StrangeCosmos valuations out of MA

[strangecosmos]

I just published this article: Based On Q3 Cash Flow, Tesla Is Worth $20 Billion

Summary

• Tesla is worth $20 billion today, based on the cash flow multiples of major automakers.
• But Tesla is also growing 41x faster than those other automakers.
• Profit is a different story, although that should change at least somewhat in the coming quarters because of how Tesla calculates depreciation.

 

[sdtslafan]

I just published this article: Based On Q3 Cash Flow, Tesla Is Worth $20 Billion

Summary

• Tesla is worth $20 billion today, based on the cash flow multiples of major automakers.
• But Tesla is also growing 41x faster than those other automakers.
• Profit is a different story, although that should change at least somewhat in the coming quarters because of how Tesla calculates depreciation.

Misleading title which feeds the bears. You should account for the tremendous growth rate in the market cap. AMZN and NFLX have PE ratios over 100 but are growing revenue slower than Tesla. If Tesla was given a PE ratio of 100, price would be $1160 with market cap close to $200 Billion. That should be your title! Why put out a title with 20 B (which completely ignores Tesla's growth) when you know that is a ridiculous number? Totally bogus

 

[strangecosmos]

Misleading title which feeds the bears.

More like incredibly accurate and straightforward title.

Why put out a title with 20 B

Because it’s truthful and factual, and non-clickbaity.

 

[strangecosmos]

I just published this article: Based On Q3 Cash Flow, Tesla Is Worth $20 Billion

Summary

• Tesla is worth $20 billion today, based on the cash flow multiples of major automakers.
• But Tesla is also growing 41x faster than those other automakers.
• Profit is a different story, although that should change at least somewhat in the coming quarters because of how Tesla calculates depreciation.

Key excerpt:

“Of the six [major auto] companies, the average price/operating cash flow (P/OCF) ratio is 3.5. Excluding negative figures for GM and Nissan, the average free cash flow yield is 16.6%. (This spreadsheet shows the figures for all the companies.)

In Q3, Tesla’s operating cash flow was $1.4 billion. Annualized, that’s $5.6 billion. On a 3.5 P/OCF ratio, Tesla would be valued at $19.6 billion.

In Q3, Tesla’s free cash flow was $881 million. That’s $3.5 billion annualized. On a 16.6% free cash flow yield, Tesla would be valued at $21 billion. $19.6 billion and $21 billion average out to $20.3 billion.

Does this mean Tesla is overvalued by $30-40 billion? Well, let’s have a look at growth rates. The compound annual growth rate (CAGR) of revenue for the six major auto companies over the last 3 years was, on average, just 1.3%. By contrast, Tesla's 3-year revenue CAGR was 54%.”

 

[sdtslafan]

Key excerpt:

“Of the six [major auto] companies, the average price/operating cash flow (P/OCF) ratio is 3.5. Excluding negative figures for GM and Nissan, the average free cash flow yield is 16.6%. (This spreadsheet shows the figures for all the companies.)

In Q3, Tesla’s operating cash flow was $1.4 billion. Annualized, that’s $5.6 billion. On a 3.5 P/OCF ratio, Tesla would be valued at $19.6 billion.

In Q3, Tesla’s free cash flow was $881 million. That’s $3.5 billion annualized. On a 16.6% free cash flow yield, Tesla would be valued at $21 billion. $19.6 billion and $21 billion average out to $20.3 billion.”

I like that you can play with ratios and multiply numbers, but if you put out an article title where you assign a market cap which completely ignores the GROWTH of a GROWTH company, then it has zero value just my opinion.

 

[EVNow]

Does this mean Tesla is overvalued by $30-40 billion? Well, let’s have a look at growth rates. The compound annual growth rate (CAGR) of revenue for the six major auto companies over the last 3 years was, on average, just 1.3%. By contrast, Tesla's 3-year revenue CAGR was 54%.”

So, why compare to companies that are 100 years old and act like they are indeed 100 years old ?

So, if we go by this method what should be the valuation for Amazon or Netflix ?

 

[anthonyj]

I just published this article: Based On Q3 Cash Flow, Tesla Is Worth $20 Billion

Summary

• Tesla is worth $20 billion today, based on the cash flow multiples of major automakers.
• But Tesla is also growing 41x faster than those other automakers.
• Profit is a different story, although that should change at least somewhat in the coming quarters because of how Tesla calculates depreciation.

Sir, I believe you are missing a “4” somewhere in your article’s title

 

[Thekiwi]

Key excerpt:

“Of the six [major auto] companies, the average price/operating cash flow (P/OCF) ratio is 3.5. Excluding negative figures for GM and Nissan, the average free cash flow yield is 16.6%. (This spreadsheet shows the figures for all the companies.)

In Q3, Tesla’s operating cash flow was $1.4 billion. Annualized, that’s $5.6 billion. On a 3.5 P/OCF ratio, Tesla would be valued at $19.6 billion.

In Q3, Tesla’s free cash flow was $881 million. That’s $3.5 billion annualized. On a 16.6% free cash flow yield, Tesla would be valued at $21 billion. $19.6 billion and $21 billion average out to $20.3 billion.

Does this mean Tesla is overvalued by $30-40 billion? Well, let’s have a look at growth rates. The compound annual growth rate (CAGR) of revenue for the six major auto companies over the last 3 years was, on average, just 1.3%. By contrast, Tesla's 3-year revenue CAGR was 54%.”

Lol - you undercut your own ridiculous valuation argument yourself in the same excerpt.

 

[strangecosmos]

Lol - you undercut your own ridiculous valuation argument yourself in the same excerpt.

What Tesla is worth based on Q3 cash flow ≠ what Tesla is worth based on estimated future cash flow

 

[dandurston]

I think his point was that the current value of Tesla's existing sales is $20 billion, and then growth will add to that. He's not saying that $20 billion is the total value. Everyone values growth differently, so he's left that up to others to decide.

 

[SpaceCash]

I think his point was that the current value of Tesla's existing sales is $20 billion, and then growth will add to that. He's not saying that $20 billion is the total value. Everyone values growth differently, so he's left that up to others to decide.

That's very generous of you but I don't think almost anyone would capture that nuance from the headline. It's definitely misleading and basically a "wrong" valuation by any standard accepted metrics

 

[Thekiwi]

What Tesla is worth based on Q3 cash flow ≠ what Tesla is worth based on estimated future cash flow

No kidding einstein!

I don’t know what you are expecting by posting a theory stating that “Tesla is worth $20 Billion” on TMC, where most of us here have valuations 10x-100x that.

 

[dqd88]

More like incredibly accurate and straightforward title.



Because it’s truthful and factual, and non-clickbaity.

I found it to be clickbaity.

The title makes a statement, and implicit in a title is that the article body will explain how you came to the statement made in the title. But essentially your article is an exploration of various future assumptions, many of which lead to a market cap greater than $20B. So while the article body seems relatively impartial (just a bunch of thought experiments), it leads to various conclusions that don't jive w/ the title.

 

[strangecosmos]

I don’t know what you are expecting by posting a theory stating that “Tesla is worth $20 Billion” on TMC

I didn’t say Tesla is worth $20 billion based on estimated future cash flow, I said it’s worth $20 billion based on Q3 cash flow — which is true and a positive sign.

To put it another way, Tesla’s P/OCF ratio and free cash flow yield is only 2.5x to 3x higher than the industry norm. On an OCF/FCF basis, the stock’s growth premium is only 2.5x to 3x.

 

[dqd88]

Key excerpt:

“Of the six [major auto] companies, the average price/operating cash flow (P/OCF) ratio is 3.5. Excluding negative figures for GM and Nissan, the average free cash flow yield is 16.6%. (This spreadsheet shows the figures for all the companies.)

In Q3, Tesla’s operating cash flow was $1.4 billion. Annualized, that’s $5.6 billion. On a 3.5 P/OCF ratio, Tesla would be valued at $19.6 billion.

In Q3, Tesla’s free cash flow was $881 million. That’s $3.5 billion annualized. On a 16.6% free cash flow yield, Tesla would be valued at $21 billion. $19.6 billion and $21 billion average out to $20.3 billion.

Does this mean Tesla is overvalued by $30-40 billion? Well, let’s have a look at growth rates. The compound annual growth rate (CAGR) of revenue for the six major auto companies over the last 3 years was, on average, just 1.3%. By contrast, Tesla's 3-year revenue CAGR was 54%.”

I think more fitting titles would have been something like

What is Tesla Worth? It Depends on How You Look at it
Or
Tesla Could be Worth Anywhere from $20B to $80B (if you wanted a bearish tone)

Just my 2c. Kudos to you for putting yourself out there.

 

[strangecosmos]

The title makes a statement, and implicit in a title is that the article body will explain how you came to the statement made in the title.

Which I do within the first 5 paragraphs (156 words). So far nobody is disputing the analysis, they just think the title should involve more hype/opinion rather than neutrally state a fact.

I think more fitting titles would have been something like

What is Tesla Worth? It Depends on How You Look at it
Or
Tesla Could be Worth Anywhere from $20B to $80B

The problem is this conveys less information than the title I used. The most interesting mathematical “result” I found was the $20 billion figure. I had expected more growth to be priced in.

Just my 2c. Kudos to you for putting yourself out there.

Thank you.

 

[dqd88]

Which I do within the first 5 paragraphs (156 words). So far nobody is disputing the analysis, they just think the title should involve more hype/opinion rather than neutrally state a fact.

You just cherry picked part of my post to fit your position. You're not addressing the fact that the bulk of your article doesn't jive w/ the title.
No offense but you come off as a manipulative person.

 

[EngRyan]

I think his point was that the current value of Tesla's existing sales is $20 billion, and then growth will add to that. He's not saying that $20 billion is the total value. Everyone values growth differently, so he's left that up to others to decide.

Sure it's technically correct for a small sub section of the article but for the average SA subscriber it reads, "hey based on the Q3 numbers Teslas only worth 20 billion!!!!" OMFG short that *suuggaaaar* #bearlife #TSLAQ #SpiegelDaddy... haha ok I've had my fun.

Tittle could have been "Based on Q3 numbers Tsla worth [59 billion] or [345 a share]." Hell I'd still disagree with you but at least you are starting somewhere reasonable. And then the whole article would go to explain how you got there, instead of a small part of it.

 

[strangecosmos]

I think his point was that the current value of Tesla's existing sales is $20 billion, and then growth will add to that. He's not saying that $20 billion is the total value. Everyone values growth differently, so he's left that up to others to decide.

Yes, exactly, thank you. We should of course expect some amount of growth to be priced in. The market prices stocks based on expected future profit and cash flow, informed by management guidance and analyst modelling. An important question for Tesla, then, is: how much growth is currently priced in? Or, to put it another way, how much of the valuation is not based on growth, but based on current cash flows?

Well, the answer I found is $20 billion. $20 billion is justified by current cash flows, and the other $30-40 billion is the growth premium.

 

[dqd88]

Which I do within the first 5 paragraphs (156 words). So far nobody is disputing the analysis, they just think the title should involve more hype/opinion rather than neutrally state a fact.



The problem is this conveys less information than the title I used. The most interesting mathematical “result” I found was the $20 billion figure. I had expected more growth to be priced in.



Thank you.

I think something your missing is that in writing you have what is written and what is implied. And you also have tone. Your title (by itself) may or may not be factual, but it implies (to the average reader who glosses over many article titles) that the author views the worth of Tesla as $20B, and the tone is bearish. While the article itself may not be bearish, that is the feel of the title.

Also, it's kinda like, what's the point? If you are long Tesla, why even put this out there? There's nothing to gain from it