The vauation on this stock is still insane. They were valued 2x of Toyota and VW. Will they ever make as many cars or be as profitable as those companies?
When was the last time you saw a Tesla ad on TV? When was the last time you saw Toyota or Ford sell a $7,000 driver assist upgrade or a $2,000 speed upgrade (both delivered over-the-air and instantly)? When was the last time you saw a Tesla dealer and not a store where you just go buy a Tesla like an iPhone? Tesla has the chance to dominate the car the way Apple dominates the smartphone and capture an enormous amount of value in the process, way more than any traditional car company has been able to.
It's better to compare an automotive giant with a different tech giant.
Or Tesla with another big brand/marketing car company like Audi, BMW.
The boring reality is that it's a bubble.
It can be both a bubble and people can also be failing to make the right comparisons. Apple and Amazon have both been in bubble territory before. Eventually their valuations were justified.
I was under the impression they did this deliberately because it was a means to drive down supplier prices and alleviate liabilities (e.g., Visteon, Delphi)
https://ycharts.com/companies/TM/enterprise_value https://ycharts.com/companies/TSLA/enterprise_value
Even this is absurd, though.
Tesla has a couple US factories, one in China (practically owned by the CCP) and another under construction in Germany. They sell a few hundred thousand cars a year, and sales are relatively flat/slightly up y-o-y. They've never made a profit outside of selling credits, some of which have come from controversial schemes like their battery swap.
Meanwhile, Toyota has factories all around the world (20+ countries) and produces 10 million cars per year at a profit. It doesn't add up.
Toyota's revenue is around $280 billion, while Tesla's is around $25 billion, so Tesla will need to grow by a factor of 11 to hit Toyota's revenue.
Other manufacturers also generate/sell credits, so it's not like Tesla is alone there. Tesla being able to expand in a segment where most manufacturers only build compliance cars to avoid fines speaks to how effective they are at building EVs compared to everyone else, which is expected because they're the only manufacturer designing EVs from the ground up.
The scale of Tesla's production could be another reason for their valuation. If they're hitting roughly a tenth of Toyota's revenue with 3 factories, all of which are incomplete, that could speak to how efficiently they're using capital. For comparison, Toyota has 50+ factories they own and another ~20 contract/licensed/joint factories.
https://en.wikipedia.org/wiki/List_of_Toyota_factories
The Q2 sales figures aren't great if we examine them superficially, but their largest factory, Fremont, was closed for half the quarter too.
https://www.usatoday.com/story/tech/2020/07/22/tesla-makes-1...
Even approaching Q2 2019's production figures means Shanghai was able to take up most of the slack from Fremont sitting idle for ~1.5 months, and Shanghai only broke ground at the beginning of 2019.
Their production capacity by 2021 should be about double what it was when they sold a few hundred thousand cars in 2019. Production of the semi, cybertruck, expansion of the Shanghai factory, and completion of their factory in Germany should all increase production and revenue significantly.
The biggest question mark IMO is whether they can manufacturer their own battery cells. If they can pull that off, I don't see any technical hurdles to them approaching Toyota's $280 billion in revenue in the next 5-10 years.
Don't get me wrong, they're valuation is still very speculative, because they need to execute on these new factories/products/production lines, but like I said, I don't think their valuation is absurd.
Gimme odds and I'd place a bet - they dominate the top 2-3 growing niches in auto (Battery tech & recycling, software/experience, and EV mass production). As long as their sales are constrained more by production than demand, it's unclear where their ceiling is.
You also need to consider they may just sell inputs to their competitors. Toyota may sell 10x the cars, but if Toyota must rely on Tesla battery factories, then Tesla can just eat their margin: Toyota sales feed Tesla's bottom line.
That would assume that Tesla somehow had a lasting monopoly on lithium ion batteries, which are ultimately a pretty generic product. In practice, you'd expect margins on batteries to be very, very low in the long term.
I advised my friends to buy the dip around Feb for ~350, but now is the best time to at least sell 75% of the stock and take home a cool profit on the backs of fanboys.
Do you honestly believe that? Like how often do we need to see industries disrupted from outside. Tesla itself literally did this to the car industry, 'no way Tesla can innovate and beat GM'.
Panasonic and LG is focused on making deals with lots of people and leveraging their technology to make lots of money. They haven't fundamentally innovated on Lithium Ion in quite a long time. The are totally entrenched and will make slight incremental tweaks to their chemistry.
Tesla has been involved with battery technology for a long time and they know a huge amount about it. They basically wrote the book on how to do battery packs with Lithium Ion (people don't remember but putting together 1000s of cells back then was considered totally insane). The founders of half the battery startups once worked at Tesla.
They are also the largest consumers of lithium ion cells in the world by far and have more date about their performance then anybody else by far.
Tesla has multiple long term research agreements with some really good battery researchers, like Jeff Dahn and others. They have bought multiple companies that had interesting technology for battery or battery manufacturing. They have spent multiple 100M on this. They also have one or likely more pretty large pilot battery production lines.
They will release their own battery/battery manufacturing line and it will be ahead of what the state of the art is.
But I'm sure they spent all these many billions of $ and 5-10 years of research in order to do some news item twitter storm to booster their stock price in the short term. Does that honestly make sense to you as a strategy?
> a few months ago it was how novel their heating was
It is novel and its something that makes their cars more efficient. Its in every Model Y, you can open them up and see yourself if you don't believe that it exsits. And btw, the company that does the most teardowns (selling reports to the competition) confirmed that they had never seen a heat pump like that before.
Maybe, just maybe, Tesla is just doing good technology and there is not a actually a huge conspiracy.
That all said, I don't think you can value the stock based on them becoming a battery supplier or something stupid like that.
Or like a coin machine where more people put in money because they see the other players continuously winning, resulting in mass FOMO driven investment similar to what happened with Cryptocurrencies.
If short term fluctuations of less than 4 weeks are a bother (even in moderate amounts given the current overall market / economic instability), then it sounds more like day trading concerns.
Personally I'm withholding judgement until after battery day.
Insiders know what's up with battery day. I think it's more likely a 'sell the news' moment than not.
90% of their revenue comes from cars. Their solar installs are shrinking. What other business do they have?
>Personally I'm withholding judgement until after battery day.
No doubt we'll get some show, like the "1 million robotaxis!" or the Neuralink pig. Always something coming soon...
Some people disliked Tesla's recent profitable quarters because they used green credits from Europe to make a fraction of their profit. Why is that a downside? Every industry has huge governmental incentives, that's nothing new.
The Europeans, who actually legislate based on science and reality, are supporting BEVs (Tesla) and taxing ICE makers who have no green options(Fiat-Chrysler), meanwhile the US has massive fossil fuel subsidies which help every ICE company. Isn't it rational for STEM-savvy investors to look at this massively misaligned governmental policy regime and predict future change based on sound science?
Tesla simply looked at the science and made a prediction on BEV demand, a prediction no other car company did (in fact, they fought to bury EV's internally in some cases), and now they're all behind on the future technology. Stock investors are tech-savvy, they want a technological car company; this is a "story" stock, plain and simple.
I agree that it's playing a bit into the valuation, but it seems to be momentum and cult of personality as well. Hard to justify a >1000 P/E just based upon environmental impact.
It's not about "disliking" the profits. The incentives are good.
It's people saying, "Tesla is profitable!", when all of the tiny profits come from one time charges.
>The Europeans, who actually legislate based on science and reality, are supporting BEVs (Tesla)
Did you know Tesla sales are down over most of Europe, as the "ICE companies" put out competitive vehicles?