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Vastly overvalued stocks


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Vastly overvalued stocks

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  #1 (permalink)
Pedro40
Pittsburgh, Pennsylvania
 
 
Posts: 563 since Jan 2013
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I know there is a TSLA thread but since I am not allowed to post there, here it is, a realistic opinion:

A responder at Seeking Alpha:

""How many cars and what kind of margins will Tesla have to make to justify a $30bln market cap?"

In the long run, the stock will be valued at a P/E of about 10, just like all the other car makers. If they have a BIG component of business from an industry with more growth and more potential for a new entrant to make an impact, they might be valued closer to P/E of 20.

But there is virtually no income other than the auto sales today, so by industry standards, they would need $25/share of GAAP earnings or over $3Bn a year in GAAP profit. Does somebody want to lay out a rational business case for how and when they will get to $3Bn in GAAP profits (bearing in mind they have never had any GAAP profits)?

It is not mathematically impossible, as Toyota had almost $18Bn of profits in its latest FY. But Tesla ain't Toyota. If Tesla matched Toyota's profitability (a big "if",) they would need to sell about 1.2M vehicles a year to get to a P/E of 10, and they would have to do so without any further stock dilution. That is THIRTY-FIVE TIMES their current scale with no stock dilution. Somebody please explain how that works.

If there is no such scenario, then the stock is guaranteed to go down -- it is only a question of when."

------------------

Remember, a stock can stay unrealistic longer then before you get a margin call...


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  #3 (permalink)
 tturner86 
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Pedro40 View Post
I know there is a TSLA thread but since I am not allowed to post there, here it is, a realistic opinion:

A responder at Seeking Alpha:

""How many cars and what kind of margins will Tesla have to make to justify a $30bln market cap?"

In the long run, the stock will be valued at a P/E of about 10, just like all the other car makers. If they have a BIG component of business from an industry with more growth and more potential for a new entrant to make an impact, they might be valued closer to P/E of 20.

But there is virtually no income other than the auto sales today, so by industry standards, they would need $25/share of GAAP earnings or over $3Bn a year in GAAP profit. Does somebody want to lay out a rational business case for how and when they will get to $3Bn in GAAP profits (bearing in mind they have never had any GAAP profits)?

It is not mathematically impossible, as Toyota had almost $18Bn of profits in its latest FY. But Tesla ain't Toyota. If Tesla matched Toyota's profitability (a big "if",) they would need to sell about 1.2M vehicles a year to get to a P/E of 10, and they would have to do so without any further stock dilution. That is THIRTY-FIVE TIMES their current scale with no stock dilution. Somebody please explain how that works.

If there is no such scenario, then the stock is guaranteed to go down -- it is only a question of when."

------------------

Remember, a stock can stay unrealistic longer then before you get a margin call...

A stock is like a car, house, or painting, its real value is only what you can get someone to buy it for when you are trying to sell it.

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  #4 (permalink)
Pedro40
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tturner86 View Post
A stock is like a car, house, or painting, its real value is only what you can get someone to buy it for when you are trying to sell it.

I thought my post was about the value of the STOCK and not the CAR.

But speaking of the value of the car, a personal story:

We went carshopping and ended up at Kia, looking for EVs. The dealer said, that although Kia does make an EV, they simply don't carry it because for the average American customer it isn't economical to pay the extra price. Once that math changes, the industry will change too...

 
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  #5 (permalink)
 tturner86 
Portland, Oregon
 
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Pedro40 View Post
I thought my post was about the value of the STOCK and not the CAR.

But speaking of the value of the car, a personal story:

We went carshopping and ended up at Kia, looking for EVs. The dealer said, that although Kia does make an EV, they simply don't carry it because for the average American customer it isn't economical to pay the extra price. Once that math changes, the industry will change too...

My post is nothing to do with the car, it simply states that the value of a Stock is similar that of a Car, House, or Painting, in that its real value is only what someone else is willing to pay for it.

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  #6 (permalink)
 Neo1 
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Pedro40 View Post
I know there is a TSLA thread but since I am not allowed to post there, here it is, a realistic opinion:

A responder at Seeking Alpha:

""How many cars and what kind of margins will Tesla have to make to justify a $30bln market cap?"

In the long run, the stock will be valued at a P/E of about 10, just like all the other car makers. If they have a BIG component of business from an industry with more growth and more potential for a new entrant to make an impact, they might be valued closer to P/E of 20.

But there is virtually no income other than the auto sales today, so by industry standards, they would need $25/share of GAAP earnings or over $3Bn a year in GAAP profit. Does somebody want to lay out a rational business case for how and when they will get to $3Bn in GAAP profits (bearing in mind they have never had any GAAP profits)?

It is not mathematically impossible, as Toyota had almost $18Bn of profits in its latest FY. But Tesla ain't Toyota. If Tesla matched Toyota's profitability (a big "if",) they would need to sell about 1.2M vehicles a year to get to a P/E of 10, and they would have to do so without any further stock dilution. That is THIRTY-FIVE TIMES their current scale with no stock dilution. Somebody please explain how that works.

If there is no such scenario, then the stock is guaranteed to go down -- it is only a question of when."

------------------

Remember, a stock can stay unrealistic longer then before you get a margin call...

I'm not really sure where you're going with this.

However in my opinion it's foolish in this market to go claiming Tesla is overvalued, especially when you're basing the premise of your argument around lack of potential earnings. I've seen the same augments since the stock was in the 10's...Fundamental arguments are useless in a market that's not rational.

Also, it's very short sighted to just go comparing TSLA to traditional automobile company's, when TSLA clearly isn't you're traditional automobile company, and clearly isn't viewed this way by the market either... If you look at TSLA like this then it's no wonder you're so confused about the stock price, as you're completely out of touch with the market.

TSLA's end game isn't just to just sell EV, it's to change the world through sustainable energy, thus become the "industry standard" in EV- where other manufacturers end up sourcing components through them & using their infrastructure.

So TSLA isn't just an automobile company, they're a technology company...

What the market also likes about TSLA is that the company isn't guided along by you're traditional run of the mil CEO, but by perhaps the most captivating entrepreneur of our time- the man who's become almost a "Cult hero", and the man who could literally change the world. So when you're buying into TSLA, you're not just buying into the company, but into the vision & ultimate success of Elon Musk...

 
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  #7 (permalink)
 Cloudy 
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It would seem that TSLA may be driven more by stock interest rather than actual revenue factor where stockholder equity and capital far exceeds cash assets and revenue. Maybe it's investors piling on more like it's the new Apple knowing in the future it may do a stock split like Apple, and QCOM before it. Remember when QCOM hit 500 or was it a thousand? Maybe folks invested are expecting TSLA to be the leader when the growth stage of EV hit it's stride and everyone starts converting over to EV like from manual stick shift to automatic.

Or maybe not, the world "oil cabal" may never let that happen with more new wars to distract and destabilize.

otoh, funny to see HLF, herbalife now plummeting. oops it was an MLM fad business after all!

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 Big Mike 
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