Nobody knows what the intrinsic value actually is -- you can try to model it with historic cash flows, but it's very inaccurate to do that with a company without a solid cash flow trend. But because its enterprise value to revenue multiple is way, way out of whack with respect to normal companies, it's a pretty safe bet that there's a lot of expectations priced in to the stock. That's not inherently a bad thing, and in fact it is normal for young companies, but what it really means is that much of the growth potential of Tesla is "priced in" to the share price, meaning that if you buy TSLA at current prices, it may not rise all that much in the event they are wildly successful. If they are anything less than that, the share price could drop dramatically.
Tesla right now is a bet that their battery technology will be insanely profitable and have some sustainable advantage over competing technologies. It's an interesting stock to play with as part of an algo strategy because it's so volatile (again, this is typical of young companies), but I wouldn't own TSLA as a buy-and-hold right now. The share price is just too expensive, and they're going to need massive, continued infusions of capital to continue (as evidenced by the article).
Basically, the risk with Tesla is that if they are crazy profitable, their share price likely won't rise all that much because investor expectations are high. If they are not crazy profitable, the share price will drop over time.
Very good analysis and bonds well with my thinking as well. For me, TSLA doesn't have the fundamentals to be so expensive. In theory, TSLA shareholders are actually losing money right now if you exclude the share price movement by speculation.
Wtf are you talking about. There is no such thing as an 'intrinsic' value vs the price of a share. The market determines the value of each share. Just because that represents a higher p/e than you like just means you don't want to pay.
Intrinsic value is something of a misnomer; in reality it simply means: I've done some sort of analysis, looked at the future cash flows, and discounted them back to the present at some rate. In reality there is nothing intrinsic about it; your valuation is your opinion about the future based on a multitude of assumptions, nothing more.
But even if your valuation is remarkably different than the public markets it does not then follow that you should short; this ignores the importance of time in making a good investment decision. This is compounded by the fact that shorts and options are incredibly effective means of losing lots of money in a short amount of time.
Because the market can stay irrational far longer than you can stay solvent...
Saying that a share is overvalued against its "intrinsic" value is not saying the share is overvalued or will go down, it's just saying that it's currently being priced with an expectation the company will be worth more in the future.
> Saying that a share is overvalued against its "intrinsic" value is not saying the share is overvalued
It is exactly what it means [1]
> or will go down.
The intrinsic value of a lottery ticket is below the price you pay, it doesn't mean you can never win. That said, nobody knows the intrinsic value. In the case of TSLA you have a range of sell-side analysts telling you it's somewhere between $178 and $400. (Edit: to be fair, probably they are using multiples [2] and not a proper intrinsic value calculation. A DCF doesn't get you very far in the current market, much less so in companies like Tesla. For a discussion based on fundamentals see [3]).
In fact some would say the stock is trading at these levels due to a prolonged 2-year short squeeze. The initial squeeze brought in new retail (and institution) investors forcing margin calls which in turned raised the price more creating more short sellers and retail longs.
I bought stock and options when this was trading at 35 and sold at around 140 as I put my fair market value at about 125 for this company. Would gladly reenter at that price.
