Dear Reader,
Tesla's stock price currently stands at 597.95 USD which amounts to 573.945 billion USD market capitalization. Tesla's market capitalization is approximately 30 % below its recent historic high.
I estimate, however, that the real intrinsic worth of Tesla is around 120 billion USD in the long term or one quarter of the current market capitalization or market price.
To substantiate its even current market capitalization Tesla has to gain an automobile manufacturing market share of around 80 % and achieve 15 % minimum net profit margin. This is very difficult, to say the least. The current leaders like Toyota, Volkswagen and General Motors are very entrenched in the market with significant customer loyalty. In addition, producing cars is characterized by low profit margins, around 4 % for mass producing conglomerates like Toyota and Volkswagen and 7 % for luxury sedan makers like Volkswagen's Audi, BMW and Daimler which produces Mercedes Benz.
Tesla definitely has a first mover advantage, but Tesla is barely profitable. And the other leading automobile manufacturers are quickly catching up and ramping up their electric vehicles production lines. Producing electric vehicles, however, is unprofitable currently without government subsidies. So the major automobile producers are reluctant to commit fully in the long term to electric cars. Producing electric vehicles entails significant consumption of ferrous metals, much more than internal combustion engines vehicle production. And now with the rising economy the prices of base metals are forecasted to go higher, which will make producing electric cars even more lossmaking.
In short, I believe Tesla is worth 120 billion USD in the long term. And my estimate of Tesla's intrinsic value hangs on the assumption that Tesla starts recording profit with exhibiting at least 2- 3 % net profit margins sustainably and without government subsidies.
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