Dear Reader,
Tesla, the electric vehicle automaker, has currently a market capitalization of 407.550 billion USD.
Basically, the single scenario in which Tesla can grow sales and possibly profits into such a valuation is that Tesla becomes the dominant by far automobile manufacturer in the world.
The market seems to be pricing such expectations for Tesla. The route to car production dominance for Tesla goes through electric car future. Currently electric cars are a very small portion of the overall market. As even Elon Musk admitted recently Tesla was on one month away from bankruptcy not long ago.
Yes, Tesla has a competitive advantage in electric car manufacturing. It is quite ahead in electric vehicle technology from its main competitors like Volkswagen and Toyota. But to grow into its current market capitalization Tesla has to win something like 30-50% of the global automobile market. The problem with electric cars is that they are currently too expensive to produce, because they contain a lot of ferrous metals, which currently makes electric vehicle production loss making. Even conventional combustion engine automobiles are produced with very thin net profit margins. Tesla has to achieve a technological breakthrough to live up to the current promises built into its stock price. If Tesla makes a quantum leap in electric vehicle production technology the company will achieve a healthy net profit margin.
The high market capitalization of Tesla has certainly bought the company some time. Will Tesla achieve its high goals? I think Tesla will be worth around 70 billion USD in the long-term. With other words, Tesla's stock currently is a bubble. Many bubbles like Fitbit, Groupon, DDD, GoPro have already burst.
Tesla's current technology is valuable, though. That is why I think Tesla is still worth 70 billion USD in the long term, 5-10 years on, which is still a lot of money.
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
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