A lot of people predicted the 2000 bubble. Cisco's market was 30 times sales and 175 profit. It was worth more than everything else on the market. Tesla is 2 times sales and not currently profitable, but on track for 70% growth in 2016 and probably leveling out to 30% growth in 2017, before accelerating in 2018 -- according to plan anyhow.
Since a stock valuation is based on net present value and not current earnings or sales, the question is if TSLA will create 22 billion in earnings, discounted for risk and opportunity costs. If you think they will earn as much per unit of sale in the future, forever, there is no NPV. If you believe they can raise their margins slightly and that R&D and Capex will decline as a percentage of sales, and they can improve manufacturer processes and reduce the cost of batteries, you should come up with a positive NPV.
If they grow at 50 YoY for another 7 years, assuming 8 billion in sales for 2016, they will have 137 billion in revenue in 2023. That is a big assumption, but if it worked out, and if they have maintained a consumer perception of market leader, they will have pricing advantages of a BMW and similar if not better margins. If these were knowable, there would be no debate. Can Tesla grow this fast, in theory they can. Can they grow that fast without increasing leverage (return to market for capital), not likely. Anyhow, if they do grow at this rate and they earn 5-8% net margin, they could be making 10 billion a year in 7 years. If I could invest 22 billion elsewhere, I could find a safer 3-5% return in consumer goods or ATT\VZ. I might also find higher growth, and less capital constraints with Facebook.
In the end, the NPV of Tesla is based on the markets perception of that sustainable growth rate and if that growth will be accompanied by future profitability. They will hit the law of large numbers sometime after 2020. If successful, not until about 2027, when they would be at 3 to 5 million in car sales. If they can't improve margins and become cash flow positive, we won't have to worry about the law of large numbers.
Good to see the bears come out of the woodwork and good to see some of the past bulls re-enter the ring. Next week will be very interesting. Some of those disinterested academics like Jim Chanos may be on CNBC crowing after earnings, or they will be busy trying to cash out their short earnings, if they can find a door.
*Note, 15 years after the bubble, Cisco's market cap was 555 billion and it never hit 50 billion in sales. Tesla will likely hit 22 billion in sales in 2018. This is like comparing apples and elephants.
Neither did they predict the top of the 2000 bubble. They are notoriously bad at predicting major inflections, which is why I do not believe this to be one. But just because we won't be going down 60%+ amidst major financial upheaval doesn't mean we can't have a run of the mil -30% bear market with a couple of nominal negative GDP quarters eventually. That has been my worry this whole time, not a repeat of 2000 or 2008.