Thatâs an intentionally dishonest take. Not saying that TSLA isnât grossly overvalued because it is⌠but there are worse companies out there valuation wise. Itâs the first viable electric car company. Thatâs worth a lot. Not 161B obviously, but again there are tons of worse situations out there.
Iâd never short Tesla but this is completely out of hand. $160 billion market cap is more than GM, Ford and Honda combined.
Totally agreed.
I never understand what Iâm suppose to think about these regular âx is so over-valuedâ stories. The only people getting hurt are rich. Itâs rich people betting on who is the dumbest and last to hold the bag. They are gambling. Why should I care? Just donât invest your money just like you wouldnât put it all on black eight.
Imagine what GM, Ford, or Hondaâs market cap would be if they also controlled like 90% of the worldâs oil and gas stations. Teslaâs cars are nice but the batteries and superchargers are what give them a huge edge over everybody else.
There are a lot of middle class people who shorted Tesla because of stories about how overvalued it was. There are also a lot of middle class people who buy stuff like Tesla because itâs going to the moon.
Meanwhile the rich people buy shares of companies that make parts for airplanes with stable dividend yields and big moats.
Personally Iâm probably done with financial products until Iâve maxed out the number of real world investment vehicles I can personally manage. You can buy a small-mid size business for 3x earnings because someone is retiring. Meanwhile they want 20x earnings right now for below average stocks.
Iâm nowhere near rich enough to deploy my capital with implied yields like that.
I suspect youâre in the same boat with a consulting business. You should probably reinvest your excess earnings into your business unless youâve already scaled as hard as possible.
There are plenty of regular joes buying Tesla stock.
Shorting stock is not something most middle class people are doing.
There are even people over at Bogleheads insisting Tesla is a âgame changerâ because they drove one and itâs great. I mean, come on.
Maybe they do somehow become a consistently profitable company. But the current valuation assumes they will do so on a massive scale and is basically impossible to defend with any kind of reasonable financial analysis.
To play devils advocate see Amazon.
How is it âintentionally dishonestâ iyo?
There has to be something to justify that kind of market cap besides just feels. Some kind of number you can point to and say, âHey look, never mind net profit, these guys are still in a good position and worth investing in.â Cash flows are one of those things. Companies can limp along nicely for years with insane losses if they have the cash flows necessary to keep the vendors and employees paid and the lights on (like Amazon). Tesla appears to have neither. And âitâs the first âviableâ electric car companyâ definitely reads like a feel. How do we know itâs viable long term other than âWow will you look at that market cap?â
No⌠there doesnât. Most market caps are like 85% feels lol.
I know itâs crazy but itâs absolutely true. Company valuations are like 15% fundamentals and 85% feelings about that company and the market generally.
Right. Again, itâs possible Tesla ends up being a trillion dollar company. Iâd argue a dozen factors that differentiate it from Amazon and make that highly unlikely but it really doesnât matter. I would just say that in general you want to bet against highly leveraged, unprofitable, cash incinerating firms in capital intensive industries with questionable sustainable competitive advantage, that are highly sensitive to economic cycles, that Joe Blow investor is buying at any price.
I mean, maybe you are right and it lives up to the hype one day. I hope it does fwiw. But as an investment advisor or fund manager or whatever I would be hesitant to put my clientsâ money into something which looks at a glance to be doing well based on (irrational?) exuberance while it is losing money hand over fist and hemorrhaging cash to boot.
Because it intentionally took a ten year view, which in Teslaâs case is a lot of building of factories and incurring massive expenses to create the business it now has. Meanwhile 10 years ago Nike was a world dominating shoe brand.
Teslaâs current valuation is entirely about the last quarter, maybe two and what those quarters mean about the next ten years.
Obviously Iâm on team âTesla is hilariously lolwtfbbq overvaluedâ⌠Iâm a value investor who hates the idea of paying more than ten times earnings for anything. But that doesnât mean that comparing its last ten years vs Nike is a good faith effort at analysis.
A lot of the Tesla valuation is (I believe⌠I havenât studied it because itâs in no danger whatsoever of being something Iâd invest short or long) based on the fact that theyâve recently stopped the bleeding and are starting to turn a modest profit.
BS,
I know you have car dealership experience - it absolutely blows my mind you can buy a profitable auto dealership for like 4x earnings. With leverage a 50%+ return on equity is like the base case scenario! I have absolutely zero idea why these big dealer groups donât go public, and why prices are so low (I get you need a good manager but this shouldnât be that hard to find, just give them a little equity).
Itâs actually a nightmare. Car dealerships are a license to print money or an open pit trash fire that eats cash at a terrifying pace.
Itâs also entirely dependent on the management and managing the dealership is not easy. I worked for a dealership group in San Antonio whose owner was a former GM whose real gift was picking and nurturing talented managers⌠and he basically would insta buy a dealership when he thought he had a guy who could run it well. He eventually flamed out completely and the whole thing basically collapsed.
Itâs a really weird space whose best years are far behind it. Nobody knows when the music will stop, but itâs looking like soon honestly. I quit in 2006 and Iâve never regretted it. It was the first leg of my career and I learned a lot⌠but seriously it was the right call.
When I sold cars selling 15 a month made you a success who made 75k+. Now the number is 7-10 and many of the salespeople arenât even on commission.