Tesla, Inc.'s stock price and respectively Tesla's stock market capitalization is at an all time high, Tesla, being the largest electric automobile manufacturer, is leading according the many the revolution into electric vehicles.
But is Tesla at these lofty valuations overvalued. I would say yes, Tesla is overvalued by 40%. Tesla's stock market capitalization has grown quicker than Tesla's prospects. However, as in many moonshot technology companies that aim to disrupt whole industries Tesla's final outcome is somewhat binary. Tesla and the electric vehicle revolution will either fly or die. There is of course the prospect of electric vehicles taking a small share like 10% of the global automobile market long term.
However, the electric vehicles and respectively their business model needs some volume to scale. As you know, governments subsidize electric vehicles, so now and in the past Tesla is notoriously unprofitable making yearly losses often above 1 billion USD. But the good news for Tesla is that its sales keep growing on a year on year basis. In 2018 full year compared to 2017 full year Tesla's sales grew almost 100%. If Tesla continues to scale sales like it does in the not too distant future, 3-5 years, Tesla could start reporting profits on a yearly basis. The problem is that in the last quarters Tesla's sales are doing not that great, which speaks that the potential electric vehicle market is getting saturated.
So, basically Tesla is still in the binary outcome phase. If Tesla continues to grow its sales of electric cars by more that 30-40% year on year, Tesla could become a profitable and viable business. Otherwise, Tesla's business model is still out to prove its viability.
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Petar
Vladimirov Posledovich is not liable for any investment losses incurred
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Petar Posledovich
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