Company founder and CEO Elon Musk may not mention Tesla Motors Inc's (TSLA.O) stock price when his electric car company gives its latest financial update on Wednesday, but it will be front and center for investors divided over its seemingly rich valuation.
After a rally that ended in April, Tesla's market capitalization is currently about $31 billion - equivalent to $620,000 for every car it delivered last year, or $63,000 for every car it hopes to produce in 2020.
By comparison, General Motors Co's (GM.N) $48 billion market value is equivalent to about $4,800 for every vehicle it sold last year.
Tesla's heady valuation - about 125 times the next 12 months of expected earnings - and the implication that shareholders may be overpaying for Musk's small but fast-growing luxury car company have made the stock a favorite of short sellers.
Source: Reuters
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A rally in Tesla shares [...] briefly vaulted the company's market capitalization past the German luxury carmaker in early Friday trading. The amount of ground Tesla covered was vast: BMW was valued at a $30 billion premium as of early December.
[...] Short interest represented about one fourth of the shares as of the latest quarterly filing.
According to The Drive the three most valuable auto makers are "Toyota, Daimler, and Volkswagen."
Tesla stock sat at $357.32 after market close after trading as high as $376.87 on Friday.
—Silicon Valley Business Journal
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VW Responds to Diesel Scandal, Says "the Future is Electric"
Bob Lutz Thinks Tesla is Doomed
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Elon Musk's "Top Secret Tesla Masterplan, Part 2"
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(Score: 1) by khallow on Thursday May 05 2016, @03:25AM
After a rally that ended in April, Tesla's market capitalization is currently about $31 billion - equivalent to $620,000 for every car it delivered last year, or $63,000 for every car it hopes to produce in 2020.
Well, that sounds like an awesome destination for my retirement funds. Does make you wonder who's pushing up the price of this stock, especially with all the alleged short sellers out there. Maybe a few buyers are enough to push it up?
(Score: 1, Insightful) by Anonymous Coward on Thursday May 05 2016, @04:45AM
After today's better than expected numbers, the resulting price bump may be partially the result of a "short squeeze" which is a sort of self-reinforcing price increase when short sellers are forced to cover their short positions which drives the price up which causes more short sellers to cover their shorts which drives the price up, rinse lather repeat.
On the other hand, future valuation of a company based on past sales is a reductive analysis. GM is a titanic, its had decent growth satisfying all the pent-up demand for new cars since cash-for-clunkers knee-capped the market in 2009. But there are only so many customers that have been sitting on old cars, that growth rate is unsustainable. When that demand peters out, GM's inertia is going to ram it right into that iceberg. Tesla's got massive potential for growth, well over 300,000 people put down $1000 deposits on Model 3 pre-orders. And that 2020 projected sales volume was bumped up to 2018 today. The chevy bolt (or volt?) just isn't in the same league in terms of customer interest and sales growth - the very fact that they choose such easily confused names as volt and bolt shows GM can't get their marketing shit together.
(Score: 3, Funny) by tftp on Thursday May 05 2016, @06:14AM
the very fact that they choose such easily confused names as volt and bolt shows GM can't get their marketing shit together.
Don't forget also Chevy Colt, Chevy Dolt and Chevy Jolt :-) Hey, they are all perfectly cromulent model names!
(Score: 2) by Capt. Obvious on Thursday May 05 2016, @06:47AM
I thought shorts were timed. So a short lasted until a certain day, regardless of the price. Am I wrong?
(Score: 2) by rondon on Thursday May 05 2016, @12:19PM
Some investors with short positions will get nervous and buy the underlying stock if they think they have taken a losing position. Usually via automated buys at certain price points, in the circumstances I am familiar with.
(Score: 0) by Anonymous Coward on Thursday May 05 2016, @03:27PM
Shorts are not timed, you are probably thinking of options contracts which have expiration dates but can be freely traded up until they expire at which point their value goes to zero.
Many people short on margin, that means they borrow money (that is secured by the other securities they own) in order to purchase their short positions. When the price goes up, that short position becomes more expensive because the cost to close it out goes up. That cost increase means an increase in the amount of money they are risking on margin. At some point their 'credit limit' runs out and they must either come up with more cash to make up the difference or close their short position (aka buy actual shares). Which, in a heavily shorted stock, can cause a cascade effect known as a "short squeeze."
(Score: 2) by Capt. Obvious on Thursday May 05 2016, @08:43PM
So, if the price remains flat forever, I can hold a short position at no cost forever? And the only limit I have is that I put up, say 10k in cash and credit. So if the delta between my short price and the actual price becomes 10k (in aggregate over my shares), I have to make good. But other than that, it's all good?
(Score: 2) by legont on Friday May 06 2016, @12:24AM
You'll still have to pay dividends if any and interest on borrowed funds, including shares themselves.
This is why it is much easier to bet on rising market. You are always timed when you are short regardless of actual instrument be it borrowed shares, options, futures or whatever over the counter thing, while long position can be maintained with no costs.
"Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
(Score: 2) by Capt. Obvious on Friday May 06 2016, @01:37AM
Okay, so if I borrow money to fund the short, I pay interest. Sure. But if I put that 10k in, I'm presumably just losing out on the opportunity cost of that capital... Except I have to match whatever dividend the stock issues? So, for... what stock never pays dividends, Amazon?, it would essentially be a long term bet?
And yeah, it's obvious that the betting on a rising market has a structural advantage.
(Score: 3, Informative) by legont on Friday May 06 2016, @02:54AM
You need to borrow the stock to sell and the owner will not let you do it for free.
"Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
(Score: 2) by Capt. Obvious on Friday May 06 2016, @06:17AM
Ah, it's a real loan of stock you sell. You're not just selling a contract which obligates you to buy back the stock later.
Thanks for the help, I never really understood shorting before. I mean, I got the concept at a high level, but not the mechanics.
(Score: 3, Interesting) by legont on Friday May 06 2016, @10:18PM
Real is a shaky concept when one talks about financial innovations, but yes, in this particular case broker has to have real securities on somebody's account that he will loan to you. Conspiracy theorists claim that they in fact violate the rules, especially when commodity such as gold is concerned. There are also contracts without any underlying securities involved, but they are usually in futures/forwards/swaps fields.
Nevertheless, they will charge you for keeping short position.
"Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
(Score: 3, Insightful) by bitstream on Thursday May 05 2016, @09:32AM
This is it. The value of Tesla car manufacturing are their abilities and the future. Otherwise it's like valuing a computer by the weight price of the metals used. It won't give any good hint on what's really going on.
(Score: 3, Insightful) by Phoenix666 on Thursday May 05 2016, @01:41PM
People who only look at Tesla's sales and pre-order numbers to value the stock are missing the bigger picture. Elon Musk is a deep, strategic thinker. He's several steps ahead of everyone else in the industry. When he was building the roadster, his naysayers were carping, "Nice car, pal, but where you gonna plug it in? Who's gonna sit around for hours waiting for their car to charge?" So when they announced the Model S, they also simultaneously announced the supercharger network to shut those people the hell up, and announced that the supercharger network was powered by solar panels to shut up the jackasses who would inevitably come along and whine that the supercharger network was only shifting the fossil fuel load to coal-fired powerplants. Musk has founded another company, Solar City, to provide the residential solar angle. He's building a battery Gigafactory to supply all the vehicles he means to build, thus avoiding the bottleneck that will hobble all his competitors. Meanwhile, that factory will churn out home energy storage batteries to go along with the solar panels that Solar City is supplying. That's all the context around Tesla, the car company.
Inside the car company, you have an outfit that sends over-the-air software upgrades to help people who have already bought the cars get more range out of their existing batteries, find other recharging locations that are not on the supercharger network, and to enable "ludicrous mode" for people that want to accelerate 0-60 in 2.8 seconds and blow every other car off the road. You have rapid battery swapping stations for people who don't want to wait 30 minutes for a recharge. You have battery upgrades on existing cars. So even just within the car context, they're many leaps ahead of their competitors.
I think when you consider all that, that stock valuation doesn't seem so outlandish. I know when I invested in Tesla, it wasn't for the cars so much as that strategic mind. Honestly I am kind of surprised the oil industry or the auto execs in Detroit haven't had him assassinated yet.
Washington DC delenda est.
(Score: -1, Troll) by Anonymous Coward on Thursday May 05 2016, @03:49AM
Elon Musk's suckable dick sprays money!@ OOoooooooo so manly...
(Score: -1, Troll) by Anonymous Coward on Thursday May 05 2016, @07:14AM
I can't even imagine which dicks you are sucking.
(Score: 2, Interesting) by Anonymous Coward on Thursday May 05 2016, @08:13AM
I was just reading some things said by economic thinkers.
Fidel Castro was in the group.
See if you don't think what he said was spot on (and directly related to TFA).
New wealth created without producing any new goods or services is an economy built on a foundation of sand [googleusercontent.com] (orig) [counterpunch.org]
-- OriginalOwner_ [soylentnews.org]
(Score: 1) by khallow on Thursday May 05 2016, @12:52PM
I was just reading some things said by economic thinkers.
Fidel Castro was in the group.
A lot of us think about economics sooner or later, making us economic thinkers in the same sense as Castro and a number of other people on that webpage. So what? I wouldn't take a politician like Castro with such a disastrous record on economics and human rights seriously. Sure, his platitudes may be more or less truthful just like those other would be economic thinkers who are quoted in that webpage, but the problem lies not in the words, but in the considerable gap between those words and actions. Communists and Marxists have been notorious for words woefully failing to match deeds for many generations. Castro has been no exception here.
New wealth created without producing any new goods or services is an economy built on a foundation of sand
Asserting it doesn't make it true. That is not the problem. Rather the problem is overvaluing those new goods and services. There is considerable value being created with a Tesla Motors business, but there is no wealth too large that one can't value it far higher. That is the true foundation of sand.
(Score: 0) by Anonymous Coward on Thursday May 05 2016, @01:31PM
Yes you may be right to dismiss it given the source, but remember the old adage: "even a broken clock is right twice a day."
The value of Tesla hinges on combined value of the brand, which is a lot of things from the IP, to image, to track record of delivering products that are exceptional and innovative (which speaks highly to talent of management and engineering teams). These things do posses value that is somewhat intangible and can vanish overnight. Say your competitor makes a discovery that renders your technology obsolete, or huge number of your employees go to work for a competitor, poof goes that value. I suppose you can call that type of foundation sand, because it is more fickle than land, mineral rights, or means of production.
(Score: 1, Interesting) by Anonymous Coward on Thursday May 05 2016, @06:44PM
You entirely missed the point being made.
(Don't color me surprised.)
When a stock certificate is traded, it simply moves from one pocket to another.
NOTHING NEW IS CREATED.
The day before, Tesla produced n widgets.
The day after, Tesla is still producing n widgets.
Nothing about the actual economy changed.
If the money used in that transaction was instead put toward the building of a NEW factory, -that- would actually ADD to the economy.
Moving your wallet from your left pocket to your right pocket isn't doing anything useful for the economy.
To do something USEFUL, you need to produce a NEW line of widgets or MORE widgets (if production capacity is insufficient).
The point he was making is that the vast majority of "investors" are simply chasing wealth without actually improving the economy.
What the stock markets around the globe do is simply SPECULATION.
(He uses the word "casino" repeatedly.)
I'd like to know what he thinks of e.g. Kickstarter.
-- OriginalOwner_ [soylentnews.org]
(Score: 1) by khallow on Friday May 06 2016, @03:30AM
When a stock certificate is traded, it simply moves from one pocket to another. NOTHING NEW IS CREATED.
So what? Trade isn't about creating new things though there's probably a number of weird examples where it does. It's about exchanging goods or services of value so that the traders' wants are better satisfied.
The day before, Tesla produced n widgets.
The day after, Tesla is still producing n widgets.
Nothing about the actual economy changed.
For whatever reason someone valued the cash represented by the price of their Tesla stock more than the stock, while someone else valued them the other way. The trade enables both parties to the Telsa stock trade to get more of what they valued more. That's what changed about the actual economy.
If the money used in that transaction was instead put toward the building of a NEW factory, -that- would actually ADD to the economy.
Maybe it will. I can say that there's a lot of trading out there and some of the resources traded do eventually end up in factory construction.
Moving your wallet from your left pocket to your right pocket isn't doing anything useful for the economy. To do something USEFUL, you need to produce a NEW line of widgets or MORE widgets (if production capacity is insufficient).
Trading is usually between different parties, not the same party. And even when it is, there's usually a reason, like ease of bookkeeping or the thing being needed more elsewhere, for why it happens.
The point he was making is that the vast majority of "investors" are simply chasing wealth without actually improving the economy. What the stock markets around the globe do is simply SPECULATION. (He uses the word "casino" repeatedly.)
Sounds like this Castro is an idiot. Casinos are about betting on inconsequential things like the roll of dice or the play of cards. Speculation is betting on serious future events that a lot of people are interested in. You would like to know more about the future, right? It's kind of important. Speculation is a way to pool knowledge about future events, secrets, and the value of many things in real time. It doesn't always work very well, but what works better? Credentialed idiots pulling speculation out of their asses? Politicians saying what you want to hear or what is officially condoned? Talking heads with empty words? At least the speculators lose money, if they are wrong.
(Score: 3, Touché) by Dunbal on Thursday May 05 2016, @09:34AM
Wall St. does that. You should see what it values Facebook or Apple at... go ahead and keep betting against Tesla.
(Score: 0) by Anonymous Coward on Thursday May 05 2016, @06:49PM
Maybe I'm completely missing something. But comparing Telsa's 31 billion value to just its cars seems moronic.
I'm sure a lot of Telsa's value is in its other assets: the Tesla factory, the gigafactory battery plant, dealerships, and large piles of other assets like parts inventory, etc.
What useful point is there to make by fabricating some ratio between Tesla's overall value and the number of cars produced?