Tesla is an impressive company that's managed to finally be profitable. But currently their market cap is higher than all other auto manufacturers combined.
> Everyone else is losing money on their EVs and can't make them in volume production, can't find the batteries for them, you do the math.
That's the thing, this space is getting incredibly crowded this year. Kia/Hyundai, Ford, and VW are all putting out very impressive mass-market EVs that are selling like hotcakes.
Tesla makes a 27.4% gross margin on that revenue though, while Ford has a gross margin of 4.8%.
> Tesla is an impressive company that's managed to finally be profitable.
Although technically true, this is a little misleading as it implies that Tesla is barely profitable - in reality they have moved from 'finally becoming profitable' to now being the most profitable automaker (in terms of total profit).
A like-to-like comparison would have Tesla's gross margin at ~18%, which is decent, bu not all that unusual for a premium car brand. Ford and GM tend to have much lower gross margins than VW or Toyota. The latter two are usually in the mid-to-high-teens, while competing in a cutthroat mass-market
Also remember that they almost tripled profit in the last year, so that PE ratio will be 1/3 if they manage to do that again. Again, I'm not claiming that it is possible, or that that would be a sensible P/E ratio, or that they aren't overvalued, but P/E can change quickly.
They’ve faced relatively little competition in the EV space until this point and benefited from a shortage juicing prices. As demand eases and more entrants come into the EV space, they will have to lose margin, market share, or both.
I wouldn't be. They have fundamental and very broad patents on important things like:
* Pre-heating the battery on the way to a charging stop (enables the battery to accept faster charging without damage on road trips)
* Using motor waste heat for battery heating (increases range while use the above strategy)
* Dynamically adjusting charge rates due to real-time battery conditions (enables charging faster)
Those patents don't expire until the mid/late 2030's. That allows Tesla to force competitors to either pay a licensing fee or use more-expensive workarounds, like different battery chemistries, to match the battery range and charging rate. Either way, it means Tesla is likely to have larger margins than competitors.
this also why Elon wants to buy twitter, besides the issue of free speech. it means PR for his companies.
What do you think Elon's shenanigans are exactly?
I for one am very happy with the wider EV push, because I will never need to buy a Tesla. I am sure many other people have similar sentiments. Obviously they are valued for their batteries and solar as well, but their business model and product offerings there are far from a fit for everybody either. It all does not add up to current value, although it is hard to see where the mad dash to buy "the future^TM" runs out of cash to throw at it.
Also, I never really understood robotaxis as something magical high margin business. It is also race to bottom operating with very thing margins. And probably only after huge waste of VC capital.
This way, there would be a huge barrier for entry to any competition, and they can keep the price high.
And thus, i would want to see the gov't set legislation to prevent this from happening - the AI and navigation software must be made open (ostensibly for audit purposes...but it would be something that is hard to prove you've copied it?). After all, the thin margins of such a business means benefits to society at large.
Far exceeds? It is only 5% higher so that's a bit of a stretch ($22.4bn vs $21.4bn).
Plus Toyota had shrunk it's net income from 20/21 to 21/22, while it was a 116.86% increase for Tesla, so it would need an optimistic person to think that Tesla hasn't already overtaken in the last few months since 21/22 year end.
There is nothing referencing Q1 2022 on this thread.
> Alas, that has not happened yet, and the market is more complex than net income trajectories
The comment you replied to didn't state that the market is simply net income trajectories.
Gross income is just an intermediate-step in the way towards the bottom line (net and/or profits).
Its strange that the earlier poster wants to talk about gross instead of net on this point. You can almost always tell that someone is being a bit shady with their arguments when they say "income" or "profits" and then backtrack it to say "Oh, I meant gross income".
When you say "income" or "profits", everyone rightfully assumes you mean "net income", the bottom line. The most important number.
Yes, in the most recently reported quarter Ford lost money. And in previous years Ford has also lost money. But so has Tesla.
Looking at Tesla as a traditional automaker is not fair to Tesla. They don't want to be a traditional automaker, I get the impression they want to be more like General Electric was back 50-100 years ago, making all kinds of things and being rather innovative.
Either way, I get it that you can look at the same data and come to another conclusion, but clearly, for a lot of investors they look at the growth, the barrier to entry, the overall trends and that's why Tesla is valued as it is.
And maybe competition? The market is booming but other automakers are starting to have competitive lines.
I want to see what Tesla could have in their sleeve to ever become as desirable as they were the past years... I'm not sure if all this hope in eternal growth of Tesla will hold.
Particularly as Musk is no stranger to using creative accounting techniques, and sheer speculation, to make his companies suddenly look more profitable [0]
There's also him leveraging his other companies to create growth among each other. Like Starlink being a major customer for SpaceX.
Which could either be really smart, or the making of a really impressive house of cards.
[0] https://www.cnbc.com/2021/04/26/teslas-bitcoin-speculation-h...
Tesla could be priced at 20x PE or 100x PE and be the same company. Your returns will be vastly different between the two scenarios.
OPs point, which is pretty obviously objectively true, is that valuations far exceeded future yields by any fundamental valuation metric. Tech has been valued as if every company will be a pseudo Monopoly like the FAANG companies, which is very unlikely to be true
It's almost as if none of them has ever run a business or even studied history. It's best not to try to reason with them at this point. Just smile and walk away. Over time they'll figure it out.
I fully believe Tesla can be the number one auto maker, and get self driving working to a sufficient extent to be marketable. But what's the upside? A few X at most. To me that risk/reward is pretty awful... many more attractive companies selling at 1x PS and fast growth/smaller market cap that can go up 10x easily over a few years
Not complaining about Tesla stock price as it has the price that people is willing to pay but to me this is definitely a redefinition on what people care when deciding where to invest.
[1] https://www.youtube.com/shorts/vCA79HTry0A?&ab_channel=Roast...
Net income was higher for Toyota - almost double that of Tesla.
Tesla's PE ratio is 99.6, GM 5.6, Ford 10.4, Toyota 8.25.
Tesla's market cap is $1,061B, GM $85B, Ford's $83B, Toyota $254B.
The state of Tesla's stock is simply unreal, not based on fundamentals but on inertia and hype.
If you think that GM is going to successfully pivot to EVs and that Tesla will not continue to grow 50% a year, that is a fine opinion to have, but if you look at CNBC clips from 2009 you will see very similar comparisons being made around AAPL and RIMM, to what you are saying today.
I admit Q2 will be lower than Q1, but Q4 this year will likely see an even lower forward P/E if price remains the same.
Sure, they could be overvalued, I'm just trying to explain why it's valued as it is for those that think it's "insane".
Mercedes hovers around 5 because many investors believe they could go bankrupt if they can't successfully transition to EVs. GM, for example, will very likely go bankrupt (again). Many others as well.
Power of their brand is insane. But they seem to be mainly raiding it and diminishing it. Music will likely stop one day.
Whether you believe the competition will catch up, or Tesla will fail for some other reason is besides the point. I'm just trying to show that the current valuation is not "insane" given current trends, there's a very real logic to it and not (completely) FOMO.
Correction: Toyota's earnings were higher than Tesla, it was operating income that was higher (remembered it wrong).