What is the thinking behind 100B market cap being virtually guaranteed by end of year? the short numbers you've been posting or something else/combination of things? Always appreciated your contributions in both Solar City thread in past as well as here. Thanks.
My thinking is that short-covering will accelerate the process but covering in itself doesn’t provide support for valuation.
For SpaceX the holy grail was reusability. So where is SpaceX today? It proved that it is capable of reusing rockets. But SpaceX is still working on improving the process to make money (or expand margins) from it. Once reusability becomes really efficient, as in being able to fly the same rocket twice in same day it is truly money making (margin expanding). To further, the plan is to make use of the reusability into other extremely profitable domains like satellite internet. So all SpaceX has today is proof-of-concept.
Coming to Tesla: the holy-grail is affordable, compelling EV - basically Model-3. Initially Model-3 will not be very profitable. Even at good volumes it won’t make overall Tesla very profitable. But as manufacturing efficiency improves in assembly, and cell chemistry improves on battery side, it will be staggeringly profitable. Another holy-grail is autonomy. Here too Musk is promising coast-to-coast level-4 autonomy (maybe just a demo) by the end of the year. By the end of the year Tesla will have proof-of-concepts for two truly ground breaking holy-grails. But won’t be making tons of money just yet. However it will be very much on track to do so. So how much are these proof-of-concepts, milestone achievements worth?
It’s anybody’s guess. My guess is nothing less than $100Bil. So does this
VC think (who got FB right).
For instance Jonas thinks Waymo independently is worth as much as 70Bil just today. Let me drill into it a bit.
First and foremost Waymo and Tesla are the only two contenders that are genuinely close to autonomy in my view. However they have very different approaches. Waymo wants to build perfection, through upfront data acquisition, within a perimeter. Then keep linearly expanding the perimeters. Just about every contestant is following this model except Tesla/Mobileye. Tesla’s approach is to gradually improve the capability (over an exponential curve) in ‘any’ perimeter. So Waymo’s approach is perfection first. Tesla’s approach is scalability first. Once Tesla cracks the code, it can run anywhere. While waymo will gradually try to expand the perimeter 1-square-mile at a time.
In any case, by the end of the year if Musk convinces people that Tesla truly achieved level-4 autonomy. That proof-of-concept itself is worth 70Bil!
How much more is everything else worth? Model-3 in itself if a holy grail. With improvements in chemistry (Musk alluded to 12 to 13% improvements an year!) and automated assembly, what kind of prospects does Tesla have on manufacturing side? Isn’t 30Bil too low for this?
A good way to think about valuation is this. Today’s valuation is simply a discount to the ultimate valuation. The discount rate applied becomes lower as more milestones are achieved. So Tesla will keep becoming incrementally more valuable each passing year.
Musk at one point said Tesla will reach 700Bil market-cap in 10 years. Then later he said trillion dollars with solarcity acquisition. To grow into that valuation the company will have to add about 100Bil valuation each year!
Why would first 100 be such a shock. Not really. All it has to do is keep hitting milestones.