Let's Talk About Tesla Stock Valuation.. Is Tesla Overvalued now?

TL;DR

Tesla may look overvalued by conventional automaker metrics, but the speaker argues that its long-term electric and autonomous vehicle potential could make it undervalued. Tesla was valued at about ninety-seven billion dollars, with a forward P/E of ninety, far above the traditional automakers discussed. Read on to understand why the speaker believes that comparison misses a major industry transformation.

Transcript

well unless you've been hiding under a rock you probably know that Tesla stock has been on an absolute tear you pull the 2-year chart of this one and the stock doesn't do very much a lot of Peaks a lot of troughs but specifically the last few months Tesla's been on an absolute tear in here today stock closed out in nearly five hundred and thirty-ei... Read More

Key Insights

• 🥡 Tesla's stock price surge does not solely reflect its current performance, but also takes into account its potential for dominating the future electric vehicle market.
• 🚙 Comparing Tesla to traditional automakers is misleading, as the industry is undergoing a significant transformation towards electric and autonomous vehicles.
• 🚙 Electric vehicles are the future, and Tesla is expected to maintain or increase its market share in this rapidly expanding market.
• 🇧🇶 If Tesla can sell millions of electric cars each year, its revenue and net income could reach staggering levels, justifying a trillion-dollar market cap.
• 🍉 Short-term analysis may lead to the conclusion that Tesla is overvalued, but a long-term perspective reveals its potential for immense growth.
• 👨‍💼 Other businesses and potential future products, such as autonomous taxi networks and Tesla insurance, further strengthen Tesla's position in the market.
• 😮 The similarities between Tesla's rise in the electric vehicle market and the dominance of certain companies in the smartphone industry highlight the potential for an exponential increase in Tesla's valuation.

Questions & Answers

Q: Is Tesla stock overvalued or undervalued?

The speaker says Tesla may appear overvalued when judged by its current valuation and conventional automaker comparisons. From a long-term perspective, however, he believes Tesla could be undervalued because the market is shifting toward electric and autonomous vehicles.

Q: What Tesla valuation figures does the speaker discuss?

The speaker says Tesla had a market capitalization of about ninety-seven billion dollars, which he rounds to nearly one hundred billion dollars. He also cites a forward P/E of ninety and a closing share price near five hundred and thirty-eight dollars.

Q: Why does Tesla look expensive compared with traditional automakers?

Tesla's market capitalization and forward P/E were much higher than those of Ford, General Motors, and Fiat Chrysler in the comparison. The speaker notes that these companies sold more cars and generated more profit at the time, making Tesla appear expensive on current results.

Q: Why does the speaker reject a simple comparison between Tesla and other automakers?

The speaker argues that stock valuation reflects future prospects rather than only present performance. Traditional automakers must adapt from internal-combustion vehicles to electric vehicles while also competing in autonomous driving, so their current sales and profits may not reveal their future positions.

Q: How could electric vehicles affect Tesla's future value?

The speaker views the move to electric vehicles as a lasting industry transformation rather than a temporary trend. He believes Tesla's future value depends partly on whether it can remain a major competitor as automakers adopt a different manufacturing process and technology base.

Q: How does autonomous driving factor into Tesla's valuation?

The speaker identifies autonomous vehicles as the industry's second major change alongside electrification. He expects buyers to demand self-driving capability and questions how many established automakers will compete successfully in both electric vehicles and autopilot.

Q: Why does the speaker compare the auto industry with the smartphone transition?

He compares the shift from internal-combustion to electric and autonomous vehicles with the move from flip phones to smartphones. In his example, former leaders such as Nokia lost relevance while Samsung, Apple, Huawei, and Xiaomi became major smartphone companies, illustrating how technological change can reorder an industry.

Q: What long-term Tesla stock forecasts are mentioned?

The speaker says Cathie Wood projected Tesla stock could reach six thousand dollars per share over the next five years. He also states his own belief that Tesla could exceed three thousand dollars per share in 2029, using these forecasts to show why the valuation debate becomes confusing.

Summary & Key Takeaways

• Tesla's stock has surged in the last few months, prompting discussions about its valuation.

• While its forward P/E ratio is high compared to other automakers, Tesla is not just an ordinary car company due to its focus on electric and autonomous vehicles.

• The shift to electric vehicles is inevitable and Tesla is well-positioned to capture a significant market share, potentially selling millions of electric cars each year.

• When accounting for Tesla's auto business alone, it is possible to see a trillion-dollar market cap in the future.