The biggest catalyst on the horizon for TSLA is actually the mainstream buy-in of major automakers into EVs. There are two reasons why this is actually bad for TSLA:
1. Tesla Motors makes money on regulatory credits that conventional automakers must purchase in order to offset their ICE vehicle production. That's actually Tesla's only source of profit. Unfortunately for Tesla Motors, those regulatory credits aren't going to be in such high demand in a world where major automakers each produce hundreds of thousands of electric vehicles.
2. Tesla Motors doesn't currently compete on things like build quality and fit/finish, because the major factor determining whether you want to buy a Tesla is whether you want to buy an electric car. However, the time will come when you can get a mainstream electric car with the interior of an Audi, or the reliability of a Toyota, or the utility of a Ford truck. That competitive environment would be a wind shift for Tesla's business, not to mention the amount of pressure that other automakers will put on Tesla's autonomous driving features in court and with regulators.
The interior quality is the main thing in my mind that Tesla it's missing. My model 3 performance drives like nothing else and requires no maintenance. But I still miss how much nicer inside my previous Audi was. At that price point I'd like to get a lot more.
I actually prefer the interior of my Tesla's to any care I've ever owned. Combined with the technology and software, I haven't seen any car that competes. It is still absolutely amazing to me how much code goes into traditional ICE cars and they still can't create a coherent, usable, interface.
I will say that Ford has drastically improved in the last few years (I own a fairly new Explorer ST) but much of what they've done you can clearly see is copying what Tesla has done. Even still it is miles away from what Tesla has done.
Honestly, a lot of Tesla's UI advantage is solved by Carplay. I have a Tesla and a Volvo (with carplay) and I actually prefer the Volvo's interface, because I can get real Google Maps, YouTube Music, Spotify, Podcast app, Audible etc.
The minimal Tesla M3/Y interior is one of the highlights to me. But the only way it works is the integration of software and tech with regular OTA updates.
Other car interiors from Kia or Toyota seem far too busy. I know it is a matter of taste, but the minimalism is appealing. The Ford Mach-E or VW ID take on the EV cockpit is fine too, but feels much less futuristic.
I think the Tesla aesthetic is driving other automakers to improve the in car experience and incorporate more intuitive software and screens.
It's not about the minimalism. It's a design aesthetic and I don't really have any issues with that. But the quality of the materials, the fit and finish, the subtle design touches are all missing. It feels like the interior for an inexpensive car. The model S interior is also not great and very very dated.
The software for Tesla remains a highlight and a big reason why it would be hard to move to say an e-tron. But better competition is coming and I hope it pushes Tesla to do better.
Tesla's build and interior quality is crap. A $40k Mercedes C-Class has better interior than a $100k Model S.
But what Tesla does well is the UX. While I'm not a huge fan of fully touch controls for essentials like AC, wipers and so on, the software feels really polished including their navigation, mobile integration, OTA software updates to improve them. It feels like software coming out of a Silicon Valley software company as opposed to clunky stuff you are used to seeing in cars. Until other manufacturers catch up with this aspect, it's hard to compete with Tesla because the full experience is superior.
How many people actually buy cars for the UX? I think reliability and build quality are going to be far more valuable for most consumers, and the big automakers still have Tesla beat in spades there.
As far as ICE companies competing, most of what we've seen so far is fairly limited and there is good reason for this. Their whole profit model is built on the dealership model and serious investment into electric cars is going to, essentially, nullify that model of doing business. Moving to electric cars is not just an incremental changes for current large automobile companies but an entire paradigm shift in how they do business.
The source is Tesla's balance sheet. If you remove the credits, they're losing money. But of course, they're spending a lot for things like building factories and scaling up.
> they're spending a lot for things like building factories
Building factories is CapEx. CapEx does NOT affect profits, only cash flow.
Factories indirectly hurt profits through depreciation. But its a very round-about way of doing things. The important thing is that profits / loss is a forward looking statement implicitly.
"Savings rate" is defined as monthly disposable income. Your mortgage absolutely lowers your savings rate.
Your mortgage would also affect your cash flow. If we're talking about profit/loss, the interest-portion of your mortgage absolutely affects your profit/loss.
Only the principle portion of your mortgage statement is "free" from a profit/loss perspective. Which it is: you can always leverage the principle into a HELOC or other financial instrument if you need emergency cash.
> Their whole profit model is built on the dealership model
The US is not the only country that makes cars, and auto manufacturers in other countries often have many different models on how to sell cars. The European companies have been producing many compelling EV models, which is why Tesla has been declining in market share in Europe for more than a year.
Electric cars will still need service, and if Tesla is any indication they will need a lot of it. Sure they don't need oil changes, but that's not really a big deal overall. Dealerships still make logistics easier when you pump out cars at the big three level.
My problem with Tesla's business model is that the service model doesn't seem to scale well. Because there's no decentralized dealership network, you are beholden to the nearest service center, which could be hours away from you or be so in demand that the next available service appointment is weeks away.
Yes, they also have mobile service, but that is also spotty depending on where you live and is only appropriate for minor issues.
The service center growth is really slow compared to number of sales...something like only 10% a year when they are now trying to add almost 1M cars/year to the road. Combined with spotty quality of new cars and aging vehicles approaching 5-10+ years old that will need more frequent maintenance the quality of service has rapidly deteriorated in real time. I don't see how they fix or address that at all without serious investment in building new service centers or changing the service model to allow 3rd party repairs.
> or changing the service model to allow 3rd party repairs.
I honestly don't understand how the technologist crowd, with its ties to hacker culture, open source, etc, is not at the forefront of a backlash against this model.
Third party repair is critical at keeping the manufacturers honest. This might not matter for a disposable $60 kitchen appliance, but is critical for a $60,000 car.
Tesla probably overcharges for out of warranty maintenance and repairs and wants to keep that margin for themselves. Also other trade secrets related to their service biz that they want to stay secret. But this means they either need to build 10x the SCs over the next decade or risk losing customers over time as people get fed up with maintenence issues.
So do they get hit 2x then, if not only will they stop getting the credits but the other automakers will start getting the subsidies that Tesla will no longer be getting? Right now it seems like Teslas are also artificially cheap, since they can't be repaired affordably or in any reasonable timeframe.
There are a few different programs but I will focus specifically on ZEV credits. Basically, automakers that don't make a certain number of EVs relative to total sales must buy credits from automakers who produce a surplus of EVs. Right now, the conventional automakers buy hundreds of millions of dollars' worth of ZEV credits from Tesla every quarter. However, they won't need to buy those credits if they produce a large number of their own EVs.
> 1. Tesla Motors makes money on regulatory credits that conventional automakers must purchase in order to offset their ICE vehicle production. That's actually Tesla's only source of profit. Unfortunately for Tesla Motors, those regulatory credits aren't going to be in such high demand in a world where major automakers each produce hundreds of thousands of electric vehicles.
Tesla has a 20% gross margin, which is significantly better than most competitors. So they make lots of profit per car, lots more than they make from regulatory credits.
On a free cash flow basis, Tesla is profitable.
On a GAAP basis, Tesla is profitable.
If you remove all non-recurring revenue & expenses, Tesla is profitable.
Removing non-recurring revenue (aka regulatory credits) from their income statement is a useful exercise when trying to predict their future revenue. But if you do, you also should be removing non-recurring expenses too (mostly Musk's stock grant).
Free cash flow is not profit though, nor should it be considered equivalent.
> Removing non-recurring revenue (aka regulatory credits) from their income statement is a useful exercise when trying to predict their future revenue. But if you do, you also should be removing non-recurring expenses too (mostly Musk's stock grant).
Dilution still matters if you think about the value of the company. If you think the stock is going to go up, Musk's stock grant is going to be a part of that dilution.
How is Tesla's gross margin different from e.g. BMW or Daimler? A quick googling showed gross profit margins around 20% around 2015-2017, it was even around 24% in 2007 for Daimler.
Maybe there's some accounting subtlety I am missing here (or is "gross margin" != "gross profit margin"?).
Your second point resonates with me. After 5 years of ownership, I just got tired of looking at the same interior. Sold my Tesla and got a Volvo plug-in hyrbid and much happier now.
Over the most recently posted 12 month period they have posted financials for, Tesla booked $1.05 bn in regulatory credits, which would take their $368 mn net profit to a ($681) mn net loss.
Oh, you mean Tesla and SpaceX. SpaceX got a commercial contract from NASA to greatly reduce NASAs costs of delivering cargo to the ISS, and fully delivered, saving NASA billions. SpaceX would not have been able to build Falcon 9 without it, or likely survive. Then NASA gave SpaceX and Boeing contracts to fly crew members to the ISS, and SpaceX delivered well ahead of Boeing, and for billions less. Finally NASA has given SpaceX small contracts to gain access to new SpaceX technologies such as in-orbit refueling, which would save NASA tens of billions if it was ever allowed to use it.
And we provide tax credits to zero emission vehicles to make up for allowing ICE engines to omit CO2 indiscriminately. A better solution would be a limited market in carbon emissions, but most of the coal state politicians would lose their jobs if that passed.
Tax credits aren't really government support (it's not like the government is paying them anything). It's more akin to a discount, if anything - we support the work you do so we won't penalize you further with taxes, because your work can provide a net good.
I wouldn’t exactly call tax credits “government support”. They are, no doubt, very beneficial to Tesla, and other recipients of these tax credits. They aren’t support though: it’s the rest of the companies that are more burdened by the taxes.
At the same P/E that Apple currently holds, and assuming a 15% net margin for Tesla, Elon needs to sell 5x the cars he sold in 2020 to yield today's price. Current auto capacity is 2x units sold in 2020 (Fremont + Shanghai). By the end of 2021, will be 3x (+Berlin). By the end of 2022, should be 4-5x with Texas and expansions at the earlier factories. Tesla will be producing the Cyber Truck, Semi tractor and updated Roadster, though the unit leader should be Model Y(?).
Historic sales growth is somewhat behind capacity growth. 2017 ended at about $12B. 2020 is tracking to maybe $32B. That's around 40% annual sales growth. Let's call 2.5 million cars $125B in sales. At 40%, Tesla needs around 4 years to get to the $125B level. Essentially, the back of my envelope says long buyers today will need to hold for 4 years to see a profit based on some semblance of fundamentals.
Stock prices for high-growth companies can be fluffy for a long time. I absolutely agree that current levels are in the realm of absurdly ridiculous, but as long as the underlying economy doesn't crater, the exuberants can be irrational for quite a long time. Can they hold out for 4 years?
Your model assumes a profit margin 3-4x the most profitable auto companies in the world? You do realize Tesla's best ever profit margin was less than 2%, and that didn't come from selling cars, right?
>Essentially, the back of my envelope says long buyers today will need to hold for 4 years to see a profit based on some semblance of fundamentals.
A profit how, by selling their shares to other people? Why would those people buy at that valuation?
AMZN had almost no Net Profit their entire existence, because they were reinvesting in growth. Once their growth slows, you can expect them to show higher Net Margins.
The key for high growth companies is Gross Margins. The higher the gross, the more they can reinvest. And, the higher their net margins will be once the growth slows.
Tesla is vertically integrated. That means they don't need to share profit with a supply chain to the same extent as the incumbents. Hence, I split the difference between the incumbents and Apple's net profit.
Feel free to adjust the numbers to what you speculate the future holds. You'll get a different time horizon that will likely be even more ridiculous.
Apple is not in the auto industry. Their margins are not comparable to auto companies.
> AMZN had almost no Net Profit their entire existence, because they were reinvesting in growth. Once their growth slows, you can expect them to show higher Net Margins.
Amazon did not need nearly as many capital injections as Tesla has over its existence, and acting as though the Amazon story was slowing growth rather than AWS is missing alot.
Tesla is worth like 700/share in 4 years if everything works out with their factories and expansion. If they hit the lottery and magically figure out self driving, then they will 2x-3x, because they can have better than software company margins.
I don't fault the crowd for thinking they will have self driving cars in a few years. I don't see it really happening outside of a few really well managed cities.
And Toyota can sell higher "trim" version of their vehicles, which also has extremely good margins (as higher trim are not significantly more expensive to manufacture than base, just like software upgrades). But the issue is not about margin on some specific upsell, rather the question is about the entire margin on the whole business. Can Tesla make as good or better cars as competition for lower prices, and keep this advantage for a while? Very much possible. Will their advantage be 10x, like the current market cap suggests? In my opinion, highly unlikely.
I have no idea. But you can also sell an aftermarket 10k upgrade of "trim". I don't think toyota can offer that.
I don't think the bull case is very strong. But I do think the previous bear cases of "they cant run a factory", "they cant scale production", etc are all mostly disproven.
I would describe myself as bearish on their self-driving future as something I could trust to sleep or do work in. The recent videos are impressive and exciting. I hope they succeed.
Of course Toyota could offer that. There are plenty of independent car shops that will do all kinds of stuff to your ride, from visual trim replacement, repainting, mechanical tuning, engine swaps, aftermarket parts etc etc. Toyota doesn't bother, because there isn't much money in it. An independent tuning shop can make $1M/year in revenue, and a thousand of such shops can make a total of a $1B. But $1B/year of extra revenue is paltry change for Toyota.
Anyone can offer 10k aftermarket upgrade, but the real question is how many will buy it.
> But I do think the previous bear cases of "they cant run a factory", "they cant scale production", etc are all mostly disproven.
Yes, I'm very bullish on Tesla, mostly because I have great trust in Musk's ability to run business. However, my bullishness doesn't extend to valuing Tesla today more than next five of biggest auto makers combined.
Maybe, depending on what those features do. But all you are doing is moving the car into a higher market segment, with fewer potential buyers. Other manufacturers do this, too.
How many people are buying a software upgrade for their car that is worth close to a new car? None of this scales outside of Tesla's small incredibly wealthy customer base.
In terms of base tech, Tesla is more like Apple + BEV than like GM + BEV. Said another way, a Tesla is a supercomputer you can drive around. A GM is a car with an electric motor.
Also, Tesla sales growth is 40% annually over the last 3 years and will likely continue for 5-10 years. GM's might be 1%. Keep in mind, GM is fighting to retain market share. Tesla is taking it away from the incumbents. They really cannot be compared in this analysis. Apple is the closest as a proxy for future P/E.
If the legacy autos spun out their BEV business, that would be the closest comparable.
>Said another way, a Tesla is a supercomputer you can drive around. A GM is a car with an electric motor.
They have an awesome software experience, but they buy off the shelf parts and assemble them into cars, just like everyone else. Nothing about that makes it a supercomputer on wheels.
>Tesla is taking it away from the incumbents
Competitors are already taking EV share back in some markets. Won't be as easy as you seem to think.
The comparison to Apple or a software company only makes sense is if an incremental sale requires very little investment. That's not true for Tesla though. They have to scale up massive factories to meet demand, while Apple can quite easily scale up iPhone production through contract manufacturers. Apple can also scale up their subscription revenue on TV, Music, Arcade and what not with zero incremental investment. These two companies are not comparable at all. Apple has very little CapEx on its books.
If Tesla keeps growing 40% for 10 more years (which would be hugely amazing achievement), in 2030 it will become the biggest car producer in the US, selling something like double the number of the next biggest competitor, GM. I'm not going to speculate on likelihood of this, but consider this: if the optimistic scenario is that future revenues are expected to be twice that of GM, wouldn't you expect Tesla's value to be something like twice of value of GM, additionally discounted by time needed for these revenues to materialize? Alas, the market cap of Tesla is >10x that of GM.
Moreover, the market cap of the biggest car companies have been relatively stable over last 10 years, as the market cap of Tesla was soaring. If the expectation is that the Tesla will eat the automotive market (as it well might), wouldn't you expect the market cap of other companies fall accordingly? As of right now, it seems like the market expects insane increase in revenues of entire industry, not just Tesla, which doesn't seem likely to me: Tesla's growth is almost certainly mostly predicated upon cannibalizing sales of its competitors.
I think Tesla is great company, and I think Elon Musk is exactly the kind of person we need more of, if we want to have bright future instead of stagnation or degeneration. My only point is that Tesla's market cap seems to be greatly inflated, by factor of at least 5x, and possibly even 20x.
Enterprise Value can be incredibly misleading for companies with large financial arms. GM has a large financing arm that provides loans to consumers which is what makes up the vast majority of their total debt. If you EV correctly captured what you wanted, companies should make as many loans as possible.
If Company A borrows $10 from the bank and then loans $10 to Joe, it's got $10 in assets and $10 in liabilities on its balance sheet.
A fair price for Company B to acquire Company A is $0 in cash changing hands. That's the market cap.
But on the books for Company B it will show a cost of $10 to acquire Company A. It had to assume a debt of $10 to gain assets worth $10. To company B, assuming a debt of $10 has no material difference from paying out $10 in cash. So $10 is the true value of the transaction.
> If Company A borrows $10 from the bank and then loans $10 to Joe, it's got $10 in assets and $10 in liabilities on its balance sheet.
Yes, it's equity hasn't changed. However, the debt on its balance sheet has, so the enterprise value formula of EV = market cap + debt - cash now has, because the loan asset won't be counted as cash, but the loan liability will be counted as debt.
That's why no one calculates enterprise value for bank/insurance companies. It doesn't provide any insight or meaning.
> Tesla's growth is almost certainly mostly predicated upon cannibalizing sales of its competitors.
Yes, this is a large element of the reason that Tesla's stock price has grown quickly (though from here, who knows) while the incumbents have not.
A notable difference that plays into the discussion is the profitability of the business itself. Tesla should be able to achieve a ~30% gross margin. The legacy companies come in around 15%, once you expense their R&D spend (it's hard to find, I did it once. They amortize it over car sales on their P&L.). A significantly higher gross margin is a significant competitive advantage, but also enables higher net earnings. In principle, P/E is founded on 'anticipated net earnings'. Clearly, buyers today (whether they are aware of it or now) are anticipating Tesla to be greatly profitable in the future.
In my mind, there is no rational thesis that justifies the current trading levels. Buyers today couldn't possibly be thinking through the risk they are taking, unless they know they can hold for many years, and through stomach-churning gyrations. That said, if any NHers have a thesis that they've penciled out and which determines, 'yes, buy TSLA at $860 (1:40PM EST 1/8/21)'. I'd be very interested in seeing it.
> Clearly, buyers today (whether they are aware of it or now) are anticipating Tesla to be greatly profitable in the future.
Right. To justify the current trading levels, the expectations must be that it will capture significantly bigger part of its market than any of its competitor, and it will have better profit margins than them. I simply can't see that happening over long-terem horizon. I can definitely believe that Tesla will capture large part of the market, and in fact that it becomes number one automaker. I can also believe they will significantly enjoy higher profit margin than their competition. I just can't see any path to both at the same time: this would imply having some enormous advantage that none of its competitors can get even close to. Since the competitors are not bumbling morons, I think it's unlikely.
Such an advantage could be well-integrated self-driving capability, assuming they can make it work. Everyone seems to be assuming that this will be a commodity, but it might be very hard to achieve.
If e.g. only two companies in the world achieve it in a reasonable timeframe, those companies will be able to price it such as to capture a large portion of the value. This is a huge market, and Tesla would already have millions of vehicles deployed.
If it's about batteries, why isn't then Panasonic stock booming? Panasonic is the one that's actually supplying the technology and building the Tesla's battery factories. However, Panasonic's market cap is less than 5% of Tesla's, and batteries are not even its main business. It seems that the investors value Panasonic's battery technology and expertise at something like 1% of Tesla's market cap.
I'm not sure what exactly you mean by "infrastructure put in place", but I can't imagine running charge stations to be hugely profitable business: gas stations most certainly aren't. They might still be pretty good business, but they clearly are not so good to account for hundreds of billions in valuation.
It does seem to be out of date, but doesn't change the thrust of my argument. With the advancements of battery technology by Tesla, would you say that Tesla's battery business (which is mostly IP and research labs) is worth more than entire Panasonic's business? I say that's highly unlikely: building a good research lab and coming up with a good new battery design is worth a lot, but not tens of billions of dollars. Even if it was worth as much as entire Panasonic, it would still be <5% of Tesla's market cap. As such, I can't see how Tesla's battery business would explain its huge market cap.
@fly4dat has posted some astounding charts that highlight just how overvalued Tesla has become. They’re closing in on the value of every other automaker in the world, combined. Elon Musk’s net worth is higher than the combined revenue of all his companies, plus all wages those companies have ever paid out.
I'm a Tesla bear, but I know better than to bet against it. Arguably, Tesla's implied success is priced into to these other car companies. A lot of these companies are behind on electric cars, Toyota in particular.
Tesla’s product is the stock, pure and simple. Everything they do from rushing the model Y, causing its lead engineer to leave the company, to battery day, autonomy day, $420 funding secured, the solar city merger, the semi, roadster, FSD, all of these exist to support the stock price and nothing else.
With the end goal of maintaining the brand of Musk’s companies and pushing the stock price higher. If SolarCity had gone bankrupt, which it should have, Musk’s whole empire would have been in jeopardy
Yes, an Elon and his brother owned debt in SolarCity both personally and through other business ventures (SpaceX owned $100 mn in SolarCity debt at the time).
Court filings that have been released show that SolarCity was approaching bankruptcy, and that Musk faked the solar roof presentation to sell the deal to Tesla shareholders. The homes shown at the event were non functional.
How is Toyota in particular behind when they’re probably first with plug-in and regular hybrids? And they seem to make the best there is.
I feel like Toyota will release EV Corolla and stop this whole nonsense with Tesla. Hell, even VW took a huge chunk from Tesla in Europe with just couple models.
The market cap is already much higher than that. The share count including granted options (dilluted) per the last availabe 10Q report is already at 1.1b. That translates to a market cap of 968 billion at today's share price of 880 USD.
1T company while only a fraction of people used their product, while companies of similar value touched the lives of pretty much all the people in the world.
My impression was that GM/Ford are, for investors, pension funds with a side-hustle making the odd car. But maybe this is out of date? Are the european manufacturers also like that?
I wouldn't call them pension funds. Ford's total investments as a % of assets is pretty small, basically a rounding error. Now, you could absolutely call those two companies, truck manufactures with a side-hustle making cars, and that would be pretty accurate.
The problem with Ford is they have a ton of debt and they are in a capital-intensive, highly competitive industry and they are one the first industries hit in the event of a recession.
All car manufactures are essentially in the same situation. There's a reason this industry is rife with bankruptcies, mergers, and government ownership. Car companies all need so much capital to survive that they tend to starve very quickly. If Microsoft revenue went to $0 tomorrow, they could float on reserves for several years while they correct course. If the same situation occurred to Ford, they'd be gone by in a few months.
Generally speaking, you don't initiate a short position with longer than a two- to three-year time horizon. The cost of borrowing the shares, plus the opportunity cost of holding cash for margin maintenance requirements, is too prohibitive.
This is only in the current low interest rate environment. Back in the day you kids probably don't remember, where interest rates weren't 0, you could make some serious returns from the cash you got from selling the shares short.
That's a bit unfair. If there's a time window then people will short, which will then force a short squeeze and instead of collapsing it will balloon more.
The share price is already reflecting that people thought it would have collapsed last year.
I'm not an investor, I'm out of work, wish I had money to gamble at the moment, but something tells me the smarter move would be creating some sentiment algorithm that invests like $500 every time a positive/electric car article comes out in a competitor. Say Toyota releases new electric car, invest $500 immediately in Toyota, Nissan, do the same, etc...
Because when the tide turns all that money will go into whichever competitors are still standing and have the best e-car portfolios. Best to diversify.
If you could time it right, sure shortsell, but that's a HUGE risk, this one not so much...again I'm NOT a financial guru, my negative bank account could prove that, but it's just a hunch I have, a similar one I had in 2013 about bitcoin and kick myself daily for every day.
Burry has been predicting the fall of TSLA for months. On Sep 22 he compared its market cap / total revenue (17.84) and -$69M EBIT to the other top 32 global auto makers (0.35 and $100B EBIT).[1] Even back then the market cap / EBIT of TSLA (-6,353) looked crazy compared to that of the global auto industry w/o TSLA (8.08).
Then Tesla released its 3rd quarter earnings (which moderately surpassed Wall Street's expectations) and the stock has since risen dramatically. Burry's argument that TSLA is overvalued appears cogent based on Sep 22 data and more so today.
Burry deleted hundreds of his tweets from 2020.[2] He should stick to picking stocks. His #FauciFraud nonsense was irresponsible.[3]
If you believe in Tesla enough to put everything you can spare into the stock, then bears are only helping you by increasing the amount of time you have to buy in. If you don't believe in Tesla, then why worry about other people who don't?
Somebody needs to invent a financial instrument that enables betting on a collapse, without it exploding and bankrupting you if you get the timing wrong.
Instead of collecting a payment upfront, and paying back a potentially unlimited amount (or zero) as we do with the current instrument, you should pay in any amount you choose, and the higher the stock goes before it collapses, the more you get back when it does (maybe by the square root of the difference), though the value falls off slowly over time. If it doesn't burst, you get nothing. If it bursts too soon, you get back only what you paid in.
That said, I would not bet against SpaceX/Starlink.
>Somebody needs to invent a financial instrument that enables betting on a collapse, without it exploding and bankrupting you if you get the timing wrong.
Typical PE ratio for any stock is on average around 17. Just before the financial crisis the market average was around 25. Before the dotcom bust it was 25-30.
TSLA is at 1,671 LOL!!!
The market right now is around 40. Obviously technically we are in a recession but the stock market is going up. So where's the crash?
What are your typical measures that we have a massive market crash coming? If people believe this they will move their money to something that shouldnt crash or at least are isolated. Amazon is sky high as well.
Bitcoin is at $40,000. Ethereum is way up as well.
Gold is way up.
Bond market is way down(implying people are buying bonds in droves) Germany, Belgium, Netherlands, France, Switzerland are all negative interest rates.
The thing about the summer and covid lockdowns. People got out to spend money in the summer due to lockdown being over. We are now back to lockdown. Which means earnings calls are going to be bad.
Late spring we will be seeing the crash. People are moving their money now to safer places. Tesla, Amazon, Gold, Bitcoin, Bonds is how they are doing it.
When the crash comes, it will likely not be Tesla.
You can get an arbitrarily high P/E ratio if you're running a growth company that aggressively reinvests. It's a meaningless metric in this context. Look at gross margin and price to revenue instead.
Tesla is still richly priced by these, but within the realm of plausibility if you make the right assumptions.
Basically in a fiat currency the very last place for debt to go. You can clearly see when the financial crisis happened and how the USA never really recovered from it. Then you can see when the covid recession hit.
I'm mixed on tesla. I bought in when the stock was at ~$50 in 2013 and sold after it jumped to $175. I bought into the company as I was seeing model S's everywhere I looked and realized it was a company that was growing rapidly. Fast forward a few years I owned a house that has solarcity(owned by tesla now) panels on the roof, the roof needs to be replaced and dealing with solarcity was probably one of the worst experiences I have ever dealt with in my life. After that experience I wrote off Tesla as a really badly run company and have since never owned their stock. I think alot of the growth is FOMO and extreme hype around the cult of Elon Musk. I like that Musk takes chances and goes for moonshots, we need more of that in todays society. That being said the stock is in stupid territory and I'll be taking a short position myself(I think even Elon thinks its overvalued).
It is hard to say how well Tesla will complete their giga factories and bring them into production. The Chinese one was a Tour de Force, if Texas and Germany get completed and into production in a similar way to defeat the gathering forces of the IC car industries electrification efforts then the share price will tend to flatline as Tesla and reality meet. If the IC car makers create a few years of crappy products(as is likely) their stumbles(which Tesla has already put behind it, I hope), then it may even go higher and the short-fry will become epic...
Shorts cost money in interest etc, wouldn't it be better to hedge your bets, and just invest in the competitors evenly adjusting for news stories and maybe some sentiment analysis?
If just one or two hit the electric bandwagon hard and start eating into TSLA's lead, then you hit pay dirt. Less payout, but less risk as well.
The change to EVs will proceed far faster than Tesla can keep up. Even the new EVs by the trsditional IC car makers will ramp slowly as the inevitable stumbles cause recalls and production delays. People are now witnessing the huge economies in EV, both in terms of far lower electric power costs coupled with the far lower mechanical repair costs due to the ability of an electric motor to last millions of miles compared to the thousands of threshing/wearing parts in an IC machine. The high first cost has been a barrier.
I can see no reason that a large car, with a well streamlined body, and only 150-200 miles range as well as a far smaller motor than Tesla can not fill the low end chevy niche. This will save on the first cost of the battery. Many people can operate within that range for days and new houses will all have chargers, same with new condos. Many deliverers can use a small cube van that only goes 150 miles on a charge. With flat floors, they can easily make 2-3 versions with extra battery space under the floor as ordered. There will be an epic expansion of EVs over the next 10 years, and all makers will expand into that space.
Short selling is a form of informed gambling/guessing...
1. Tesla Motors makes money on regulatory credits that conventional automakers must purchase in order to offset their ICE vehicle production. That's actually Tesla's only source of profit. Unfortunately for Tesla Motors, those regulatory credits aren't going to be in such high demand in a world where major automakers each produce hundreds of thousands of electric vehicles.
2. Tesla Motors doesn't currently compete on things like build quality and fit/finish, because the major factor determining whether you want to buy a Tesla is whether you want to buy an electric car. However, the time will come when you can get a mainstream electric car with the interior of an Audi, or the reliability of a Toyota, or the utility of a Ford truck. That competitive environment would be a wind shift for Tesla's business, not to mention the amount of pressure that other automakers will put on Tesla's autonomous driving features in court and with regulators.