Is Tesla a Bubble?

Dear Reader,

Tesla Inc. the electric vehicle manufacturer, is trading at a market capitalization of 128.97 billion USD.

Tesla's stock, after falling more than 50% from its recent highs because of the coronavirus COVID-19 pandemic, started rising again recently.

Is Tesla a bubble? Yes. I do not think Tesla is worth more than 50 billion USD currently. Tesla is notoriously not profitable clocking in only a couple of profitable quarters during its period as a public company. 128.97 billion USD, Tesla's market capitalization as of today, is a huge sum of money. Larger than the yearly gross domestic product of most countries on the planet. Can an unprofitable company be worth such a staggering sum? No. Yes, Tesla makers about 25 billion of USD in revenue, but a business is created to earn profit, right?

Tesla's Stock Price Graph

According to my estimates, Tesla is worth about 50 billion USD currently. And that number is premised on Tesla becoming a profitable company in the next 2-3 years. Tesla, recently picked up billions of USD in capital. At present, the capital markets are frozen, basically closed for raising new capital. If Tesla did not raise capital and given its cash burn rate, Tesla would now be facing operating difficulties. However, if the coronavirus disease COVID-19 pandemic economic lockdown goes on for a year Tesla would face the question if it can remain a going concern.

In short, for Tesla becoming a profitable company is a matter of mid-term survival. What is more, Tesla is heavily indebted with 26.8 billion USD of liabilities as of end 2019.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich