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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
(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.