Dear Reader,
Currently Tesla's market capitalization stands at approximately 568 bln. USD. Tesla, the electric vehicle manufacturer, is valued more than Volkswagen or Toyota based on future expectations of brisk revenue growth and in the end reaching profitability.
Basically, Tesla's stock is a bubble like the rest of the current market environment, technology stocks especially. I estimate Tesla's long-term intrinsic value is no more than 90 billion USD. The market seems to price that Tesla would turn the automobile manufacturing market in a near monopoly with Tesla achieving net profit margins of something like 30 % - 40 %. This is an unrealistic assumption to say the least. Ferrari is also valued very richly by the markets based on both Price/Earnings and Price/Sales multiples. People seem to buy into their dreams. This is one of the main reasons for Tesla's record price run. Ferrari, RACE ticker, also. Millennials, or young people born between 1981 and 1996, buy Tesla's stock because they dream of owning Tesla and they buy into the technology hype.
What we are witnessing now is another dot-com bubble like the one in 2000. This time, however, it is the everything bubble driven by money printing by global central banks which supports profligate government spending. The excess money finds its way into real assets also like real estate and common stocks of companies which produce the goods and services we as humanity consume. In search of ever greater profit people buy into highly speculative stocks like Tesla, Nikola, Virgin Galactic which promise clean energy, space exploration and so on. These very dreams may well come true, but Tesla's stock seems to be pricing 10 years of above 25 % revenue growth and net profit margin of around 30 %, which is hard to achieve.
If Tesla achieves a technological breakthrough and manages to consistently produce electric vehicles profitably, Tesla's market capitalization could even reach 200 billion USD in the long-term. But since most consumers are not very well off, charging high prices for automobiles is very difficult. That is why the major automobile manufacturers have net profit margins of around 3-7%.
In my opinion, Tesla's intrinsic value is around 90 billion USD as of today.
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
No comments:
Post a Comment