Wednesday, July 1, 2020

Tesla Now the Biggest Market Capitalization Automaker

I never thought it would be possible, but today Tesla, Inc surpassed Toyota Motor Corporation to be the biggest automaker by market capitalization: $208 billion versus $202 billion.

Does that make any sense? Consider the following:

  • Toyota trades around 1x book value and Tesla trades for 20 times book. 
  • Toyota sells 9 million vehicles a year and in 2019 Tesla sold 367k, or 1/25 as many.
  • Toyota trades for 0.8x revenue and Tesla trades for 8 times 2019 revenue.
  • Toyota trades for about 10 times earnings and has been profitable for 10+ years straight. Tesla has never had a profitable year.

Take a look at this chart of Tesla. At the end of 2019 the price and valuation went absolutely insane. It happened at the same time that their growth stopped!


Wide Moat said...

I hear you but...

Change the numbers and those comparisons would have been as compelling a long time ago... i.e. 10x book value, 1/50 the cars, 16x the revenues.

If I shorted it yesterday, I get 3.7% in my face today v. 0.7% on the S&P. How many more days of this heat does one have to take? Asking for a friend...

CP said...

Perhaps it will take longer than one day.

whydibuy said...

Just ask David Einhorn, lol.

Anon2 said...

Truer words have not been spoken.

"It seems like stocks have fully transmuted into crypto. They are just numbers to be traded having no bearing on anything other than trading dynamics."

CP said...

The problem is that the theory is completely wrong (taking it at face value, and assuming that the actual end-game isn't just to go public and get out). Delivering food has a very, very low entry cost and very low margins (restaurants have tiny margins without delivery, let alone with it). There will be no monopoly rents at the end of the rainbow; these companies will never be able to turn off the subsidies they use to keep people on their system because they'll never really be able to get to profitability. Unit-level. You can't scale your way out of that problem. Barring massive automation well beyond currently feasible technology, which seems to be what they're mostly praying for at this point.

This strategy works for some industries, but not others. WeWork, the idiotic scooter/bike-sharing companies, and Uber are all cases in point. If you have negative unit margins and you can't change that without charging more than the product or service is worth to people (if you can change it at all), then people will exploit your service while it lasts and stop using it when you try to jack up the costs to pay back the billions you spent. Or you'll get undercut by another VC-backed start-up moving in on your space.

Anonymous said...

GRUB $6.4B
WeWork - bust
Airbnb - $20 billion rumored valuation, loses money!

whydibuy said...

This TSLA stuff makes me question Ken Fisher's concept of stocks pre pricing the future.
I've found that stocks not only pre price the future, they pre price fantasy, eternity and world domination. To often, stocks discount a future that never happens and can never happen.
AMZN is such a case. AMZN would need to have 100% of the retail in this country to even slightly be reasonably valued. It can never happen. But don't tell the stock. Its pricing in the future. Like Ken Fisher says.

CP said...

$325 billion market cap. As big as:

*Toyota ($200B)
*VW ($80)
*Honda ($45B)

Which are the three largest. They sell 20 million vehicles annually and Tesla sells ~0.37M. So a 54x valuation difference per unit sold.

They also make a combined $40 billion of net income - they trade at only 8x earnings.

Tesla has never had a fiscal year with any net income.