While I am a believer in the Tesla story, I was pretty surprised to read on the Wall Street Journal this morning an article that stated Tesla has surpassed the second largest U.S. Automaker Ford in stock market value. Tesla Shares were up big yesterday after the company reported that its global sales rose 69% in the first quarter, putting the car maker on the path to meet its goal of 50,000 deliveries in the first half.
The changing of the guard reflects a growing belief that internal-combustion engines will eventually be replaced by electric motors as the primary power source for automobiles. It is the latest threat to Detroit’s once-dominant stranglehold on personal transportation, a role that was diminished by Japanese car companies in the 1980s and is now being challenged by Silicon Valley’s technological might. While Mr. Ford’s Model T ushered in a wave of affordable mobility for the middle class, Mr. Musk is promising the same with the coming Model 3. It is a sleek, computerized $35,000 sedan that can drive nearly the distance from New York City to Washington on a single charge.
Do you guys believe that Tesla deserves it's high valuation? Do you think other car companies will be able to competitively capitalize on the growing electric & self driving car markets?
Doesn't make sense to me. Besides all of the obvious value-based arguments you can make, it seems like an obvious red flag that Musk a) is now dividing his time between 4 companies (that's only the ones where he is CEO), b) Elon clearly values the sum of these four companies than he does the parts (i.e. he'd fuck the tesla investors over if he thought it would better serve his overall vision for the future), c) his willingness to take loans against his shares introduces meaningful tail risk that investors are not being compensated for.
I should have quoted this the first time around, but the article does give good information about how potentially crazy Tesla's valuation is in comparison to ford:
I also agree that Musk seems to get ahead of himself with how many different concepts he is trying to capture. I think Tesla and SpaceX are enough. Solar City was a stretch, but that's not even counting all the other endeavors he is chasing. I could honestly see it going to either extremes of his house of cards collapsing or him being labelled as one of the best innovators in a generation. Only time will tell IMO.
To be super clear, I'm not bashing Musk as a person or trying to be critical of his ambitions (I'm actually extremely supportive/envious of his ability to push these endeavors forward). My point is that, regardless of whether you agree with Musk's vision of the future, there are very real areas of misalignment between him and his investors. That misalignment, when combined with what I would characterize as speculative valuation metrics, would make the stock not attractive for me.
I love Testa, but their cars are only feasible with heavy govt subsidies. If Elon was a company I'd say he'd deserve any valuation, but Testa being valued higher than Ford is a stretch.
I think that they will continue to get strong subsidies due to the fact that it is actually a good investment IMO on the governments part to do so. The initial investment should be more then offset by the savings in pollution credits as well as the reduction in number of deaths and traffic from the widespread utilization of self driving cars.
That being said, it's current valuation is certainly a big stretch for the time being.
Counterbalanced by the increase in unemployment from self driving trucks.
I actually support the govt subsidizing something that benefits this country and advances us. Seems like all we do is subsidize people and things that never move us forward as a species.
Thoroughly agree on the government subsidy part
No. Tesla is one of the biggest and most resilient bubble stocks of our generation. There is no way to rationalize a laggard company with poor execution and industry low profitability in a highly competitive, low-profitability industry trading at such multiples. I won't even bother to go into the analysis - you can find it all over the internet and its pretty obvious. Several of the most mind-bogglingly stupid things i've ever heard from an investor have come out of the mouths of TSLA longs.
My bet is that TSLA eventually gets bought at a fraction of the current valuation by a tech company with a real cash flowing business and a dearth of good investment ideas. It will fail to justify even those reduced valuations, but the brand will live on selling as a research lab that sells higher end electric vehicles.
If you have an investment vehicle that can withstand some vol I'd consider shorting and waiting 3 years. If it doesn't die of poor execution the next recession will put it on its deathbed
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