wrong, its just the way I see a currently, small automaker selling at a current FIFTY times earnings and now lately, slashing prices/cutting profit margins and benefiting from taxpayer funded perks that will end.

 

[DwightFrye]

Financial experts, who have a proven track record like Paul Baron and Cathie Wood with Arkk Investing have very different opinions of TSLA's valuation potential over the relative short term, like 3-5 years and long term, like by 2030. They are evaluating Tesla unlike other so called financial experts who tend to use traditional metrics. And they think it will far exceed its previous high value.

It's just a car. And an iPhone is just a cell phone. But Tesla is not just an automaker.

Elon Musk has continually shown himself to be an innovator and a visionary. Sure he has done some boneheaded things and probably will continue to. But his overall scorecard is unmatched in the 21st century. I'll continue to hold my cards for a while.

 

[alarmguy]

Agree, we will see what it looks like in 2030.
Im not sure why anyone would listen to Cathie Wood, I mean, why? Because she gets media attention on a stock that gets media attention and investing from individual investors?
Im sure you know people have been bailing out of that fund. I mean, talk about risky and a HORRIBLE track record.
She is as speculative and maybe more dangerous to ones worth than bitcoin as I see it anyway. Which granted means nothing.

I just do not, for the life of me understand why people quote her or even mention her name, (just discussing) by anyone, even you. What are her credentials for people to invest with her?
This is the way I see her track record for the Ark fund. I can certainly see if you were to follow her (or anyone) as strictly a speculative investment part of ones portfolio.

I mean, this is just fact. I think even bitcoin is more safe. What was the purpose of buying the fund in 2019 and still holding it today? 4 years of no growth or return on your money? Yet everyday in the media she gets coverage on how wonderful she is. Well, we know the table is turning on her and had been for some time now.
I dont know, what about people who thought they were going to retire in 10 years back in 2019 and bought this fund?
Here is the Ark Fund =

Here is the S&P 500 =