I added this aspect of p/e influencing SP upwards on a different reply.
Thought adding the point of p/e to this message also is relevant.
Re-stating, for the SP to continue sideways for a few years like in the past, the finances of the company must keep the p/e pretty much at current levels (~672 as of this writing) or within 60% of this level (say ~400) if the multiples across the growth stocks are cut down due to market conditions. Isn't that very unlikely?
I agree that adding the p/e influence on the SP is a meaningful driver of the share price. Specifically because it is a metric that the financial metrics focused investors care deeply about.
My own thoughts - first off, I hope that Tesla continues to find a way to keep the GAAP EPS down. That'll be by spending money like crazy (R&D, building business infrastructure) in order to keep pushing depreciation up. In particular I would like to see negative quarterly cash flow on a consistent basis - at least for a year or two in amounts of ~$1B per quarter. Several impacts I see from this - it'll keep the PE low by keeping GAAP earnings low(er). Lower PE and the company building infrastructure for future growth will continue to fool investors that don't understand the bigger vision, markets, and products thereby keeping the share price lower for us to buy
Directly regarding PE - I see Tesla as being in an interesting (at least to me) transition phase, as we go from consistent losses to consistent profits. As long as we were losing money, there was no PE to calculate. That kept things all up in the air - what is the company really worth? And we can all choose our own conversions from possibility to reality.
We're transition now into profits, and this awkward period is that we're seeing small profits against a very high share price. So PE right now is ridiculous and leads to analysis closer to the money losing analysis. You mention quarterly earnings of $0.80 PE and projecting that into the next year. I consider a longer run PE of 100 to be more likely, or at least a better expectation so I am more likely to be surprised than not.
But we're too new to quarterly earnings for a PE of 100 - it SHOULD be a lot higher, especially with the 50% units guidance. So different share prices I get to, using the 100, 200, 400, and 672 PE and a $3.20 12 month forward PE:
- $320, $640, $1280, and ~$1900.
So a $3.20 forward PE plus a 200 multiple puts us pretty much at today's share price. The multiple is our own, and more importantly new buyers, view of the value of Tesla's growth, strategy, execution, and opportunity. The thing we can watch closely are GAAP earnings (or non-GAAP to the degree we think that new buyers will use the non-GAAP). I see this as aggressive relative to the $3.20 PE, while being comfortable with the 200 PE (to the degree that I do financial analysis, I don't think I would ever be comfortable of a sustained PE > 200).
If we start hitting well above $0.80 per quarter that looks like a good reason for us to at least get support for the current share price, and maybe start pushing it up (all depending on the degree to which a 200 PE draws buyers in to push the shares up closer to the 400 multiple). I am personally not using a multiple or ratio of the current PE as indicative of the future.
. The Jun 700s have to go soon because I don't want them to become a total lost. Only a few contracts are making a little money, Jun 22 600s and March 23 550s but I am getting nervous I don't cover the lost of the others. I been trying to make money back by selling calls but the premiums are terrible and the strikes that pay decently are too risky for my comfort. I sold a few put credit spreads for Friday but a few grand doesn't seem to help that much.
