Their margin are contracting, and it's actually probable they will loose money in Q3, Q4 this year. They don't have any significant advantage on competition anymore, and China's competition is already well ahead Tesla.
Elon himself suggested Tesla is worthless as a 'car making company' and it's value will come from solving autonomy with FSD. While Tesla is very good at marketing, there were 2 companies allowed to operate self-driving taxis in SF past month, and there are already several operating in China. It's hard to argue that Tesla still has the lead in that domain.
Look at the financials of this 'underlying charging network for the entire continental US' - the optimistic ones, project that it will bring ... 10B$ in revenues in 5-10 years (revenues, not profit !).
It's absolutely meaningless in the big picture of this company revenues and valuation.
No one said irrelevant either, but that their best days are behind them. From an investor's point of view that could certainly be correct.
It's not that he will solve FSD, Tesla is valuable until FSD is solved as then it becomes just a car company.
And he picked the correct impossible puzzle that will never be solved. Same with the SpaceX premise.
The market value is the desire of groups of people that it be solved.
The lesson here is what impossible problem is our domains that we can market that our company is attempting to solve it and which of those impossible problems happens to intersect with a large group of people wanting said problem solved.
This doesn’t jive with their investor guidance, nor the sales figures. I’m curious where this prediction is coming from.
Maybe it is due to the capital expenditures from all of the new factories being built?
I don't think their did any investor guidance about profits - I may be wrong though.
Re factories - I don't think they are building any new factories now - are they ? The only one announced is Mexico, but they still don't even have the official permits yet.
https://ir.tesla.com/#quarterly-disclosure
Deliveries are currently on track and each vehicle delivered is profitable, with a larger margin (18.2%) than any other major car manufacturer. This may not be true with the first Cybertruck deliveries later this year, but total number of delivered Cybertrucks will be tiny. Cybertruck deliveries should ramp up in 2024 and the margins should improve.
About those large margins - yes, they are a bit higher than others, but it's not that much - and they appear much more price sensitive now. Thing is, they compare themselves to Ford / Toyota etc, while they don't sell nearly as many cars. A much better comparison is to the likes of BMW / Mercedes - but it doesn't paint the same picture.
Cybertruck deliveries are definitely not happening this year (unless we talk about <100 units for marketing purposes - much like the Tesla Semi deliveries start a year ago...)
Does that answer the question, though? Future growth is an estimate and approximation, is not real, and says nothing about current revenues and losses.
Another way to think of it is if I spent 10 billion to make a company which now successfully produces gold bricks from wood in a way most think I'll be historically net positive in 5 years then it's not really a mystery why waiting 5 years for the number to hit 0 is not particularly relevant to when people may be interested in buying parts of the company.
We're depending on the feedback mechanism here working correctly. If it doesn't, we are rewarding unproductive behaviours.
I 100% agree that du-jour saas companies raising 300MM on limited revenue is one thing, but this is not the same.
These companies are going to make money as a means to accomplish their goals. The control could shift away from him in the future and then at that point the goals could change to shareholder profits but that is not the case currently.
Musk has been making mission statements ever since the days of Paypal. It's been 30 long years.
And he has never delivered tangible quality of life improvement for the avarage American
You can hate on Gates and Bezos and Zuck, tell you what, I will be joining you in that fight. But the products and services that they signed off are everywhere in society and if you disappeared them you'd have chaos if not outright civil war by the end of the month. (Note that I said 'signed off' not 'built')
Disappear Tesla and SpaceX and you'd have the manbun and big latte crowd throw a tantrum on ExTwitter and not much else. Life will go on as usual, for all practical purposes it's like you disappeared Tiffany&CO
Tell that to the people who depend on StarLink for rural internet access.
Neither has Ferrari or Rolex but that doesn't make them failures. Most of Musk's companies deliver good value to customer, just not cash flow profits from revenue to the companies themselves. They do somehow still deliver profit to shareholders via stock price movements though. It's not clear if Tesla will ever achieve long-term cash flow solvency but for now most customers are happy, and most shareholders are happy.
SpaceX seems like it won't be super difficult to achieve long-term positive cash flow. They're dumping tons of cash into Starship R&D but the expected returns are great. There really isn't any competition knocking on their door so they'll have at least a decade of uncontested pricing/margin dominance.
In fact Rolex, Ferrari, Fender etc. aren't valued at 680 billions. They are valued like status symbol companies . Again like Tiffany & CO.
As they should be, Musk convinced people that Tesla will deliver 'Standard Oil-esque type quality of life jump in the life of the avg. citizen.
Instead it's just a Ferrari made in Silicon Valley. When people will wake up it's gonna hurt many people who believed in this dream, which was more a mirage tbh.
It’s not super controversial that Tesla is likely overvalued, but shareholders generally still have a reasonable expectation of upside on new shares purchased so they continue to buy. I’d hope most of the qualified shareholders understand those returns are coming from speculation rather than valuation.
“Silicon Valley” seems inaccurate, most Tesla employees are in Nevada, Texas and China.
Also you talked about “Elons companies”, not just Tesla. The only company I can think of that maybe hadn’t been delivering value to both customers and shareholders is SolarCity. It’s acquisition was super sketchy but it no longer exists in any case.
No, for a company that has reached the status of top 5 most valuable it isn't unreasonable to ask for concrete quality of life improvement for most people.
Moderna and BioNtech aren't even in the top500 and yet delivered quality of life on a global scale by de-facto ending the Covid pandemic
On the other hand. If Tesla disappears all the competitors will keep milking their ICE cars, since none of there EV make any profit. If Starlink disappears Ukraine is fucked, yes even if Elon has secretly given Putin access to all the satellites or whatever is the rumor of the day.
If you believe that, I have a social network to sell you...
Come on, the guy who keeps cozying up to the political party that denies global warming and loathes environmental protections is just looking out for the planet? The guy who spends hours on twitter trolling people, and refuses to honor contracts and severance payments is actually a misunderstood good guy?
Elon is great at attracting talented people and investors to his companies, and a big part of that is his ability to spin a compelling yarn about saving the planet or living on mars bases. That doesn't mean he's actually trying to save humanity. We're already seeing him pivot to a totally different persona, or maybe just not bothering to hide his true self as much.
This is really my only complaint about Space X. I wish they would stop trying to be this somewhat unrealistic hype machine. What they are doing nowadays is amazing - that should be enough!
This chart is quite amazing:
https://apolloacademy.com/40-of-companies-in-russell-2000-ha...
In Russell 2000, 40% companies lost money in 2022. It's higher than the peak of dot-com bubble, and almost as high as at the worst of financial crisis in 2008-2009. And it seems to be the norm lately. Eventually though, everything comes back to earth.
This is why I don't take seriously any stats about pharma R&D spending. They don't consider acquisitions to be R&D even though it often effecively is.
For a much more thorough look at how our modern financial systems produce what naive thinkers would consider to be bizarre results, I highly recommend Mariana Mazzucato's "The Value of Everything." It's a challenging read, but it goes into the details of how economic and political thought has shifted over the centuries regarding the concept of wealth and value creation, and how the game really works.
His companies has paid worker salaries from day one and continues to pay wages for over 127,000 people every month.
/s
It's plenty easy to lose money and stay poor.
Only a handful of people in the world have "lost money and became kings"
Want to do the same? You live in the same capitalistic society as Elon/Bezos...
Most tech companies lose money before they make money. Amazon lost a shitload of money before it started turning a profit, now Jeff Bezos is the 2nd richest person in the world.
Amazon businss model was/is based on selling books/toys etc. online. Basically Walmart but online + obsession over customer and improving the quality of life of the customer + AWS Cloud.
Tesla business model is based on the political choice to do away with fossil fuels. They aren't the same.
Tesla is the product of a centrally planned economy because the avg. person didn't jumpstart the Tesla/EV phenomenon. Matter of fact when the avg. person is left free to choose with their wallet they stil buy ICE cars, despite all the billions in subsidies, funny math and psyop over the population.
Sears or Ford may have produced a ton more in profit than was, as you say, put into the company. But the current valuation is based on what profit the market believes it will produce in the future.
Musk is 50, already past his intellectual prime. Has been an entrepreneur (or at least he claims) ever since he was 20.
If he hasn't delivered any profit in 30 years, it's clear that his business model is based on politics, subsidies and aggressive promotion to sell the stock and enrich himself as opposed to building something that improves the quality of life of the avg. citizen.
Are you one of these people who believe contracts/loans are subsidies?
Say you make $1 of profit, does that translate into $1 your company can control for its benefit? If kept as profit part of that dollar flows out of the company, to other companies and possibly to the government as taxes (god forbid).
If the company reinvests then it fully benefits from its would be $1 as opposed to someone spending it elsewhere.
IMO Accounting is the only reason many companies don’t turn an external “profit”
Those investments will basically be a money printer by lowering the cost to orbit drastically below any possible competitor.
It’s a long term play and it’s very smart.
There's a huge difference between unrealized value and actual profit.
It's like living in a house worth 1 million. That doesn't mean that you have a million dollars to spend on toys. The value might go down or the house might get trashed.
This assumes that the business is, of course, growing though and growing at a faster rate than the economy and its competitors, and that it has a positive return on capital from the core of the business.
A growing company with high return on capital which is not aggressively reinvesting in itself would be a red flag.
This should go in one of those "Myths that Engineers Believe about Finance" that all companies that don't produce profits are bad.
Growing a company that loses on its unit economics (eg. WeWork) ought not to make founders rich
If the company has high operating margins and high growth then it makes sense to take those profits and reinvest in capital and R&D to make the company bigger. That is the definition of an efficient economic machine builds itself, and the way to a very good stock for the investor.
That is different from the pathological stock with flat operating margins which is growing on debt, spending $1 to make less than $1 at the margins and will only consume itself as it grows.
And learning to tell the difference between those two requires learning to read 10-K's, you can't just look at the net earnings bottom line.
It us economically inefficient but every thing in US defense is so mindbogglingly economically inefficient that it makes SpaceX look like amazing value. (and IMO justifiably so)
The idea of creating a profitless company that somehow makes you personally rich used to be thought of as a fluke. Yes it's possible but it shouldn't happen and aside from extreme luck it won't.
Something has changed. Losing money and getting rich anyway has gone from fluke to something else, and it feels like we are lying about how the game really works.