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Comment by seanmcdirmid | Hacker News Reader

Market perception.

Ford's P/E ratio is 9.89. IBM's P/E ratio is 14.02.

Facebook's P/E ratio is 40.79. Tesla's P/E ratio is infinity since the E is negative.

I'm sure Ford has done many incremental innovations, I didn't say they didn't. IBM does the same thing, and has "record profits" every few years also. Its just the market isn't expecting the next big thing to come from Ford, while they are expecting that from Tesla.

If you think the market is wrong or too irrational, you can make a killing by shorting Tesla and buying cheap Ford stock.

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I don't really like the analogy for several reasons, but what's wrong with IBM? Have you looked at their share price over the past 12 months? As of today, IBM is trading at around $164 billion market cap and paying out a dividend of over 3%. I'd say that's pretty good.

I don't short stocks because I don't believe in trying to time the market. I actually think Tesla could move well north of where it is currently trading. Not because I think they are going to grow to justify the valuation, but because I think lots of people will look at the $45 billion valuation and will incorrectly compare it to Amazon, Facebook (as you just did), Alphabet, and Apple and think $45 billion is low.

However I am long Ford. In fact it comprises the largest percentage of my personal portfolio. I continue to add more to it with every drop and just added more a few days ago. While the value has been dropping over the past couple of years, I've been collecting healthy dividends along the way ($F pays out now over a 5% yield), and am happy to sit and wait to see how long people will wait for Tesla to move beyond a niche auto maker and into the mainstream market.

Edit: One other point- this recent run-up is attributable to Tesla delivering more cars this quarter than expected, not because they just unveiled some new technology the market wasn't previously aware of. TSLA has been extremely volatile whether you've been long or short over the past 2-3 years. All it takes is one missed earnings report and it'll send this stock down at least 25%.

In general people who invest in stock are people who work at big financial institutions. Not 'regular' people trading on their own. For individuals, picking stock in stead of just buying accross the board is really risky. So it doesn't matter what 'lots of people' think, really.

The only thing happening now is that investors seem to be extremely worried of 'missing the boat' on automated driving. See the big investment in Uber, a taxi company with an app that essentially anyone can copy. But they raised billions on the promise of automated driving.

The only thing here is the idea that the organisation that perfects automated driving first will dominate every transport sector. That seems far fetched to me though.

But hey, I'm just a regular person too. So maybe I'm dead wrong.

Tesla is RISKY: it is a bigger gamble, higher volatility, higher upside if it works out, bigger chance of it going completely bust. Put Tesla in your portfolio if you want to add some risk to it. You want stability with a healthy dividend? Well, add some Ford to it.

Shorting is the way you capitalize on a stock that you think is overvalued. It is an advanced maneuver but can be done for the long term as well.

IBM...man, IBM is a tech company that got rid of most of its R&D to focus on consulting and accounting tricks. But ignoring that, IBM has a huge R&D division but has been unable to come up with any breakthroughs for quite some time now, it is the canonical mature tech company that isn't going to have rapid growth like a startup.

If you're looking for other stable tech-sector companies (mostly supplying corporate infrastructure), FICO and PEGA are good examples; so is Microsoft, for that matter. But why look for them? (They're S&P 500 components with solid dividends, so maybe that's answer enough.)

I own Microsoft stock, it isn't exactly a growth one.

That's not how the math works out, according to Nasdaq.com Tesla's P/E was -53.63 for 2016 and estimated -103.48 for 2017.

Sorry I guess. I couldn't find Tesla's P/E ratio on Google like I could for the other companies. It is my understanding that they don't report P/E ratios for companies with negative earnings.

And it makes sense: a high P/E ratio indicates high potential. The lower the earnings, the higher the P/E ratio. But if earnings went negative, then the P/E ratio would automatically go negative (since that is how math works, as you say). So if my stock price is $100, and I earn $1, my P/E ratio is 100...so much potential! If I accidentally lost a dollar instead, my P/E ratio automatically becomes -100 even though not much changed in my earnings.

The interesting thing is that as soon as you go negative, a larger negative P/E is better than a smaller negative P/E, and it's really wonky at earnings close to 0.

Those numbers are meaningless since Tesla has negative earnings. Infinity is basically right.

> If you think the market is wrong or too irrational, you can make a killing by shorting Tesla and buying cheap Ford stock.

the market can remain irrational for longer than you can remain solvent!

Don't try to short Tesla! Shorting depends on the short-term trajectory of the stock after you borrow it, and Tesla's being bought like mad by people who've put their faith in St. Elon, so this is a great way to lose your money.

The likely long-term outcome is for Tesla to be bought out for a pittance (maybe $20-$30 a share? $10 would be surprisingly low, $50 surprisingly high), by a mature automaker interested in the marque; in the meantime, the way to make money off Tesla is to realize that all the people who are zealously pumping their money into Tesla are leaving everything else under-valued.

And you can lose a lot of money while still being right. Always remember, Wall Street's cemetery is full of people who were right too early.

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