A very interesting opinion piece at SA extending the ‘S’ curve concept with data and charts, the first time I have seen it done.
Tesla: No Irrationality In The Current Price
Apr. 18, 2022 11:42 PM ET
• There is an opinion that the market by its nature is very often irrational. Perhaps this is an overly simplistic view of the nature of things.
• Tesla’s return on equity barely exceeds 20%, but the company’s P/BV multiple is almost equal to Apple’s. What is this if not proof of overvaluation?
• If you evaluate a company taking into account its life cycle, which is expressed in the company’s growth rate, then the result may already make sense.
https://seekingalpha.com/article/4502033-tesla-stock-no-irra…
A Tesla bear objected saying “but it should be viewed in the context of the auto industry” to which I replied
@Bsoidonym “but it should be viewed in the context of the auto industry.”
If that were the case I would never invest in Tesla or in any other carmaker – too capital intensive. I much prefer the asset light, increasing returns technology sector. So the discussion comes down to in what sector does Tesla live in.
more…
https://seekingalpha.com/article/4502033-tesla-stock-no-irra…
Denny Schlesinger
4 Likes
I saw a YouTube*, a couple days ago, suggesting the Tesla ‘car’ S-curve will begin to flatten, about 2030.
At which point the S-curves for Tesla Bot will be ramping up.
In between, are the S-curves for FSD and Energy, and Insurance.
Multile S-curves on the horizon.
I’m salivating.
ralph
- it was one of the take off youtubers who was trying to justify Cathy Wood’s 2026 $4600 TSLA price target. I appreciated his using the S-curve concepts in his ‘analysis’.
I tend to agree that the Tesla EV ‘S’ curve should start flattening around 2030 when they hit 20 million production.
The good news about the flattening is that growth tends to convert to cash cow.
Denny Schlesinger
1 Like
I think we have known for a long time that Tesla is over valued. Current PE is shown on Yahoo Finance as 203. A typical S&P 500 stock does 16, a growth stock 32. A high growth company might sustain 64 or so. Above that is speculative.
Yes, 18mm vehicles is top production in the US. If Tesla gets to 50% market share in 2030, it will be a clear winner. Their US production capacity is about 1MM, expanding in China and Germany to maybe 2MM.
They have much expansion to meet that goal. The big question is can they sell all those cars. That is the main risk. Those willing to pay 200x earnings clearly think do.
I think we have known for a long time that Tesla is over valued.
I didn’t know it! LOL
I still don’t know it! LOL
Joking aside, Tesla’s Battery Day presentation and competitors entering the market convinced me that the EV technology had Crossed the Chasm and that it was time to invest. Shortly after Tesla started to be profitable, it actually had a P/E Ratio! And cash came rolling in. Most growth stocks are neither profitable not cash flow positive. It makes no sense trying to value Tesla like Ford and GM. Like it or not, ICE is on the way out and incumbents are getting whacked according to script, The Innovator’s Dilemma script.
A few years back I missed out on Apple’s iPhone precisely because I used ‘accepted’ valuation practices.
After market close… Tesla Earnings!
If it goes crazy up I take some profits…
If it goes crazy down I buy some more…
Denny Schlesinger
5 Likes
I didn’t know it! LOL
I still don’t know it!
I hear that after this conference call the competition will be tanning their nuts.
Most growth stocks are neither profitable not cash flow positive.
I’ll challenge that. In that S curve the growth phase goes on for years. Much of it can be profitable. Of course companies are hungry for cash as they invest to meet demand.
And price earnings ratio usually comes into a realistic range in time. Until then the stock is speculative.
Tesla announced earnings on 4/20.
Are you high yet?
Their US production capacity is about 1MM, expanding in China and Germany to maybe 2MM.
How do you figure that?
Last year they were at 900K+ with a Q4 run rate of about 1.2M. They said at the Q4 call they were planning on 1.5M with just the CA and China assembly plants.
They have since opened both Germany and Texas plants that are quite large. At least comparable to China and have lots of expansion room…maybe 1M each.
Seems like they can get to 3 - 3.5M with just these 4 sites.
Note that the new sites will be more efficient due to the use of the giga press.
Mike
1 Like
OK, they have said they expect to expand that 1.2M by 60% next year.
Texas and Germany are planned to be large when completed but no one is promising full run rate next year.
OK, they have said they expect to expand that 1.2M by 60% next year.
I thought they said in the Q4 2021 earnings call that they would get 50% growth THIS year.
Mike
Agreed that max run rates and actual production can be quite different specially with covid and supply chain problems. Tesla is guiding for 1.5 million cars in 2022. My original guesstimate was 1.8 million, now somewhat lower.
What really counts is the bottom line. A 50% growth in EVs delivered can easily translate into a doubling of Net Income. Take into account that the price increases don’t apply to current order but to new orders. Average selling price will increase even as manufacturing efficiency increases lowering production costs.
Denny Schlesinger
2 Likes
I thought they said in the Q4 2021 earnings call that they would get 50% growth THIS year.
At the earnings call Tesla officially said 50% growth in 2022. Musk chimed in saying that 60% was achievable.
Denny Schlesinger
1 Like