I suspect I hold a minority opinion - but I think Tesla is woefully overvalued for what it is, and what it sells - yes, it has interesting new technology, but I have doubts about its ability to execute at the scale required to dominate the market as they wish.
Tesla has a market cap of 56 billion dollars - compared to Ford at 45 billion, and GM at 61 billion.
Tesla I believe sold around 100,000 cars in 2017, and 76,000 in 2016, in the US alone Ford and GM sold 2.5 and 3 million respectively in 2016 - to give you scale GM sold 10 million worldwide (again, in 2016).
Scaling manufacturing operations is one of the hardest things to do - so I dont see it to be possible for Tesla to chase after the mass market, or do anywhere near the sales of the other manufacturers.
Nobody is buying Tesla shares based on 2017 sales. They're buying an option on the future.
You may think the company's future isn't worth a $56 billion present value, but comparing Tesla's historical production against Ford and GM is completely missing the point.
That would be like comparing Google's revenue in 2004 against its competitors in the advertising industry.
Investors who bought Google's IPO were valuing the company's potential in 2014 and 2024, not its minuscule market share in 2004.
Google's 2004 IPO valued the company at $23 billion, twice as much as WPP Group even though WPP had much higher revenue than Google.
Today Google is worth 35 WPPs, and Tesla investors think it could be worth multiple GMs and Fords ten years hence.
I feel like too many people hold a short sided “stock market only” view of Tesla. Its not, long term, an auto maker. Its solar panels, energy storage, energy management...everything that will be necessary to survive somewhere coal wont be available to burn. There is a long term vision that is funded by capitalizing on short term markets along the way. That vision is much larger than P/E ratios...
Thus I’m not surprised when i hear about Elon being sad or annoyed with “shareholders” and the board, because he holds a vision for our future that Wall Street just cant comprehend, and thats depressing.
I don't think you are alone on the other hand I view holding Tesla stock not so much as an investment but as a way to support a "brighter" version of the future :)
I too find the notional valuations confusing for Tesla, and other entities. Comparing net worth, listed worth against industrial titans like Ford or GM is very hard for me because they are involved in supply chain logistics and dynamics of goods sold and bought on a scale which justifies their apparent net worth, when Tesla is a giant speculative 'maybe' play.
But the thing is, I'm just as confused understanding how IBM is worth anything any more, now that it has no core central logic except "do stuff, for money, for big clients"
Or why any of this matters, when Chinese state enterprises are worth more than all of this put together. CNOOC, the state oil company, is 1.17 trillion in 2014 CNY terms. thats $180b US for a shipping company alone. That, I can relate to.
I can't conceive of enough uses for things in space, to justify Tesla rockets being so valuable but then I can't conceive of that many creme eggs, bought with that much money either.
Market cap is not the right comparison. Ford has a substantially higher enterprise value than Tesla: like 157B vs 66B. The reason Tesla has a higher market cap is that Ford is carrying more debt (which has little to do with expected future production and sales).
>Tesla I believe sold around 100,000 cars in 2017, and 76,000 in 2016, in the US alone Ford and GM sold 2.5 and 3 million respectively in 2016 - to give you scale GM sold 10 million worldwide (again, in 2016).
And I'm certain Casio sold millions more watches than Rolex last year. The fact is that consumers are rational in their choices with respect to not just actual utility, but perceived social value. High end brands have an undeniable, albeit intangible, value.
1. Tesla can always enter into the ICE market with ease, not that they will do it, but they can and probably will succeed. The big 3 have had a lot of difficulty in getting into the EV market. Sure, they have competing vehicles, but lack the marketing power of Tesla.
2. Tesla is the new cool factor. Undeniably. People get mocked for driving a Prius. Owning a Tesla evokes a more positive response.
3. Tesla has it's supercharging network, which I think is a very smart move. That's a pretty big moat.
4. Tesla's marketing machine is immense and enormously efficient. I remember Elon writing a blog article about a journalists negative review of their car and the discussion about Tesla dominated social media for a few weeks. No one even bothers about the management at the big 3, but Elon is a celebrity who is given geek god like status.
I am not sure it completely accurate to compare Tesla with GM or Ford. Tesla is not a car company (they removed the word "Motors" from the original "Tesla Motors", like Apple removed "Computers" earlier). They do sell some vehicles (electric ones), but they also sell batteries, and solar panels. And they sell those just to show what their main product can do. Tesla main product is the Gigafactory. The factory is the product. Tesla is in the business of building factories, new generation of factories.
Now, is it business worth ~$56B ? And what could it be worth in one year, 5 or 10 years ?
And Nokia used to sell 300x as many phones as Apple did at one point. Giants don't tend to adapt well to paradigm shifts in the industry, and make no mistake, switching to EVs is a huge paradigm shift. Everything from factory tools, supplier partnerships, type of employees, and even business model is different here.
This is. win-win for Elon. He’s already a billionaire so salary doesn’t move the needle. At the same time it sends a message of confidence to investors. If his net worth was $5m would he make the same bet?
As someone in a similar situation, at much lower numbers, I can say this is likely primarily about tax optimization, with the optics being a nice side benefit.
If you're fairly liquid and decently bullish on your company, then holding off and taking your income later as capital gains makes a lot of sense. And as seen in the article, he can borrow against the shares to achieve as much liquidity as he wants/needs for his lifestyle without having to pay ordinary income taxes.
I guess I'm impressed by Elon that he can get such puff from the NYT for some basic tax structuring.
If it's primarily a tax dodge, why is it so uncommon? Seems that most CEOs get paid very well even if they underperform but Musk will get paid nothing.
The interesting part is how this contradicts what Elon's original stated goal of the company was.
I am a Musk believer, and when he started Tesla he stated his goal wasn't to be a major car manufacturer but to be a proof of concept to push the major players into the space. He demonstrated this by the open sourcing of EV patents.
Tying compensation to cap value of Tesla means that he no longer believes the major players will adapt (although there is strong evidence that his original plan has worked and the other manufacturers are making much larger investments in EV), or that the auto's segment will grow as a whole so significantly, that Telsa, as a minority player, will still be able to reach a 10x size over the next decade.
>If Mr. Musk were somehow to increase the value of Tesla to $650 billion — a figure many experts would contend is laughably impossible and would make Tesla one of the five largest companies in the United States, based on current valuations — his stock award could be worth as much as $55 billion
Except that as the article says, he already owns 20% of Tesla, so his current shares would rise in value by $110B. He could fail to meet any of performance targets and still be pulling in a billion dollars a year in capital gains.
Bold would be if he would donate his entire net worth if Tesla fails to meet goals. This is not bold because he would still be a billionaire if Tesla failed.
Jobs had a $1 salary and no bonuses. That doesn't say anything about stock options, grants, etc. It sounds like Musk will get minimum wage and no stock anything if Tesla doesn't meet the thresholds.
[+] [-] Aloha|8 years ago|reply
Tesla has a market cap of 56 billion dollars - compared to Ford at 45 billion, and GM at 61 billion.
Tesla I believe sold around 100,000 cars in 2017, and 76,000 in 2016, in the US alone Ford and GM sold 2.5 and 3 million respectively in 2016 - to give you scale GM sold 10 million worldwide (again, in 2016).
Scaling manufacturing operations is one of the hardest things to do - so I dont see it to be possible for Tesla to chase after the mass market, or do anywhere near the sales of the other manufacturers.
[+] [-] panarky|8 years ago|reply
You may think the company's future isn't worth a $56 billion present value, but comparing Tesla's historical production against Ford and GM is completely missing the point.
That would be like comparing Google's revenue in 2004 against its competitors in the advertising industry.
Investors who bought Google's IPO were valuing the company's potential in 2014 and 2024, not its minuscule market share in 2004.
Google's 2004 IPO valued the company at $23 billion, twice as much as WPP Group even though WPP had much higher revenue than Google.
Today Google is worth 35 WPPs, and Tesla investors think it could be worth multiple GMs and Fords ten years hence.
[+] [-] traviswingo|8 years ago|reply
Thus I’m not surprised when i hear about Elon being sad or annoyed with “shareholders” and the board, because he holds a vision for our future that Wall Street just cant comprehend, and thats depressing.
[+] [-] andars|8 years ago|reply
Tesla, the energy company, might.
[+] [-] qaq|8 years ago|reply
[+] [-] snuxoll|8 years ago|reply
Tesla needs to get production capacity on track fast, or they will get left in the dust as other major players hop on board the EV wagon.
[+] [-] ggm|8 years ago|reply
But the thing is, I'm just as confused understanding how IBM is worth anything any more, now that it has no core central logic except "do stuff, for money, for big clients"
Or why any of this matters, when Chinese state enterprises are worth more than all of this put together. CNOOC, the state oil company, is 1.17 trillion in 2014 CNY terms. thats $180b US for a shipping company alone. That, I can relate to.
I can't conceive of enough uses for things in space, to justify Tesla rockets being so valuable but then I can't conceive of that many creme eggs, bought with that much money either.
[+] [-] tedsanders|8 years ago|reply
[+] [-] aphextron|8 years ago|reply
And I'm certain Casio sold millions more watches than Rolex last year. The fact is that consumers are rational in their choices with respect to not just actual utility, but perceived social value. High end brands have an undeniable, albeit intangible, value.
[+] [-] kumarvvr|8 years ago|reply
1. Tesla can always enter into the ICE market with ease, not that they will do it, but they can and probably will succeed. The big 3 have had a lot of difficulty in getting into the EV market. Sure, they have competing vehicles, but lack the marketing power of Tesla. 2. Tesla is the new cool factor. Undeniably. People get mocked for driving a Prius. Owning a Tesla evokes a more positive response. 3. Tesla has it's supercharging network, which I think is a very smart move. That's a pretty big moat. 4. Tesla's marketing machine is immense and enormously efficient. I remember Elon writing a blog article about a journalists negative review of their car and the discussion about Tesla dominated social media for a few weeks. No one even bothers about the management at the big 3, but Elon is a celebrity who is given geek god like status.
[+] [-] elchief|8 years ago|reply
[+] [-] llsf|8 years ago|reply
[+] [-] mtgx|8 years ago|reply
[+] [-] MarkMc|8 years ago|reply
[+] [-] rdlecler1|8 years ago|reply
[+] [-] olivermarks|8 years ago|reply
"Mr. Musk does not take a salary, although under California State law, Tesla is required to pay him at least minimum wage."
"To afford to live, Mr. Musk has borrowed against his shares, a practice that some corporate executives have questioned"
All seems rather odd to me.
[+] [-] maehwasu|8 years ago|reply
If you're fairly liquid and decently bullish on your company, then holding off and taking your income later as capital gains makes a lot of sense. And as seen in the article, he can borrow against the shares to achieve as much liquidity as he wants/needs for his lifestyle without having to pay ordinary income taxes.
I guess I'm impressed by Elon that he can get such puff from the NYT for some basic tax structuring.
[+] [-] MarkMc|8 years ago|reply
[+] [-] cycrutchfield|8 years ago|reply
[+] [-] mcot2|8 years ago|reply
* Energy storage. See the giant battery in Australia.
* Residential solar and solar roof tiles. See Gigafactory 2 in Buffalo New York.
* Electric vehicle charging. See the supercharger network.
* Battery cell production. See Gigafactory 1 in Nevada.
They have also said they are exploring:
* Launching a ride sharing service using autonomous cars.
* Capitalzing on the supercharger network with retail and food.
* Moving into trucking and logistics with the semi project.
This is why people invest in Tesla.
[+] [-] jameshart|8 years ago|reply
[+] [-] brwnll|8 years ago|reply
I am a Musk believer, and when he started Tesla he stated his goal wasn't to be a major car manufacturer but to be a proof of concept to push the major players into the space. He demonstrated this by the open sourcing of EV patents.
Tying compensation to cap value of Tesla means that he no longer believes the major players will adapt (although there is strong evidence that his original plan has worked and the other manufacturers are making much larger investments in EV), or that the auto's segment will grow as a whole so significantly, that Telsa, as a minority player, will still be able to reach a 10x size over the next decade.
[+] [-] andars|8 years ago|reply
[+] [-] kumarvvr|8 years ago|reply
[+] [-] cmsmith|8 years ago|reply
Except that as the article says, he already owns 20% of Tesla, so his current shares would rise in value by $110B. He could fail to meet any of performance targets and still be pulling in a billion dollars a year in capital gains.
[+] [-] trafnar|8 years ago|reply
[+] [-] ctdonath|8 years ago|reply
Jobs wanted to make the very best computers.
Musk is trying to open Mars to humanity.
[+] [-] brwnll|8 years ago|reply
[+] [-] c3534l|8 years ago|reply
[+] [-] j7ake|8 years ago|reply
[+] [-] taeric|8 years ago|reply
[+] [-] andars|8 years ago|reply
[+] [-] xiphias|8 years ago|reply
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