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The last time I valued Tesla, it needed to have CAGR revenue growth of over 70% in the next 5 years with margins of comparable high end car manufacturers (about 15%) to get a fair value of around $75.

I hope you get off the train before this cycle comes to an end.

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I wouldn't weigh an investment in TSLA with the same metrics you'd use for mutual funds or steady large companies.

Tesla is clearly a growth company. They're creating new categories (luxury, electric vehicles) and building infrastructure around it. They've also only released 1 sedan so they've barely penetrated the market. As a growth stock, I don't see anything alarming about a company that's worth 30x its quarterly revenues. They have a visionary, intelligent CEO in Elon Musk and the image/brand of a car company that's ahead of the game. Not to mention, they make amazing products. FB is valued at 60x quarterly revenue, TWTR is valued ~140x quarterly revenue. I would much rather bet on Tesla becoming the most valuable car company in the world (at least ~$50b in mkt cap) than the insane valuations of social media companies.

I got both of my rear cheeks handed to me on earnings today. (I was long a fair number of puts on TSLA.)

I believe in the company's technology, and the Model S is quite nice (a colleague has one), but the stock is WAY, WAY ahead of itself here.

"The market can stay irrational longer than you can stay solvent." rings quite true for me today.

They just had a run-up from 130 to an all-time high of over 200, they released early that they would be exceeding expectations.. and you had a put out for earnings?

Irrationality exists in many shades, I guess.

It takes two sides to make a market...

Well yes, and the other side are all those people that keep themselves up-to-date on their stuff. If your information base is summed up as "a colleague has that car, but they recently had fires, so surely they are not worth X", why are you doing options?

(I have a theory of course: TSLA shorts stock supply is scarce enough to carry a very significant premium. So you enter options, where it's easier to find that "other side".)

That's the risk you run when shorting any stock, especially one with an already high short interest. It's better to just avoid the overvalued companies.

It is almost never correct to short a stock with long puts. It's not a solvency issue, it's a premium issue. You're making a bet that it will crash in time period X, and people overvaluing these time-limited bets is the #1 way options traders make money (seriously). Solvency won't save you when it's -EV.

Tesla might be the biggest extinction threat to GM, Toyota, VW and the other big guys.

Don't you think they would pay $23B to, not only extinguish that threat, but also gain from the upside?

In my mind, if someone may be willing to pay $23B for something, it's worth $23B. That's why I think the valuation is quite fair.

EDIT: Fixed typo

If an acquirer would pay $23B and the market values it at $23B then you don't make any money. Meanwhile you take the risk of holding a high flying stock. Maybe you're right, but it's a gamble.

You just described every stock on the market. If it's not a gamble then people buy it and the price goes up until it's a gamble.

You're arguing for strong market efficiency. There's nothing wrong with index funds, but that doesn't explain why Graham, Dodd, Buffet, and similar investors have out performed market indexes for so long.

A stopped clock is right twice a day. If you compare random subsets of index funds (i.e. take a random half of the stocks in the fund and call those a new fund), some of those will consistently outperform the indexes too.

Tesla is strongly positioned (effective first mover, superior execution) in a rapidly growing slice (electric vehicles) of a stagnant market filled with cut-throat competition (U.S. automobiles). The present valuation precludes a Cupertino-style citadel in the luxury market - Tesla has to burn Ford, GM, and/or Fiat's market shares into the domestic market and/or steal their growth in emerging ones, or burn their capital trying.

Tesla's margins are almost double those of other manufacturers; a big part of the profit comes in from their automated highly scalable production. When they eventually release their Model E (affordable performance electric vehicle for the masses) it'll be a game-changer.

Surely your money is where your mouth is, right? You're going to make a killing guaranteed! Where can I subscribe to your newsletter?

I'm curious: why did you restrict your analysis to 5 years?

On the one hand, I'd expect Tesla to have tech-like growth for 10 to 20 years. On the other hand, competition is bound to happen eventually. How did you pick 5 years?

So the last time you valued Tesla, you stuck your head into the sand and calculated a range of "indicators"?

I mean, really, what do you expect people to respond? You are trying to smash water with a hammer.

I don't understand, what do you think is a reasonable way to make investment decisions if not a fundamental value analysis?

Magic 8 Ball.

Market speculation.

Do you have this analysis handy? I find valuation...yada yada yada about as convincing as the other posts citing Tesla's great prospects. Tesla's margin is about 25%, so your valuation sounds like it would be way off out the gate.

http://www.youtube.com/watch?v=7FVbyyDLzvg

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