Now, you might disagree with Gary Black's numbers and think that they are too optimistic but at least there are numbers to disagree with.
This article, sadly, lacks any quantitative or qualitative analysis to disagree with. You should probably disregard people who's only argument is shouting "bubble" and comparing anything to bitcoin.
For the past 10 years Tesla has been growing revenue at 50% Compounded Annual Growth Rate.
If they keep growing at 30-50% for the next 5 to 10 years, they'll grow into a valuation that might seem excessive today. That's a very simple and yet more often than not unappreciated math behind compounded growth. Einstein understood it. Warren Buffet understands it. The author of this article doesn't.
> If they keep growing at
And that's where the falacy is. Nothing keeps growing forever. Past performance is no guarantee of future results.
You don't need great analysis to see that something that has appreciated 131 times in less than a year is a bubble, unless they cured cancer or seriously undersold at their IPO. And no one undersells by that much.
I'm not sure what it means to count up the number of times a stock has appreciated in a year. A stock with steady, reasonable 2% annual growth could in principle appreciate on every trading day.
Tesla obviously is a bubble. It's hype that hasn't delivered in its promises, and certainly not on its returns. But the fact that the company itself isn't worth much doesn't mean you can't make money from it in the stock market.
> If they keep growing at 30-50% for the next 5 to 10 years
A significant part of their revenue is selling regulatory credits to traditional manufacturers. In essence, buying a Tesla subsidizes someone else's purchase of an Escalade.
If Tesla continues to grow they will be taking market share away from traditional manufacturers, who will thus need fewer regulatory credits. So at some point each additional sale of a Tesla will result in no net gain in profit. Tesla will have to grow well beyond that point for additional sales to equal additional profit.
Unless you think that consumers have the money and desire to purchase an Escalade and a Tesla at the same time.
> If they keep growing at 30-50% for the next 5 to 10 years, they'll grow into a valuation that might seem excessive today
Well, I mean, you could say this of practically any growing business. But that _very, very_ rarely actually happens.
Seems particularly dubious in this case; most of the Tesla bull numerology seems to take as an article of faith that both demand for cars will grow quite dramatically over the next decade, and (even more dubious) that the ASP for cars will grow dramatically over the next decade.
I agree. That doesn't mention the actual product milestones and accomplishments either...
- 10-year lead on the EV market
- Undisputed best product in the EV market (not the cheapest).
- Proprietary charging stations rolled out globally that'd take years (even a decade?) for anyone to catch up with.
- Hands down best autonomous driving system
- Diversified into solar, upcoming diesel.
The audience of Tesla fans is, not my cup of tea. But I can't help but draw some parallels to the $30-40/share Apple days when it started growing and there were similar arguments against it. But in my head I thought, well, have you actually used the laptops? There was nothing close to them.
Their first practical car was introduced two years after the Nissan Leaf.
> Proprietary charging stations rolled out globally that'd take years (even a decade?) for anyone to catch up with.
I'm not sure how well they're doing there globally. There are about 200 fast charging locations in Ireland (mostly CCS/Chademo combo) and 1000 or so 22kW AC ones. Tesla supercharging stations? Two. (They also have a bunch of destination chargers, perhaps 20 or 30). I think they're doing worse in Ireland than in most European countries, but not THAT much worse, and of course the CCS infra in many countries is far better, too.
People repeatedly report quality issues with Teslas. Not some minor stuff but stuff like rain getting inside.
> best autonomous driving system
I'd put a big question mark next to this one, because they don't use LIDAR. It's laudable that they want to build camera-only autonomous driving systems, because that makes them more affordable, but this has a cost in quality/performance.
re: product. Yea. Known issues with trim, body alignment, etc. Where it really counts tho, drivetrain, range, a computer system that feels a hundred years ahead of any other car tho.
re: auto-pilot. My recent car purchase was almost solely on picking the best autopilot. Current day, short of the Super Cruise nothing compares. I read a lot of "it doesn't actually drive itself" but as of the last few months it literally goes onramp to offramp, handling all the merges and lane changes with zero intervention reliably. It's remarkable. I don't expect anyone is close to complex traffic signals and urban driving regardless of platform.
Lane change can be configured to happen automatically with FSD in autopilot, I prefer the stick confirmation though.
Yes. Enters and exits freeway without intervention or confirmation. On a recent road trip there were several times where it exited one freeway, circled around, and merged onto another without any intervention at all.
Yea, I don't know where the idea that Tesla is the "Best EV" comes from. Hype? Tesla has no where near the quality or standards of other car manufacturers. That makes sense because they are so new.
The best EV thing comes from the fact that they are best in drive train, efficiency and battery tech.
They don't necessarily build the best cars.
As a tesla owner I'd say they are better bult than most American cars, on par with German but behind the Japanese.
Five years ago I would have agreed that they don't have quality cars (even though they were still the best EV). I was refusing to go near them for several years after test driving a "classic" model S with rattles and squeaks and all that, but at least in my own car (2019, model X "raven") these kind of things are non-existent.
Edit: On topic, I also think that the stock is crazy high.
> The article claims that Tesla valuation is not based on fundamentals but it fails to present any fundamental model.
> If they keep growing at 30-50% for the next 5 to 10 years
What makes it a bubble is the above statement you just made which sounds reasonable but is actually absurd. I'm curious how in year 10 Tesla will grow 50%. Do you have any idea how big that number is? How will that be accomplished?
Curious, I just ran math on Tesla growth at 50% for 10 years. That means Tesla's revenue will be 1.2 trillion dollars and in year 10 it will GAIN 461 billion dollars worth of revenue growth.
For comparison's sake, in 2019 Telsa revenue grew 15% (by 3 billion dollars) to 24.5 billion.
I've listened to the bulls continuously say things Tesla can double every year for the next 10 years and so on, but there is no path there. It always involves moonshots like self-driving taxis, a new eletric grid powered by Tesla batteries ect ect. All of these are super low margin businesses with heavy competition that require heavy investment with unexpected payoff.
The article claims that Tesla valuation is not based on fundamentals but it fails to present any fundamental model.
Here's one model that justifies price target of $600 (i.e. much higher than current $480 price): https://twitter.com/garyblack00/status/1300540006864486404
Now, you might disagree with Gary Black's numbers and think that they are too optimistic but at least there are numbers to disagree with.
This article, sadly, lacks any quantitative or qualitative analysis to disagree with. You should probably disregard people who's only argument is shouting "bubble" and comparing anything to bitcoin.
For the past 10 years Tesla has been growing revenue at 50% Compounded Annual Growth Rate.
If they keep growing at 30-50% for the next 5 to 10 years, they'll grow into a valuation that might seem excessive today. That's a very simple and yet more often than not unappreciated math behind compounded growth. Einstein understood it. Warren Buffet understands it. The author of this article doesn't.