Tesla drops 7% after Goldman Sachs says the stock is worth $180
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Those who keep repeating that Tesla stock is "overvalued" should understand that a stock's "value" is based on the current value of all future cash flows. Ford and basically all the other incumbent car companies are generating profits now, but are stagnant and waiting to be disrupted. Meanwhile Tesla's revenue is $7B last year, will be $10B+ this year, $20B+ next year, and $60B in 2020. Which companies are overvalued and which would you rather own?
There's a reason Wal-Mart's top and bottom lines are both several times that of Amazon, yet Amazon is now worth twice as much as Wal-Mart. It's about growth and future addressable market.
Next you'll tell us that nobody does insider trading, because, to riff from Richard M Nixon: "we can do that ... but it would be wrong".
Nobody gives good analysis for free.
More seriously, the TipRanks performance timeline is only over 1 year. Perhaps GS is judging him on a much longer timeline.
The other car companies are rapidly developing their own electric cars. See the Chevy Bolt and Nissan Leaf for mid-level and entry-level examples. Who says they will not disrupt themselves? These are huge incumbents with large R&D budgets who always look for ways to one up the competition. There is a very limited window of opportunity from an outsider where the insider industry misses something obvious, but that isn't frequent.
In most cases, what is called disruption is either breaking laws or ignoring some fundamental problem the incumbents think too important to ignore. They test assumptions, and (rarely) prove them invalid, but the intent to disrupt alone shouldn't make for such enormous PIs.
huge incumbents with large R&D budgets who always look for ways to one up the competition
Possibly the laziest analysis I've ever seen
2. Engineering effort is not required for Ford to continue to be able to pay their engineers a living wage, as they could live off of their current product line for the next decade.
Combine 1 and 2 and surprise, you have lazy engineers.
Even Tesla's first car, the Tesla Roadster, is a slightly remodelled Lotus Elise.
Apple's first iPhone is only a slightly rethought version of products that had existed for years.
That's what the typical Bay Area programmer thinks of as a "trivial" change.
From the outside, yes, you are correct.
But under the hood...you couldn't possibly be more wrong. It is definitely more than just "body styling and incremental change".
It's still a car. An electric car, to be sure, and there have been quite a few of those for quite a long time. Electric drive systems are extraordinarily common.
It's not like Tesla came out with a radically new design for what car means and dropped an Alcubierre drive in the thing.
> The other car companies are rapidly developing their own electric cars. See the Chevy Bolt and Nissan Leaf for mid-level and entry-level examples. Who says they will not disrupt themselves? ... There is a very limited window of opportunity from an outsider where the insider industry misses something obvious, but that isn't frequent.
So the outsider's survival is uncertain. Maybe the right move, then, is to figure out which one of the incumbents will remain standing after all of the foreseeable disruption? Which ones are the least encumbered by their legacy systems and relationships? Which ones are sincere about pursuing the electric/autonomous future?
It doesn't seem to be selling that great, which could be due to a great deal of factors, but the awards it has won makes me believe that the traditional car companies are going to be able to keep up with Tesla at least on technical merit.
Here in Ontario they sold out completely in the first month they were here and there's a waiting list that won't get fulfilled until next year at the earliest.
I've driven one and it's great.
No argument here about GM shooting themselves in the foot. I'm a Volt owner and see it all the time. But it's a classic example of different divisions of a company fighting amongst themselves.
But they've made a good product.
I'm not sure what makes it worth 2x a Honda Civic.
It is also worth considering these batteries have a fixed lifetime. Any electric car is going to need new batteries in 10 years - batteries that originally represented about half the ticket price of the car. You basically assume the cost of batteries will drop tremendously in the next decade or else not only are you paying a lot for the car up front, you are also paying the price of a new entry level car every decade just to replace the batteries.
Proper temperature control and discharge and recharge management is part of it. Air cooling like Nissan and a few others have done just doesn't cut it in most climates, which is why they've had to replace many customer's batteries.
The Bolt's body styling makes it look like a cheap hatch, which is unfortunate. The insides of the thing are actually really good. I'd recommend taking one for a drive just for fun. GM can't seem to get its act together on styling, but apart from fairly uncomfortable seats, I actually prefer the Bolt's interior to my Volt.
Anyways, here's some numbers. The Civic even in its "Sport hatch" configuration isn't even close:
Acceleration times & torque: 2017 Honda Civic Sport 1.5T Hatchback C 0-60 mph 7.0 | Quarter mile 15.2 Power: 180 hp @ 6000 rpm Torque: 162 lb-ft @ 1700 rpm
2017 Chevrolet Bolt 0-60 mph 6.4 | Quarter mile 15.0 Power: 200 HP @ all RPMs Torque: 266 lb/ft @ all RPMS
You want a 5-star crash rating and GM ask which platform do you want it based on. Designing a good EV is a lot easier for companies that already design competitive cars.
You're right, they may survive. Surviving isn't gonna please the people who invested in them.
It is also about state and national regulators.
"A few common fallacies about valuation of public and private technology companies: First, ask any MBA how to value tech companies, she'll say "discounted cash flow, just like any other company!"
Problem: For new & rapidly growing tech companies, up to 100% of value is in terminal value 10+ years out, so DCF framework collapses. You can run as many DCF spreadsheets as you want and may get nothing that will help you make good tech investment decisions.
Related to fact that tech co's don't have stable products like soup or brick companies; future cash flows will come from future products.
Instead, smart tech investor thinks about: A future product roadmap/opportunity, B bottoms-up market size & growth, C talent and skill of team. Essentially you are valuing things that have not yet happened, and the likelihood of the CEO and team being able to make them happen.
Finance people find this appalling, but investors who do this well can make a lot of money. Spreadsheet investing is often disastrous. Doesn't mean cash flow doesn't matter, in fact opposite: this is the path to find tech companies that will generate tons of future cash."
This thinking is what led me to buy GOOG(5x), TSLA(12x), NFLX(7x), YELP (ouch) and LC (oucher). I am buying what I believe the company will become, not what the company is. It's risky, and only a portion of my portfolio goes into these high-risk investments. Much of the rest is in mutual funds.
MBAs might do a little better in income investing for dividends. It's a totally different view, but investors need to understand that as well when it comes time to transition from growth to income stocks.
No she won't. Discounted-cash flow methods have been around since the 1500s [1]. We've had the time to figure out it's good for predictable cash flows and bad for everything else.
I used to be tolerant of (non-financial) Silicon Valley's anti-intellectualism towards economics and finance. Sort of like the Graham-Dodd speculator-investor line [2], I thought it was a handy, if comically-simple, rhetorical device. I've become more suspicious. It seems like an easy way to deter reasoned economic discussion.
For growing companies without earnings, you work out from production capacity (for existing markets) or down from the expected customer base (for new markets). Nobody finds this appalling. Few venture investors use spreadsheets to make decisions, though many use checklists or spreadsheets to idiot test valuations, i.e. understand what assumptions must pan out for their thesis to hold.
[1] https://poseidon01.ssrn.com/delivery.php?ID=5371001000070250...
[2] https://blogs.cfainstitute.org/investor/2013/02/27/what-is-t...
No, it doesn't collapse.
Mr Andressen seems to be defining Discounted Cash Flow very narrowly - as the the kind of spreadsheet an MBA creates where cash flow from each year is relatively predicatable.
His approach of simply making an educated guess about market size and team talent is still essentially DCF analysis.
Isn't all this just a way to get an idea of future cash flows, though?
I'm pretty sure all the people saying it's overvalued understand precisely that.
Lets talk about models - Tesla doesnt make a mass market car - even their basic sedan, starts at 35k - I can buy a nicely equipped Taurus, Fusion, Malibu , Impala, Camry or Avalon for less than that - and from a size perspective its far closer to a Prius or Volt (23k or 33k starting respectively).
Secondly, Brand Cachet - Tesla appears to be positioning itself from a branding perspective closer to where BMW or Audi does.
I'm more hopeful for Ford figuring out technology, than I am with Tesla figuring out how to be a really good mass market car company.
The reason I consider Tesla overvalued has to do with potential market share, as well as the traditional margin on cars - if they try to be a mass market manufacturer, I don't see Tesla capturing more than 10% of the (very crowded) marketplace nor do I see them easily besting the historic 5% margin most (mass market) automakers have, if they decide to be more like BMW or Audi - their margin could go up by a rather large amount - but their volume would go down by an almost an large amount... they might however have a bright future as a technology licensing company - that remains to be seen.
In short however, if you measure it by the "car company yardstick" its drastically over overvalued - if you measure it by the "technology company yardstick" however the numbers start to look a little friendlier. Consider though that the technology company yardstick seems to be mostly based on hype, rather than actualized returns basis.
Consider for a moment that Tesla isnt pioneering a new market here, it's trying to produce a better dohicky (thats really cool, but not revolutionary) in an already crowded market - this alone says that the technology yardstick shouldn't apply - you should instead measure it like its peers in that industry.
That isn't what people intuitively expect, but once that expectation changes, the market is going to see major disruption. Gasoline based powertrains will not be seen as the superior choice by most people 5 years from now.
I'm hopeful yet though - I think a transition to electric power for cars would be wonderful - there are currently many drawbacks to electric power, mostly relating to batteries yet still to be overcome.
At first glance, that seems like more of a reason for low-end electric cars to disrupt Tesla.
We're still early-days yet on electric car technology - there are still many hurdles to overcome yet to make the technology practical for most drivers - so its really hard to say what the future will hold yet - I'm excited for the potential, but I'd like to think I see the realities of it.
> Ford has 23 global assembly plants that built 6,651,000 cars and trucks in 2016. [...] Elon Musk can imagine a single Tesla factory producing 5.25 million cars per year per assembly line [...].
> If this becomes the way to go for global car makers then Ford has 22 assembly plants it needs to scrap. I wrote scrap rather than sell because if every one of Ford’s competitors is doing the same thing there won’t be any buyers for those old factories.
[1] http://www.cringely.com/2017/06/05/the-robots-are-coming/
The logistics and storage of both material and finished goods are part of why Ford has 22 factories to produce 6.5 million cars.
So two miles per hour? That doesn't actually sound too bad.
That's if we assume they don't just self-park.
The hard parts by far are actual production and getting in enough materials. If you can get in a thousand each of every single part, it's easy in comparison to get a thousand assembled cars back out.
There'd be some additional logistics to figure out how to recharge the vehicle as necessary on route, but that's a very different problem, and probably also amenable to automation.
But whatever Tesla is now, eventually if it sells cars it has to turn into a car company. It has to deal with things like logistics for spare parts, repair facilities, dealers (or whatever way they choose to sell cars). The fixed costs as Tesla goes on are only going to go up because of the legacy they are creating, as cars last a while (hopefully a long while), and need to be maintained/repaired, if only because of accidents.
Tech, on the other hand, usually means you don't have to worry about physical manufacturing. You don't have to worry so much about supply logistics, travel and transport costs, inventory, etc. Once you build the technology, at least with software it's easy to mass reproduce (especially with digital distribution and no physical media) at low overhead and sell at a reasonable price, sometimes direct to the user (higher profit %).
Now let's talk about another case study of a consumer discretionary company that uses tech a lot, Amazon. Amazon is leveraging tech to help the front end and the supply chain, to provide lower prices and easy shopping to people. By making a great website, they encourage people to find and buy more, attacking the "browsing at the supermarket" theory of impulse buying with their own impulse buys. They are using technology to do logistics cheaper, lowering prices to gain market share.
Tesla, and car companies in general, move a lot slower because people aren't buying cars every day. Do I think Tesla could turn into a great car maker? Sure.
But just because there's a new space (EVs) doesn't mean that current companies will own the space going forward, or even the leader today. Tesla is using its startup-ness to try to get there, but will they get over the hump of actually turning profitable while making cars? That's the big question, and if the futures earnings are in the stock price, that's a bet I'd rather pass. (but wouldn't short either)
Umm, Apple?
In this case, you managed to pick the stock that is trading currently at a 16.85 P/E, which is about half of GOOG and MSFT. It's even less than the S&P average (25.73). And Apple has a huge amount of cash in reserve overseas.
If you look at tech hardware, such as Apple, Intel, TI, TSMC, QCOM, they are traded at a much lower P/E multiple than software companies. nVidia and AMD are the darlings of that sector now and are pushing valuations, but the whole semiconductor sector has had a huge run up in prices.
And yes, I'd say that is partially do to having a supply chain, and a lot of physical capital, such as semiconductor fabs. But that is the kind of capital that you can more easily sell off than software.
Not only that, they can roll out a large fleet of cars and provide transportation on demand.
This means eating lunch from Uber, Lyft, UPS, Fedex, Food delivery, Hertz, Avis e.t.c
When iPhone came out, Blackberry and Nokia assumed it was an iPod (music player) that could make calls. In reality it was a computer that could fit in your pocket and do 100's of things.
Tesla is not just an electric car company. It's a personal computer on wheels. Their software is far ahead of any other car company. Their hardware is a lot simpler and efficient.
You did a fantastic job of illustrating the Tech vs Car yardstick!
From 2007: "Apple is a technology company that happens to make a phone. Motorola/Nokia/Palm/Blackberry are phone companies that can easily copy Apple's technology and execute better than Apple since they know all about making phones."
Cars aren't a new product line, they're Tesla's only product line. If they fail, Tesla fails. History is littered with good ideas that didn't get off the ground the first time and then got bought for pennies on the dollar by an established player in the industry.
I don't know if we're comparing apples to apples here. Volt and Prius are hybrid cars, meaning they don't have the same drive capability as a fully electric car.
Tesla's model 3 is a fully electric car for the same price as your average hybrid car and for less than you can get many hybrid models.
There are many electric cars out there like the Nissan leaf and chevy spark at a lower price point, but they don't have the performance of the Tesla and none of them have anywhere near the 346 km range that the Tesla model 3 is expected to have. They average out at around 150 km - which is good for most every day use, but not really useful for long trips. Tesla's long range combined with it's supercharger network makes it different.
A Tesla can really compete with and likely replace the average fuel powered car in range and performance. The average American family spends 1500 on fuel per year and keeps their car for about 11.5 years, that's 17, 250.00. Further a tesla will likely need less maintenance because you don't have things like coolants or radiators or oil changes. Things makes Tesla a bargain compared to fuel powered cars.
Yes Tesla has been positioning itself as a luxury brand and competing with luxury brands, but I don't think this was necessarily a choice but rather due to the fact that they can't currently make an EV cheap enough to compete with the mass market brands. Musk has always said his vision was a mass market car and I think in many ways the model 3 is what the companies real goal has always been.
Surely they must still require radiators/coolant for the batteries?
I fully acknowledge that electric cars appear cheaper to run - I'm expecting additional taxation to appear to null out some of the fuel cost differential however.
Bear in mind, I'm not bullish on electric cars - I think once the battery issues have been solved, and the charging network is fully deployed - and once the issue of charging for non-homeowners has been solved - Electric is clearly cleaner and better. I still think Tesla is overvalued for the market it's in (making automobiles), because of its limited potential to capture market share in that (very crowded) market.
Self-driving technology is going to become commoditized also -- it may be Google/Waymo/Apple who invent the technology, but the large established car companies are going to be the ones cranking out millions of self-driving cars.
The car companies that are going to be in trouble are the smaller ones who are still committed to old-school gasoline cars, such as Mazda and Subaru. They don't have the engineering resources to keep up with the others. Most of the other major companies know what is coming and are preparing to deal with it.
I could imagine that in the future the big car companies aren't going to be that interested in making a small electric sportscar, but they could partner with Mazda to make a Miata electric.
Don't you think that GS could be artificially ensuring the stock drops so they can buy it lower??
I've never seen a GS dealing I didnt think shady shit was going on...
They farked FB, they farked greece, and the rest of the woorld in 2008-09, etc...
GS are not known for giving a shit about the financial well-being of anything other than their own...
</tinfoil>
If that is the case, then his comments is actually consistently reliable - you can always take the opposite of what he says and pocket the money.
Although equities historically are the asset class providing the best return over the long-run, this is why I prefer bonds. With a bond, if your analysis is right, you get paid at maturity. With a stock, you can be right, and it doesn't matter. Stock is only worth what somebody will pay for it, and that can largely be determined by sentiment.
There is nothing so disastrous as a rational investment
policy in an irrational world.The stock market is fundamentally not meant to be an algorithm mapping company statistics to valuation. Treating it as such is nonsensical.
This. I was going to say even $180 is still ridiculously overpriced.
Teslas statements are not good by any means when compared to GM and are even poor when compared to a company in problem times like Ford. Tesla even has massively less capital expenditures than both GM and ford. For instance, Fords after tax income was 4 billion, they had capex of 1.7 billion, and an EPS of +0.2. Compare this to Tesla at -0.6 billion revenue, 0.7 billion capex, -4.8 EPS (and they are issuing new shares each quarter for financing). Yet Ford cost $11 a share while paying out a 5% dividend - and this is all from a company in rough patch.
I have no idea why anyone is putting so much money into Tesla. You have to give Musk credit for great marketing and creating a cult around his image and ideas.
I wouldn't buy Tesla for more than $200 but I really don't think it's hard to see why people do.
Tesla is overvalued. If you were to take a present snapshot in time (a data point) and compare the assets and cash value of Tesla with what its stock price is it would be wildly off.
Everyone always remembers the winners, the Googles, Microsofts, and Facebooks. No one remembers the hundreds of dot bomb companies (including Cisco) that saw tremendous loss in stock when everyone thought they were "certain" to succeed.
"People don't buy what you do, they buy why you do it."
https://www.ted.com/talks/simon_sinek_how_great_leaders_insp...
The why is more influential than the what. It's the same reason people are dumb enough to pay a 40% premium for Apple products that are equal in any meaningful metric to a PC.
"Chinese companies have plans for additional factories with the capacity to pump out more than 120 gigawatt-hours a year by 2021, according to a report published this week by Bloomberg Intelligence... By comparison, when completed in 2018, Tesla Inc.’s Gigafactory will crank out up to 35 gigawatt-hours of battery cells annually.
...
Roughly 55 percent of global lithium-ion battery production is already based in China, compared with 10 percent in the U.S. By 2021, China’s share is forecast to grow to 65 percent, according to Bloomberg New Energy Finance."
https://www.bloomberg.com/news/articles/2017-06-28/china-is-...
> I will announce locations for between two and four Gigafactories later this year – probably four.
This puts them in the range of around 175 (35 * 4 new + Nevada) gigawatt-hours annually. They are certainly looking to compete in this space
China comes number four on the list of lithium producing companies.
Much of the world's lithium reserves seem to come from South America.
http://investingnews.com/daily/resource-investing/energy-inv...
Rare earth element map: In 2013, China produced about 90% of the world's supply of rare earth element ores. The USGS Mineral Commodity Summary [2] reported production tonnages for Australia, the United States, India, Brazil, Russia, Vietnam, and Malaysia. Rare earth element exploration and/or development is being done in Canada, South Africa, Thailand, Malawi, and Sri Lanka; however, production from those countries was insignificant during 2013.
http://geology.com/articles/rare-earth-elements/
Further China has already show willingness to ban export of these materials (for example in 2010). At the end of the day the risk to the production of batteries in particular has motivated vulnerable countries like Japan to develop alternative processes:
http://fortune.com/2016/07/12/honda-rare-earth-battery-hybri...
I could be totally wrong, but being first will allow them to grab the lions share of the business opportunities, and let them vertically integrate aka Tesla run uber, Fedex etc.. Being second is like being second with PageRank.
Tesla has built the largest factory in the world for the sole purpose of producing batteries. Battery production is about to be dominated by Tesla.
Then again, this is why companies like Ford and GM pay dividends on their stocks ... stockholders don't expect them to grow, just keep making money.
> This. I was going to say even $180 is still ridiculously overpriced.
My thoughts:
- Goldman Sachs (GS) makes buy helping other people buy and sell Tesla-related securities, profiting whether Tesla shares go up or down, and I simply don't trust the recommendation enough to make bets on the recommendation's value
- No one knows if the stock is overvalued because no one has perfect information about how Tesla will actually perform, including both Tesla & GS
- If I actually did know where Tesla shares would go, I wouldn't tell anyone, unless revealing the price would be a bigger windfall for me than keeping the information confidential
I would say that most of the big investors who are betting against Tesla are finance people, with a relatively poor understanding of the real potential for this company. They tend to see it purely as a car company. They don't understand that Tesla's battery production, their solar and utility-scale energy storage businesses are also worth quite a bit. They don't understand that the self-driving technology has a lot of value as well. They also don't understand that Tesla's electric cars are currently outperforming every other electric car, and every production ICE car as well. And lastly, they don't understand that Tesla is basically the Apple of cars, they sell cool, hot ticket items. Finance people who think "Tesla just can't unseat GM and Ford" are have definitely not "priced in" all the information.
The people who are betting for Tesla are either people more familiar with technology, or people who are just really rooting for change, and happy to see a newcomer finally shake things up. The latter have not "priced in" much information either, they are going based on hope. I personally think that Tesla has a very good shot at succeeding. Not only because Elon Musk does seem to eventually deliver what he promises, but also because the company has so many people rooting for it. These days, when Tesla needs financing, they just issue more shares, and people buy them up. This basically means that Tesla can pull itself out of debt very easily. I don't think that Ford and GM can say the same, they do not have millions of small investors rooting for them, ready to pull them out of debt. If Tesla slips up in its Model 3 deliveries, even by quite a bit, I do think the stock price will suffer, temporarily, but I think that most people will forgive them. Many people, myself included, are just very happy to see electric cars finally becoming a reality. I know that if Tesla ever drops near $200 again, I will be buying a whole lot more of it.
Perhaps some market participants value the price targets of Goldman Sachs, and this new information triggered a price readjustment to the extent that these participants traded the stock today?
I'm willing to pay up to a certain amount for a Model 3, just like I'm willing to pay up to a certain amount for a share of Tesla. No matter how much I like a Model 3, I'm not going to buy the last car on the lot for 2x the price because it's the last one. I'll just wait until there's another one at the regular price.
That is the question for which everyone wants to an answer that only they know :) You can build really sophisticated models to predict stock prices, but all models are really just making guesses about what a fair stock price is.
Some common questions to ask are:
- Does it have a positive the ACID test ratio? [1] Looking at the balance sheet [2], do the current assets exceed the current liabilities? If everyone thinks Tesla can pay it's bills, but you think they will have trouble doing so, you may believe a fair price is lower than what everyone else thinks.
- Does the company have a sensible price-to-earnings ratio? [3] Looking at the stock info [4], how much weight should you put on the P/E when determining what a fair price is?
- How fast is the company growing? Looking at the income statement [5], do you believe Tesla will grow faster or slower than it has been? And is your estimate higher or lower than what other people are guessing?
- How much will Tesla have to pay for Lithium in the future? [6] Do you predict that Lithium will cost more or less than the other people are guessing, and how much should your estimate factor into determining a fair value for Tesla stock.
[1] http://www.investopedia.com/terms/a/acidtest.asp
[2] https://finance.yahoo.com/quote/TSLA/balance-sheet?p=TSLA
[3] http://www.investopedia.com/terms/p/price-earningsratio.asp
[4] https://finance.yahoo.com/quote/TSLA/?p=TSLA
[1]http://online.wsj.com/mdc/public/page/2_3022-autosales.html
Judging Tesla based on current numbers is simply being short-sighted. They have yet to produce a mass-manufactured car, sure, but unless you've been living in a cave, you know that the release of the Model 3, a car with over 400,000 reservations, is coming soon, and that's going to create somewhere between $13-17 billion in revenue as people pony up the money for the car.
Also, in your comparison of the financials you have called Tesla's after tax income for 2016 their revenue. And Fords capex for 2016 was just under 7B. From where did you source those figures?
(Ford) http://www.marketwatch.com/investing/stock/f/financials (Tesla) http://www.marketwatch.com/investing/stock/tsla/financials
1.https://en.wikipedia.org/wiki/2010_Flash_Crash#Evidence_of_m...
I completely agree that TSLA is overvalued. But that doesn't mean GS is issuing a report and lowering a price target in order to help out small, retail investors like us.
[0] https://en.wikipedia.org/wiki/Goldman_Sachs#Controversies_an...
We can all disagree on what the proper valuation of Tesla really should be, and there are good arguments on both sides, but this comment exhibits a fundamental and simplistic misunderstanding of how stocks such as Tesla are valued, and it's something HN as a group needs to do a much better job at understanding. To say that its valuation is purely based on a "popularity contest" is simple enough that it feels right, but is dead wrong.
The value of any asset is the present value of its future cash flows. In other words, find all of the cash that a company (or any other thing) will ever generate, sum it all up, and then translate that cash back into a value today using an interest rate you choose (since cash today is worth more than cash tomorrow). With that behind us, it's fair to say, "Ok — but how in the world can you ever know how much cash a company will generate next quarter, let alone next year or throughout its entire existence?" And that is the challenge of valuation, especially at this stage - Tesla's future cash flows will vary wildly based on whether or not it can execute.
That's why growth is so important in startups and other relatively young companies. If your company has revenues of x and will grow them at x^n, the n will matter so much over time that the x is nearly irrelevant. Because these sort of projections are often overly optimistic, HackerNews has become incredibly biased against this kind of valuation, and tends to focus on the times when it's way too high. But in doing so it ignores the times when they're way too low - something that's very easy to do. Everyone was saying Instagram was an obvious sign of a bubble when it was bought for $1B, but now it kicks off over $1b in revenue every year. We cried "bubble" along with DHH when Facebook was valued at $33B, and now it's comfortably at 10x that, spitting of $8B in revenue per quarter. The likelihood of that growth curve and those projections being wrong is usually priced in.
The question around Tesla isn't whether or not their market size will be big enough if they do what they say they're going to do (they're building the largest battery factory in the world, building an electrical recharging grid, have easily the largest data set anywhere for self-driving cars, etc.), but whether it's possible. That is Tesla's fundamental value, and fluctuations in its price are based on disagreements around what its fundamental value actually is.
So maybe that all comes to naught; maybe Tesla is wrong. That risk is priced in. Tesla's market cap is roughly the same as Ford's.
I'll just say that, for my money, if I had to choose whether I would own 100% of Tesla in 20 years or 100% of Ford, I would choose Tesla in a heartbeat.
I don't understand this statement. Barring a default, if you hold a bond until it matures you get paid the face value, period.
Also how is betting on future interest rates moves any less riskier than betting on future stock price moves?
Just to be clear, I'm not saying stocks are bad, they typically always earn more in the long run, but they are volatile, much more than bonds.
I don't see it that way. To me, a stock is worth the 'fundamental value', i.e. the future divided payments discounted by an appropriate interest rate. If no-one is willing to buy my shares I'm still happy because I get the future dividends.
It's entirely to gain value from a bubble as long as the bubbles life span is longer than your goals. However you must exit the bubble before it pops by transferring ownership to someone who doesn't believe it is a bubble.
The timing is important because you need the right mix of doubt and hope. When good news hits, it's actually a great time to offload the bubble gains as there is a spike in hope with more buyers believing in a longer bubble. This may account for why good news often is followed up with a drop.
This is irregardless of belief in the stock. Bubble gains may be locked in to buy at a more reasonavke price because belief in the fundamentals of the stock are still strong. However the duration of the bubble causes the stock price to lose all growth rate information.
As a tangent, this is why I don't believe wall street provides much value. Price discovery and liquidity is important yes, but most of the money made seems to revolve around psychological manipulation moated by lack of transparency.
It's not that Tesla will or won't be successful, it's just that as it succeeds, it's changing the ecosystem around it. Traditional manufacturers offerings are becoming more and more attractive.
I think Tesla is appealing to the tech/gadget market right now. For me, everything about Tesla cars and its buying process feels new and fresh. But..
When it comes time to buy my next car I'll probably end up going to traditional car dealerships, looking around, test driving, and picking something through a traditional channel. It's just the path of least resistance and there's a lot more variety.
[1] http://www.yorkdispatch.com/story/money/business/2017/07/05/...
The Model 3 will tell us a lot. If they can ramp up production fast enough, if they can fill orders quickly enough, if they can satisfy the 'ordinary' customer's service expectations, they may take their place in the long run as one of those 'traditional' auto manufacturers long-term.
There's a lot that can be missing or not at scale in the luxury car market that won't fly at the Model 3's price point.
https://www.greentechmedia.com/articles/read/10-battery-giga...
It's also worth noting that the differences between Tesla and traditional car manufactures are much less than the differences between SpaceX and the traditional aerospace companies. There's no real business innovation on the Tesla side that the traditional manufacturers will have problems emulating aside from autopilot, whereas SpaceX introduces a whole new industry paradigm.
Interviews of SpaceX and Tesla engineers show how much they've grown out of the conservative engineering molds they found at large, bureaucratic companies like Ford and GM.
Edit: Basically Ford and GM are manager driven. They are about small, incremental change where you don't change too much too fast. And you are one cog in a line of 50 cogs. At Tesla it's cutthroat and bloody, so if you get recognition and clout early on, then you basically get to do whatever you want. At least that's my understanding and that's the understanding that good engineers have
Right now I work 60 hours a week between my current job and side projects, and while I'd love to work for SpaceX or Tesla from a professional standpoint (my 3rd-grader self literally drew "designs" in pencil for warp drives after watching Star Trek with dad), the fiancée and I are probably going to have kids in the next 3-4 years, and she has her own career to think about. At that point I imagine I'll cut back on the side projects as well as take time off from work here and there to help her out. From what I've heard I doubt I could do that at Tesla/SpaceX without professional consequences. But I guess that just makes me a shitty engineer who is simply incapable of doing something as god-like as helping scale a production line. :P
The issue at the traditional manufactures is leadership, not talent. If the leadership reforms and adapts the talent will be there. That's a large if, but certainly not improbable if Tesla seriously threatens their core business.
What the issue is at traditional companies doesn't matter, the fact is that they suck and they cultivate lazy engineering. I hope that 100,000 engineers kill themselves working for Tesla because humanity itself will not survive without their effort, and then the trillions of humans that have lived and died will have done so in vain, and all of that is much more important than your kid's star trek drawings and warm-fuzzies.
Objectively speaking, someone who does not have a family can work more hours, not necessarily produce better work. But they can, potentially, as long as the "extra" hours are also focused on work. Not sure how long that is sustainable.
I'd like to ask this: if we need to kill hundreds of thousands of people to try to save the human race, are we even left with something worth saving?
It is not clear to me that workers need to sacrifice themselves to death in order for us to survive. There is no evidence of any impending catastrophe that would require such sacrifice.
A study by the Standford CS department shows that total productivity sharply declines after 50 hours of work in a week. Mistakes get made, inefficiencies are introduced. I only shoot for 60 because I can typically vary the work and disperse it over the weekends, which helps.
https://cs.stanford.edu/people/eroberts/cs201/projects/crunc...
Also my fiancee supports me in my efforts and gives me an extra reason to go to work in the morning. She makes me more productive and provides much needed support and motivation (we largely depend on my salary at the moment). Now sure if I had no desire for a family or friends or life experiences and became some kind of solitary engineer-warrior-monk, and was able to do so without falling into severe depression, maybe I'd be marginally better, but the difference would not be nearly enough to warrant the sacrifice. Even Elon Musk spends some (albeit limited) time with his family and talks about how he's had to tone it down recently (from getting 4 hours a night to 6 hours), and recently tweeted about having a fun night mixing wine and ambien. I have no doubt he works harder than me, but even he has a family and down time.
Also, I work at a big traditional defense contractor. Large companies are hardly monolithic. Some programs suck and are staffed by lazy/ineffective engineers, but my program's customer is quite satisfied at the moment, as are other programs' customers. That's why we get business, we do have competition that will take it from us if we don't deliver. You can't paint 100,000+ employees with one brush, and trying to do so makes you sound unintelligent. Correspondingly your statement "What the issue is at traditional companies doesn't matter, the fact is that they suck and they cultivate lazy engineering." makes it clear that you're not interested in discussing the issue and more interested in validating your own beliefs, which you have no evidence for beyond having "read some interviews". Once again, that diminishes your credibility.
And I don't give a damn what you think about my 3rd grade drawings (fyi you clearly rushed through reading my post and missed the phrasing, I don't have a 3rd grade kid). It was meant to support the statement that I actually am passionate about space tech and would love to work on what SpaceX works on, nothing more.
And warm-fuzzies are clearly something you need more of in your life. Tesla will probably help save the world, but they're hardly the only force out there, or even the decisive force when it comes to combating climate change. Even if they fold I don't think you have too much to worry about.
I've been polite up to this point, but I'll be blunt: You sound like a 14 year old who's sole knowledge of the world comes from blog posts. Which is fine, but don't expect anyone to take you seriously. You have to earn that when you're in a room of strangers (which is what this forum largely is), and you've only done the opposite.
Fiancees are great, I agree. And I don't think there is anything wrong with families.
You admit yourself that your company has some bad programs. Those programs are hemorrhaging money that comes from the public. That's really awful and everyone involved should be fired for wasting taxpayer money.
I dunno about the rest of this, I'm just super passionate and I'm willing to come along and tell some mid-level engineer at a big company that he sucks and his company sucks, because it's probably true. I could come to your company and observe long coffee breaks, people who put in three hours a day, and all that stuff, and you'd brush it off when I brought it up. It's cynicism because that's what is actually out there. People suck. You try and rationalize it but your company is going nowhere fast as soon as the government contracts and fat military cheques run out.
I'm in my 20s and and been incredibly hard working and suffered a lot in my life, I'm just very passionate and I'm willing to tell you that your company is really not good, because it's not.
A lot of those programs probably are due to fold. At the end of the day that's up to the customer. As I said, we have competitors willing to snap up business on fairly short notice. Quite often the contracts are structured so that the customer can cancel them at will, no lock-in.
Saying everyone involved should be fired is a carpet-bomb solution that risks punishing good talent. Sometimes the program you work on ends, or you want a career change, and take what looks like a good opportunity but turns out to be shit. Sometimes a change in leadership turns a good program bad and there are no good transfer opportunities. There are no glassdoor.com reviews for internal company programs, if you're lucky you get hearsay, and I've known many good engineers that were stuck on bad programs for some time before being able to transfer off. Fire the offenders sure, but it's not black and white.
I wouldn't brush any of the criticism off, actually. I'm well aware of my company's institutional flaws, many of us gripe about them on a daily basis. But I think you'd be surprised how many of us bag lunch and work unpaid overtime when deadlines are near. I'm not defending my company, but I am defending most the engineers I've met there. A lot of us are actually hoping for some extra competition to shake up upper management. Hell we had no less than two dozen people, including a low-level manager watching the SpaceX live-stream when they landed the first Falcon 9, and we were as excited as anyone. We'd universally love to work on something like that, but we don't get to pitch contracts or control the money. I can't speak for the entire company, or even a substantial fraction of it, but that's my neck of the woods. The picture is not as black and white as you think. Don't let your passion or prior suffering blind your attention to detail.
Yeah, my company sucks when it comes to vision (and some other things). Here's hoping SpaceX eventually makes us better in that regard. Not that my program's in danger anytime soon, we're not in SpaceX's direct line of business. I'm in my late 20s BTW.
It is worth reading those books and understanding the thesis. Because it is directly relevant to the current situation. We are looking at the gas -> electric conversion, in about the projected time frame, and all of the reasons for why traditional manufacturers were likely to fumble are all there. And the creation of hybrids that you point to is as relevant to the survival of traditional car manufacturers as the creation of sail/steam hybrids was to sailboat manufacturers roughly a century ago. (News flash, the big ones all made those hybrids, and none successfully made the transition to pure steam ships.)
This is not to say that Tesla will be a big player in the all electric age that is coming. But its odds are better than Ford, Toyota and GM.
1) Automobile efficiency has moved dramatically since the 70's and that's due to government regulation. That regulation continues to push the industry as a whole.
2) The regulation goes beyond automobiles, were moving to alternative fuels as a people. Auto's will be drug along with that shift.
3) Automobiles and selling cars, in general, are a lot more than JUST the drivetrain. All that was really talking about with electric is a drivetrain. It's not clear to me yet that everything about a car has to be rethought to simply make it electric.
it isn't "has", it is an opportunity to rethink what hasn't changed in the last 100 years.
Google/Apple (and probably Uber) can attach drivetrain to their platform while Ford/GM just aren't capable of producing a platform to attach to their drivetrains. Tesla is an intermediate step in that direction and it looks like a good [though far from sure] candidate to make it successfully into the future of electric connected self-driving cars.
In the case of cars the key performance characteristics that we need are ability to accelerate into freeway traffic, braking ability, range, and recharge time. Electric is naturally worse than gas on all of these characteristics at the same price point, however battery technology is improving at a predictable rate and it will eventually meet the characteristics that people need for daily life. At which point pure electric becomes viable for all of us.
Therefore the prediction from 20 years ago was that the pure electric cars would likely to come from something that perhaps looks like a glorified golf cart, which will eat out the car market from the bottom up.
Tesla doesn't look like this because Elon pursued an unexpected angle. He found that he could produce acceptable high performance electric cars long before the initial projection, because the profit margins on gasoline cars in that category were high enough to absorb the insane cost of the batteries. As battery technology improves, he is able to move down the quality curve. But to do so, he has to keep thin profit margins.
Traditional manufacturers still face the traditional problem. They can't afford to offer an equivalent electric car at an equivalent price because their cost structures are too rich. But he's moving down the value chain and broadening, and not moving up. By the time he can offer a mass market car, he'll have an unbeatable edge.
Of course even if Tesla's plan doesn't work, don't count out large electric golf cart companies moving up market into automobiles like Marshell Electric Vehicle Co Ltd, EZ-GO, Xiamen Dalle Electric Car Co. LTD and Polaris. Just as was predicted 20 years ago.
Either way, I do not think it likely that most established automobile companies will survive the electric transition. If they do, it will be the first case that I know of where established brands are successful in switching to an inferior technology.
Congrats, you got a hybrid now (not unlike a Chevy Volt).
GM released the Bolt several months ago, which has a longer range than the Model 3, and you can drive one off of a dealer lot right now. I test drove one and it's an awesome, fast, and affordable electric car. An average person, without any kind of pre-order, will not be able to drive off a lot with a 3 for at least another 2 years. Tesla has completely missed the ball. GM will be on their 3rd revision of the mass-market electric car by then. That's not even counting Toyota who are several revisions into the Leaf and many more into the Prius which eats Tesla's entire product line for lunch.
Tesla expects to produce and sell 80,000 units of the Model 3 in 2017.
We'll see if they hit that target, but come on ... in what reality can this be described as having "completely missed the ball"?
With an already outdated charging system! In terms of styling and execution, I'd accept a position that GM is more competent than Tesla -- especially for the conventional vehicle-as-appliance crowd. But in terms of knowing where to go in the future, I think GM has a considerable disadvantage.
The Model 3 is a comparable car starting at $35,000 but is planned to sell at an average of $45,000 with an independently estimated profit percentage of around 25%. That means that the cost of production is somewhere around $34,000.
If costs continue looking like that, as both companies scale electric car production up, which manufacturer would you prefer to be?
Also I called them comparable, but they really aren't. After looking at safety in accidents, the driving assist and so on, my family doesn't consider them equivalent. We put a deposit on a Model 3 which we hope to buy next year. Traditional manufacturers are well behind Tesla on key amenities like that.
I believe Tesla is gearing up for the car purchase after your next one. You're currently thinking in terms of a car that you'll be driving. For those cars, you're right, there are other car manufacturers that will be more successful.
However, once cars are fully automated, the entire game will change. Market leaders of today will be up-ended. That's when I believe Tesla, Google, and anyone else who has driverless technology will take over the industry.
That goes double for the taxi companies like Uber, Lyft, Juno, etc.
I've been following Audi for some time. [1]
[1] http://www.democratandchronicle.com/story/news/politics/alba...
Mercedes or Volvo getting caught with a product in the ways Tesla has been getting caught would be unacceptable to their customers. The brand damage would be massive. Tesla as 'the new kid on the block' has a lot of leeway to mess up that you would never accept from an established brand. The whole autopilot saga is an excellent example.
By the time Volvo or Mercedes release a next level self driving car you can simply expect it to work, all the time. Until then they will release small incremental steps on their 'driver assist' technology.
I think the opposite is happening - that Tesla is under much more scrutiny because they're the new one on the block. Because the established automakers have done some terrible shit, which would absolutely kill Tesla as a company.
I'll gladly find sources and further elaborate, if you're interested.
> That goes double for the taxi companies like Uber, Lyft, Juno, etc.
The interesting thing is that you didn’t mention Mercedes Benz.
Mercedes Benz owns a few carsharing and Taxi apps in Europe, almost all Taxi operators lease cars from Mercedes Benz (which, in return, gets better deals with them), Mercedes Benz licensed the entire Tesla IP and has used it already in one model, and they’ve got their own electric cars and self-driving prototypes as well as self-driving trucks.
Mercedes Benz is the most likely candidate to build a vertically integrated Taxi solution. They’ve got deals with all major cities, with Taxi operators, they own the IP, they’ve got the apps and the infrastructure, and they’ve got the required prototypes.
This may be true, but nothing I have seen so far suggests that ubiquitous full automation will arrive until long after the likes of Tesla and Uber have run out of money. From here, it looks like we still have several rounds to go for each of
- Can we actually do it?
- Will the regulators let us do it?
- Will the public believe we can do it and trust us to do it safely?
That assumes there are no black swan events undermining the whole car industry in the meantime. Given the increasing population and congestion issues in many big cities, the corresponding increasing interest in planning/zoning policy so that using cars to get around is less essential, and the environmental implications of this kind of vehicle even if it's a hybrid or totally electrically powered locally, I think there's also a slight chance that demand for this kind of technology will never reach critical mass at all.
For the time being EV/Gas hybrids like the Volt are a lot more practical and cheaper. I could walk off the lot with a lightly used Volt for half the price of a Model 3 and get the vast majority of the benefits (autopilot simply isn't a big selling point for me at the moment) with none of the downsides.
There will still probably be areas of the country where it will be hard to find charging stations (although gas stations are infrequent in those parts currently, its much easier to bring some extra gas in a can then an extra battery).
Cities are still half the population.
Would it mean I couldn't take it camping to the UP in Michigan? Likely, but I go every 3 years at most anyway. I would just rent a dinosaur bone boner from Hertz for the weekend if I really needed it.
I invested in Tesla because I wanted this to happen. For me, Tesla is not successful unless it changes the ecosystem around it. If, while doing that, it goes under as a car manufacturer, but in the end changed the ecosystem for the better, that's great! Sometimes a thing only exists in order to make itself redundant.
I doubt this will happen, though. Instead, I expect it to be like the iPhone vs Android: there will continue to be a premium electric car by the people who launched the first real contender, but other companies will outscale them and eventually provide really competitive products. That's also fine. (Note that Android was a newcomer as well....)
For example, just look at the battery packs which are essential to an electric car. Tesla was unable to find a supplier that could meet their requirements, so they designed and produced their own batteries and now have a $5 billion gigafactory to increase production volume and decrease costs (with more gigafactories on the way). If you're another car company trying to enter the EV market, what are your options? Buy inferior battery packs at a higher cost from a different supplier? Try to replicate Tesla's battery technology and then convince your board to build a gigafactory so you can produce them at the required volume and cost?
Why not another option - battery manufacturer notices that if they build an equiv. battery they can sell to every car manufacturer in the world. With the higher volume they'll be able to do it for less than Tesla if they are only building for their own cars.
pg said it best when he said something like "Traditional manufacturers vs Tesla is like Microsoft in 1997 vs Apple in 2017"
It's debatable whether software is important enough to matter, but when the most valuable feature of most cars is that you can turn off their horrible software, that's an opportunity.
I could easily imagine the traditional car companies making the exact same successful models as now, but with the electric engine being a checkbox option.
The 2017 Electric Volkswagen Golf is apparently quite good.
https://www.theglobeandmail.com/globe-drive/reviews/new-cars...
2020 deliveries: 1M vehicles (according to company guidance) Average sale price per vehicle: 900k Model 3 and Model Y x ASP $42k = $37.8B. Plus 110k Model S/X x ASP $90k = $10B. Total revenue $47.8B
Gross margin = 25% (company guidance is 30%+ for Model S/X and "mid-20s" for Model 3/Y).
Gross profit = $12B
Operating expenses = $6B (note: It's difficult to predict operating expenses 3 years out, but Tesla will likely experience a lot of operating leverage as their sales will grow much faster than R&D and sales.)
EBITDA: $6B
P/E multiple: 30 (note: If targets are achieved in 2020, Tesla likely to be growing 50% year in revenue and would likely fetch a 30-40 P/E multiple.)
Market cap: $180B
# shares outstanding: 185M shares (currently 164M outstanding)
2020 stock price = $972
A few comments:
1. The above are my forecasts based on my beliefs that Tesla can reach their own forecasts of # vehicles delivered in 2020 and gross margins.
2. Each person has their own beliefs/ideas of Tesla. So, I'm not trying to convince anyone.
3. This model can be tweaked based on changes in # vehicles delivered, gross margin, or operating expenses... to name a few factors. So, it's not perfect but it gives the basics.
4. If you find someone bearish on TSLA and who thinks it's "overvalued", ask them to give you numbers like I have. Chances are they won't be able to.
5. The Model 3 will be the iPhone moment for autos. A sexy car that redefines transport and brings in high margins. This is why Tesla has potential to be the most valuable company in the world by 2025.
6. Tesla's moat grows as they execute faster than any other auto company. It's not appropriate to value TSLA based on other auto makers. It's like valuing AAPL in 2007 based off of Nokia and Blackberry.
PE = Price / Earnings ratio, an indicator which shows how aggressively a company is priced
To put that into perspective, that's more annual production and sales than the Toyota Camry plus Toyota Corolla.
Corolla sales are above 1.2M per year.
The 900k number is Model 3 and Model Y.
How many self driving Teslas could be needed to meet transportation demand for just the US. A lot more than a million.
If Tesla can actually deliver a mass produced self driving car while everyone is still figuring out how to make electric cars with good mileage then they become the next Toyota. Just like Apple became the next Nokia.
Surely Goldman has baked a lot of assumptions about market expectations into this assessment, and surely Goldman is wrong about many of those assumptions and right about others. A more nuanced analysis would be a probability distribution of possible price bands at various future dates.
Surely by Goldman's logic it is irrational to buy (or perhaps even to hold) Tesla stock at above $185. But Goldman's analysis would also likely have discouraged investment in many other successful firms over the years.
One doesn't listen to Goldman because the advice is true, one listens to it simply to reduce the probability of major deviations from the mean across a portfolio.
The stock price is probably overvalued by the books, but for humans desperate to embrace a company who's making an attempt to make a better, cleaner world, there likely isn't a value too high. Ecological returns > monetary returns?
Well, I like the status quo. If you don't like it, vote with your wallet and quit complaining.
<six months later>
Hey, everybody, look at the stupid people voting with their wallets!
TSLA is simply not responding to the market like most stocks in its sector do. That can screw with any model based on previous data, which is really the best we can do.
It's not the fine that kills you. It's when your customers lose your trust and no one trades with you any more. Goldman has a ton of competitors in all their businesses that would pounce on any angle they could use to lure away customers. Committing fraud, etc, is a quick way to lose all your customers.
Plus the SEC and other regulators have a lot of political pressure to nail the big banks for any misbehavior.
Big banks are paranoid about these things and have huge compliance departments to minimize the chance of anything going wrong with a regulator.
The what now? Oh, those bots that scrape news articles?
I'd probably bet my life that GS did a short sell on TSLA before putting out that article.
[1] http://www.rollingstone.com/politics/news/the-great-american...
[0]:http://tvtropes.org/pmwiki/pmwiki.php/Main/EpilepticTrees
It's really incredible to me when everyone gets on HN and puts on their equities analyst hats. You guys get it wrong time and time again - and the same applies for REAL equity analysts who actually post analysis that people pay for. Let's not forget AMZN was a junk stock going to 0 in the nineties. In recently memory, CRM, NFLX and FB were all considered stocks that could go to 0 and no one had any business owning.
I'm not even going to offer any analysis of why I'm continuing to hold my TSLA stock in this post - I'll just say that my bull thesis on the company remains true. If anything, Elon has finally kept a promise with Model 3 production. If you want the company's long history of missing promises, go watch Revenge of the Electric Car (https://en.wikipedia.org/wiki/Revenge_of_the_Electric_Car_). Once again, the company blew past every imaginable deadline, was left for dead, and is now the highest-valued automaker in the country.
The solaxun comment that was #1 when I posted this is fundamentally correct - if you want to talk valuation, go trade bonds and please leave your BS end of the world market analysis to Zerohedge.
At what point would you consider TSLA to be overvalued? Do you have an idea of where your personal alarms start buzzing? Anyone can say the naysayers are wrong on the climb but the problem with bulls is their optimism and it would be interesting to see your working that justifies a particular price for TSLA.
"[T]wo years ago we were selling at 10 times revenues when we were at $64. At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking!"
Or you spend 10 years growing revenues by 10x and then, at the end of your 10th, 11th, 12th, 13th, 14th and 15th years, pay a dividend equal to 5% of revenues and earn your investors a 9.3% IRR. Or grow revenues 20x and yield them almost 25% of IRR. (Both analyses assume you close down shop at the end of Year 15 and so represent lower bounds.)
High-multiple plays rely on growth. Whether that growth assumption is rational depends on the context.
Also a lot of this companies are betting on Lidar becoming magically cheaper. Buying a company doesn't necessarily mean they'll kill it. Big companies have a lot of politics and red tape before integrations can even happen. I was at MS when they bought Skype and later Nokia. Middle management blew the whole thing up.
Maybe younger generations will feel differently.
GS complaining about a price dropping is always a self-fulfilling prophecy and hopefully, Tesla can very quickly bounce back.
I had my entire net worth in Tesla for a while (financial advisors do not recommend this - http://www.marketwatch.com/story/elon-musk-to-the-guy-who-in...), and even I thought the current price was a little bullish for my taste. This price is still high but a little more back-to-reality than toying with $400/share was.
Your financial advisor probably doesn't have the experience of the second richest man on the planet.
It's also interesting that no one provides a source for that supposed attribution.
This wouldn't even appear on HN's radar if it wasn't Tesla.
Take a look at the long term chart for TSLA (5+ year). The stock dips below 200 (often right around 180), then within 6 months its back over 250.
Nothing to do with fundamentals, Tesla's true valuation, or technical analysis. If you have working eyeballs you can see it.
If TSLA gets to 180 (which I doubt), buy some stock, make 25-50%, and thank me later.