Monday, November 11, 2019

Tesla Now Trading at Record Enterprise Value of $73 Billion

The share price of Tesla has absolutely exploded since hitting a low of $176.99 on June 3rd - it has almost doubled to $346. It has not quite reached the all time high from August 2018 of $387 that was after Elon's $420 per share going private announcement.

However, Tesla's debt has been growing and so has its share count. Total liabilities were $17 billion at year-end 2016 vs $25 billion at the end of Q3 2019. (Remember that Tesla's revenue over the past twelve months was $24 billion. No other auto manufacturer has an enterprise value of more than 0.6x revenue. This obviously raises the question of whether Tesla's business is worth as much as its liabilities. Remember Adam Jonas observed in May, "even at a zero dollar equity value the enterprise value to sales ratio of Tesla would be 50% or so higher than VW.")

And like any unprofitable "tech" company, Tesla's share count continually grows. The result is that the enterprise value of Tesla is now at a record high:

Also, while Tesla's revenue over the past twelve months was $24 billion, sales are now falling year-over-year. Revenue from 2019 year-to-date was $17.2 billion, which annualizes to $23 billion. That means that the EV is now 3.2x a no longer growing revenue. That is absolutely insane for an automotive manufacturing company - too high by an order of magnitude!

The banks handling the WeWork IPO said that company was worth as much as $100 billion despite being unprofitable. There seems to be something really wrong with the markets. Sums of money like tens of billions just do not mean that much anymore.

It is hard to think of a catalyst for things to be normal again besides rising interest rates. When the ten year Treasury yield went above 3% in late 2018, the bubble seemed to deflate. Now with falling interest rates things seem to be crazy again.

Some of our previous posts on Tesla:

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