Personally I consider TSLA stock to be more like gambling than investing, given it's excessive valuation that's nowhere near normal auto stocks and lack of dividend.
Understanding Tesla's Current Stock Valuation
- Thread starter DwightFrye
- Start date
TSLA is a volatile stock. Period. Pretty much every advisor has been wrong, both on the runnups and downturns.
By the way, if you own an S&P index fund, you own TSLA.
All I know is, I should have bought the stock instead of the car... Ha!
By the way, if you own an S&P index fund, you own TSLA.
All I know is, I should have bought the stock instead of the car... Ha!
On the other hand, I am glad I bought the car and not the stock.
I still may buy the stock but not at 50X earnings. I'm a really boring investor. I like dividends and steady growth (eg J & J). But I'll settle for relentless growth (eg Berkshire). It's worked for me.
Lightweight... Put it all on red and roll the dice! Go big or go home...
As others have pointed out, investing in TSLA carries considerable risk. A certain amount of gambling is involved. It is a place to put money that you have to lose without having a major detrimental effect upon your retirement income.
But the old axiom of "the bigger the risk, the bigger the reward" also should be taken into account. People like Cathie Wood have a following because in the past she has made a lot of money for investors in Arkk Capital. And those same people have lost a lot of money when the market crashed. That's the way it works and is why it is best to diversify. Wood is one of the first people to think outside the box (I hate that expression but it's appropriate in this example) with regards to evaluating TSLA differently than using traditional financial methods.
So if Wood is correct investors in TSLA are going to be in for substantial gains. If she is F.O.S. then the time honored methods of evaluating that stock by earnings, etc. will prove to be sound. We'll know in a few short years.
If you can afford to take the risk TSLA has about the best chance of breaking out and skyrocketing again of any stock I can think of. But you could take it in the shorts too so don't put your retirement security in jeopardy either.
But the old axiom of "the bigger the risk, the bigger the reward" also should be taken into account. People like Cathie Wood have a following because in the past she has made a lot of money for investors in Arkk Capital. And those same people have lost a lot of money when the market crashed. That's the way it works and is why it is best to diversify. Wood is one of the first people to think outside the box (I hate that expression but it's appropriate in this example) with regards to evaluating TSLA differently than using traditional financial methods.
So if Wood is correct investors in TSLA are going to be in for substantial gains. If she is F.O.S. then the time honored methods of evaluating that stock by earnings, etc. will prove to be sound. We'll know in a few short years.
If you can afford to take the risk TSLA has about the best chance of breaking out and skyrocketing again of any stock I can think of. But you could take it in the shorts too so don't put your retirement security in jeopardy either.
The vast majority of TSLA comments are based in the short term valuations. Short term investing is gambling. Long term investing is investing.
Stock advice from guys on a particular offering that missed the entire swing up, down, and up again isn't really relevant to me.
As we've seen you can make great products and never move the stock needle (GM) so I'm not sure how stock price always directly affects the car.
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GM's relatively low and stagnant valuation is because they make mediocre cars, not great ones. Same with Ford except Ford spends more of their valuable profits paying for recalls every year than GM does.
The stock price doesn't directly affect the cars, but profit surely does. When company X make four times the amount of profit per vehicle than company Y, company X has more to reinvest in improvements, R&D, factory expansion, retainment of talented employees and other categories. Provided they chose to do so anyway.
Tesla's competitors simply don't have the capital to invest in their EV category that Tesla does, and even if they did they are still several years behind. I predict that as the EV market grows, Ford and GM will certainly gain market share from Tesla but it won't be because their cars are truly competitive. It will be because consumers are willing to accept mediocrity because they hate Tesla and Elon and are brand loyal to GM and Ford.
The stock price doesn't directly affect the cars, but profit surely does. When company X make four times the amount of profit per vehicle than company Y, company X has more to reinvest in improvements, R&D, factory expansion, retainment of talented employees and other categories. Provided they chose to do so anyway.
Tesla's competitors simply don't have the capital to invest in their EV category that Tesla does, and even if they did they are still several years behind. I predict that as the EV market grows, Ford and GM will certainly gain market share from Tesla but it won't be because their cars are truly competitive. It will be because consumers are willing to accept mediocrity because they hate Tesla and Elon and are brand loyal to GM and Ford.
It doesnt matter as far as why you think. I keep reading in here about Teslas profit margin for over a year and still no acknowledgment its taking a hit right now. Who cares how much margin the other companies work on, who cares about profit per vehicle? The public doesnt.
It does matter that you acknowledge that Tesla will lose/is losing market share and they have nothing else to compete with because they do not make cars with the ICE. By 2027 the world will be awash in EVs very likely an oversupply if not before that time.
Last I checked the thread says understanding Tesla market value and well, its down well over 50% from its high and the stock would need to go up in rough number 150% to get back to that number. Will it? I dont think so, it's just a car in an industry of low P/E ratios.
Time will tell but I just dont understand investing in a car company at 50 times earnings that is down from almost 100 times earnings.
Risky it is, it's a tiny company on the world stage and one where the big boys are coming at it.
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I had some Tesla stock and was tired of the extreme ups and downs. I sold it at a slight profit and will not buy it again. If I was in my 20's I believe it would be a great stock to buy and hold for a long time. Where is the crystal ball when you need it?
Alarmguy, I have acknowledged that Tesla stock has taken a hit in the last year. And a huge one. And I have also acknowledged that their profits are down, primarily because Elon has chosen to lower the prices on several occasions. But their profits are still several times multiples of their competitors and if you look at the competitor's profits on just their EV's, they are practically non-existent. Tesla can afford to take a hit on their profits and still continue hell bent for leather with expansion, R&D, process improvement and so on. Who else can do that ?
The public generally doesn't know or care how much profit per vehicle is being made. But investors do and that's what we are talking about.
As far as the "big boys' coming in, what kind of EV do you think we will see from them in a few more years when they haven't had the kind of capital to invest in producing them that Tesla has ? They will be lucky to make 3-5% profit on their EV's if they even exceed a break even point. I suspect the big boys will all have "something" on the EV market but they won't be particularly good vehicles.
I have pointed out many times when discussing Tesla as a corporation that they are not just an automaker, And their valuation as a stock won't be under a separate market listing just for the EV portion of their business. Predicted revenue streams for other than just raw EV sales are pretty incredible.
All these things need to be considered before making an investment in TSLA should one chose to do so. Maybe the so called experts are wrong. Maybe world events or Elon being committed to an insane asylum will have a major effect upon the TSLA valuation. Or maybe people like Cathie Wood who predict TSLA will be worth $2000 by 2027 will be proven to be visionaries.
Heck I will be happy if TSLA is worth $500 by 2027. I guess we'll find out.
The public generally doesn't know or care how much profit per vehicle is being made. But investors do and that's what we are talking about.
As far as the "big boys' coming in, what kind of EV do you think we will see from them in a few more years when they haven't had the kind of capital to invest in producing them that Tesla has ? They will be lucky to make 3-5% profit on their EV's if they even exceed a break even point. I suspect the big boys will all have "something" on the EV market but they won't be particularly good vehicles.
I have pointed out many times when discussing Tesla as a corporation that they are not just an automaker, And their valuation as a stock won't be under a separate market listing just for the EV portion of their business. Predicted revenue streams for other than just raw EV sales are pretty incredible.
All these things need to be considered before making an investment in TSLA should one chose to do so. Maybe the so called experts are wrong. Maybe world events or Elon being committed to an insane asylum will have a major effect upon the TSLA valuation. Or maybe people like Cathie Wood who predict TSLA will be worth $2000 by 2027 will be proven to be visionaries.
Heck I will be happy if TSLA is worth $500 by 2027. I guess we'll find out.
Good post and why we choose to invest how we do.
Just a couple comments on this one though. Some might disagree with you on their R&D. At least with models. Many feel the model line up is stale and lets not forget the promised truck that is years behind.
To repeat again, investors do care about P/E right now the speculation is the P/E is going to rise by many multiples but it hasn't happened and the reverse is happening, competition is heating up, they shortly will not have the EV market to themselves and the dont make vehicles with the ICE. Margins are being squeezed and sooner or later someone will have to answer to the sky high P/E. Well actually that happened and has been slash in half by the investors selling.
Im not saying it's a bad investment if some want to go that route, after all risk/reward. I certainly dont see it and wow, watch out for the wacko Cathie Wood, killing her following of investors. Who called her an expert? What makes anyone an expert? Maybe George Soros ... Cathie Wood? No, there are many experts right in this forum and all others who have made a killing in the stock market, right place, right time, right stock.
Im skeptical about mystery revenue streams until they materialize, so far a disappointment.
GM has those too.
Yeah, I think as an investment based on what you believe in and knowing the risk. Im certainly not one to say $500 is out of the question which is only $300 more or 20% higher (rough numbers) then its high just over a year ago before the stock crashed. I in no way can see it but I know nothing more than anyone else in speculation. We speculate in what makes sense on our own head void of reason.
My personal reasoning is I dont see Teslas other companies saving them from the massive onslaught about to take place from all the legacy manufacturers and that is a good thing that I and many others feel the same, this way if we are proven wrong your stock will skyrocket! I do the same type of investing at times but now invest in lower P/E companies as I get older.
BTW, his rockets pass right over the area where we live. My family member told me I missed last night's launch, he actually saw the rocket boasters disconnect and fall as it passed over the ocean off the Carolinas. I hear its quite a site! My family members never get tired of seeing it, supposed to be an incredible site which, now that we live here will be able to see. For those whom may not know, Space X is private and not part of Tesla.
I think another wild card is that Musk will not be part of Tesla forever, does anyone ever think of that, just like he divested PayPal 10 years ago, will he not continue to move on to his next adventure or do you think Tesla is a life sentence for him? I dont think he will be CEO forever. HE has many other interesting companies other than being an automaker why would he want to stay? Even if the board wants him to.
Let's not forget Tesla lost money for 10 years or more before turning a profit. Legacy makers already have profits and now in the limited EV marketplace too.
Like you mention with Tesla being more than a car company, why do you bring up the limited profits of legacy makers EV product line? After all, the legacy makers are not just an EV company, like Tesla is not only a car company right?
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If you use the 4% rule then the volatility shouldn’t bother you. The main reason to sell a stock is because the expectations or the circumstances have changed.
I bring up the profits of legacy automakers for two reasons:
1. They are a fraction of what Tesla makes on each vehicle which means they have orders of magnitude less to invest in manufacturing a completely new type of vehicle
2. Their limited profits mean they have zero wiggle room to compete should Elon choose to slash prices on the Tesla models in order to capture the market and crush any interlopers who dare challenge Tesla's dominance in the EV category.
Oh, I haven't forgotten that Tesla lost money for 10 years. But you have to consider that most start up companies lose money for a while, and the demand for EV's during those first 10 years was just a fraction what it has been over the last 3-4 years.
Yes, there is a lot of speculation and gambling involved. We must all chose who to put our faith in, and how much risk we are willing or can afford to take.
1. They are a fraction of what Tesla makes on each vehicle which means they have orders of magnitude less to invest in manufacturing a completely new type of vehicle
2. Their limited profits mean they have zero wiggle room to compete should Elon choose to slash prices on the Tesla models in order to capture the market and crush any interlopers who dare challenge Tesla's dominance in the EV category.
Oh, I haven't forgotten that Tesla lost money for 10 years. But you have to consider that most start up companies lose money for a while, and the demand for EV's during those first 10 years was just a fraction what it has been over the last 3-4 years.
Yes, there is a lot of speculation and gambling involved. We must all chose who to put our faith in, and how much risk we are willing or can afford to take.
Tesla margins are still the envy of the industry. Even at current 11% to 12% they are 2x or 3x GM and Ford. Not to mention everyone else loses money on every EV they sell.
The problem other car companies have that chose to retool for EV production is, they are not centralized; they have snaller factories spread out over large geographical areas. Expect to see lotsa plant closures because they cannot possibly afford to retool so many separate plants. This is an inflection point. Critical.
Every startup loses money. Musk was nearly broke in 2018 when Fremont's new Model 3 lines kept shutting down due to robot malfunctions. Now they produce cars faster and more efficiently than any other company.
As you know I dont disagree on speculative investing. Presented are two opposing views (me and you) nothing wrong with that at all. We pick what we do for our own reasons and thoughts. I actually enjoy conversation.
If Elon slashes prices more, the stock will continue to plummet because the P/E is based on it, it's also based on market share which they are losing. So market share going down, with product prices/proft margins going down does not present well with a company selling 400% higher P/E ratio than the entire rest of the automotive industry.
Right now I am on the right side of the "view". The numbers on the direction of the stock show that. With speculative stocks like this, that doesnt mean I will be on the right side next year though.
Elon has no wiggle room, he only makes one type of vehicle, if EVs fall out of favor the stock is finished.
If he constantly has to cut prices, his stock price is finished, it will no longer be worth 100, now 50 times earnings.
Let's not ignore the long term, what happens if sooner rather than later, Elon moves onto his next venture full time and leaves the reins with someone else? The company will still be there but what price premium in Elon currently commanding in the stock price. I tend to think not as much as he used to but the combination of all these factors MAY be a huge negative.
It is speculation that legacy makers have no wiggle room, such as GM, granted the stock ha gone no place for decades and I am certainly not promoting it, even though I own some for short term only. GM isnt sitting around doing nothing and dont think for a minute they are really planning on being all electric anytime soon. The vast majority of the public wants gasoline and will only want it more as more EVs hit the road.
But what do I know? Nothing more than anyone else. Whoever is not the right side will be a hero in the media, meaning will it be Cathie? or some pundit? If it's the pundit he/she will be the next Cathie and Cathie will be forever disgraced which she already is in some circles.
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I dont use the 4% rule, never. With that said I have a specific account for speculation whether or not anything every comes of it I dont know but its doing ok. (gulp) At the same time big name companies, such as my largest holding Walmart being patient with a significant portion invested in it back in the double digit days before covid has been working nicely. Not that it's going to make me wealthy in the speculative sense of the word, S&P index fund (I ahve checked recently) may have done just as well or better.
Which legacy makers makes a profit on their EV's?
They subsidize their Ev initiative with their Ice profits and or loans from their respective governments.
Tesla is vastly different from legacy automakers as they are in the business of supplying fuel or energy to their and other Ev users.
No existing auto company capitalizes on the ongoing consumption of fuel/ energy.
They subsidize their Ev initiative with their Ice profits and or loans from their respective governments.
Tesla is vastly different from legacy automakers as they are in the business of supplying fuel or energy to their and other Ev users.
No existing auto company capitalizes on the ongoing consumption of fuel/ energy.
Here's all one needs to know about TSLA stock price.
It is grossly over-valued based on image, marketing, hype, nonsense, wishful thinking combined with total lack of deep understanding of what vehicles do and how they do it, the love affair with the concept and the man Musk, and deep irrational exuberance. It has a PE ratio of about 47 (down from around 60), which is still almost 10x higher than peer auto makers. It's a LONG WAY DOWN for Tesla IMHO, considering the other companies are rushing to catch up on technology. And they will. Plus the big automakers are hemorrhaging employees now, as is the rest of the economy with layoffs and scaling back. But the EV craze appeals to really only about probably 10% of the population in total, and it has managed to score about a 4% national adoption. I think that caps out around 10% across the board. It's just not that practical or useful for most consumers. The major adoption will be small cars for short distances, and automated driving vehicles IMO for urbanites, delivery people, golf carts, etc. and the elite class who like image and to virtue signal.
The main selling points (speed/quickness, overnight charging), apply to so few people overall whilst being outweighed by serious drawbacks including but not limited to - lack of infrastructure, inconvenient charging times + short distances, requires a place to charge it securely at home. (nearly everyone who owns an EV, also owns a ICE for reliability and range). Add to this additional fees as states start piling on fees, like Texas has now added, plus higher electrical costs and lower availability as grids have brownouts. Expensive and inconvenient repair bills, including high priced tires, expensive batteries, and proprietary OEM parts coded to that specific car, inconvenient repair locations... The nail in the coffin will be the $10k - $15k battery replacements while the cars are still relatively young, around year 12. End of story.
It does not surprise me TSLA price is off 50% on the year from 318 a year ago to 160 today, off from 410 (Nov 2021) to 160 (today), representing a 60% drop, and it's fallen 30% YTD from a high of 210.
We are in a national and global recession/depression with huge upheaval. People are going to be financially strained. We might very well see an era of basic inexpensive ICE cars that require few chips, and easily maintained vehicles. Contrast that with huge potential supply chain problems for overly complex chip laden EVs. Until they make those here, that is a real problem.
It is grossly over-valued based on image, marketing, hype, nonsense, wishful thinking combined with total lack of deep understanding of what vehicles do and how they do it, the love affair with the concept and the man Musk, and deep irrational exuberance. It has a PE ratio of about 47 (down from around 60), which is still almost 10x higher than peer auto makers. It's a LONG WAY DOWN for Tesla IMHO, considering the other companies are rushing to catch up on technology. And they will. Plus the big automakers are hemorrhaging employees now, as is the rest of the economy with layoffs and scaling back. But the EV craze appeals to really only about probably 10% of the population in total, and it has managed to score about a 4% national adoption. I think that caps out around 10% across the board. It's just not that practical or useful for most consumers. The major adoption will be small cars for short distances, and automated driving vehicles IMO for urbanites, delivery people, golf carts, etc. and the elite class who like image and to virtue signal.
The main selling points (speed/quickness, overnight charging), apply to so few people overall whilst being outweighed by serious drawbacks including but not limited to - lack of infrastructure, inconvenient charging times + short distances, requires a place to charge it securely at home. (nearly everyone who owns an EV, also owns a ICE for reliability and range). Add to this additional fees as states start piling on fees, like Texas has now added, plus higher electrical costs and lower availability as grids have brownouts. Expensive and inconvenient repair bills, including high priced tires, expensive batteries, and proprietary OEM parts coded to that specific car, inconvenient repair locations... The nail in the coffin will be the $10k - $15k battery replacements while the cars are still relatively young, around year 12. End of story.
It does not surprise me TSLA price is off 50% on the year from 318 a year ago to 160 today, off from 410 (Nov 2021) to 160 (today), representing a 60% drop, and it's fallen 30% YTD from a high of 210.
We are in a national and global recession/depression with huge upheaval. People are going to be financially strained. We might very well see an era of basic inexpensive ICE cars that require few chips, and easily maintained vehicles. Contrast that with huge potential supply chain problems for overly complex chip laden EVs. Until they make those here, that is a real problem.
why does this matter?
It doesn’t, this is business.
Public doesn’t give a rat, the investors don’t give a rat as long as there’s corporate profits
I’m not even sure if Tesla ever made a profit in USA operations yet, does this matter? No
In addition, Tesla’s first big profit year I think was 2020 or 2021? Those profits came from carbon credits, not from car sales.
But again, who gives a rat?
It’s called investing and growing a business.
You seem to leave out the fact that, for at least a decade tesla never even turned a profit, and when they did, it was from carbon credits! LOL
I’m waiting for the day that Tesla actually stands on their own two feet which still has not happened.
Without government tax credits, and without carbon credits, they have nothing but who cares?
Show the investors, the profits and right now Tesla is that 50 times earnings down from 100 and legacy makers at five times.
Time in again, Teslas earnings. Multiple over the last few years has been bringing investors in that company back to earth. Its stock price is trash and going nowhere.
There isn’t even a debate here, and there is no reason to comment any further just open up your investing software and check out the stock price the last couple years it’s laughable that this is a company that had a multiple of 100 times earnings. A lot of people have been hurt.
Some very vocal big investors as well.
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