TSLA left the land of sound fundamental investments long ago.
It is comfortably enjoying life in the land of exuberant speculation.
It is comfortably enjoying life in the land of exuberant speculation.
Is Apple at 40x P/E (which is a very simple and over-used metric) still fundamentally sound? Amazon? I think the rule of thumb was always 12x. Ok so what company is that? Intel?
I think what we're seeing is the result of excess capital. Items like accredited investor definitions lock people out of the VC space so if you can't buy a house because they are too expensive or sold before they hit market... what else are you going to do with your money? Some return looks a lot better than no return...
Granted, Tesla does have an extremely high valuation but, well, who cares? I think that's the general sentiment. It's a speculative investment.
* Disclaimer I own a small amount of Apple and Tesla shares and have a positive outlook on the future of both companies. Use your own judgement when investing or considering things you read on the Internet
I wouldn't consider Tesla to have any of those characteristics.
And don't get me started about what people said about Amazon's profitability and fiscal stability 10-15 years ago. Amazon's PE ratio was around 4000 whereas Tesla's is 1500.
My speculation, and that's all it is, speculation, is that for the most part people invest in companies that they want to see succeed and by investing in it, they become a kind of participant in the future growth and success of the company. It's mostly a place for people to park their money in a venture that they want to see flourish. There is no magic formula you plug into an Excel spreadsheet and get out a perfect stock price, there is no metric that can reliably be used to press a button to invest. You see a company working in an area you are interested in and that has a chance to succeed in, you have a positive feeling about the company, its products, its people, then you invest.
Good luck finding a stable, fiscally responsible and reliable company that ticks off all the fundamental indicators, a CEO who is a rock who never offends anyone or anything, and has a stock that does more than barely beat the rate of inflation and maybe pays out a measly 1-2% dividend.
The reality is that if the degree to which you value a stock is based on its PE ratio and other naïve but nice sounding metrics, then to be blunt you're no more sophisticated an investor than the people blowing their money on GME.
But I enjoyed reading your comment that the comment above and think it’s good to have a healthy discussion about the topic. It’s awesome!
You mean like every single, successful startup ?
Almost all of whom are run by CEOs who act professionally, are careful about their public statements and don't have the net worth to keep paying out SEC fines.
Or, the stock market is in a huge, 1929-style bubble and that's why the P/E numbers don't make sense. People don't want to even consider that though, because of what it'd do to their investments. Considering how many people have the money in the markets nowadays, this collective magical thinking can go on for some time. At some point though the value of the stock becomes detached from the actual company and its profits, and the stock becomes just a fiat token that people trade, like crypto.
BTW one scenario that can play out in the upcoming years is that the inflation finally catches up with the money printing, which increases the nominal profits of companies (as the dolar value of every product they sell increases), and the P/E numbers will again normalize. No idea how likely that is though.