Valuation Justification?

[Nb1277]

hi all,

I've been following a couple of the investor discussions threads here and, while very interesting, it's tough to keep up with the pace of posts in the particularly popular threads. So, if this has addressed recently, please point me to that thread but here goes:

The exciting run in TSLA and the recent comparisons to Ford's market cap got me thinking, has anyone conducted a thorough analysis in attempt too determine the appropriate long term value of Tesla? The potential is clear- growing automaker with ability to displace competitors, autonomous taxi - like service and energy. There are great minds who have touted the possibility of a $1T market cap but the have not seen the financial analysis behind that.

Thoughts?

 

[GoTslaGo]

hi all,

I've been following a couple of the investor discussions threads here and, while very interesting, it's tough to keep up with the pace of posts in the particularly popular threads. So, if this has addressed recently, please point me to that thread but here goes:

The exciting run in TSLA and the recent comparisons to Ford's market cap got me thinking, has anyone conducted a thorough analysis in attempt too determine the appropriate long term value of Tesla? The potential is clear- growing automaker with ability to displace competitors, autonomous taxi - like service and energy. There are great minds who have touted the possibility of a $1T market cap but the have not seen the financial analysis behind that.

Thoughts?

I think this is the thread you are looking for:

Valuation

 

[SteveG3]

I think estimating the value of a company based on its future earnings is the core of investing, and Tesla is no exception. What I do think is near exceptional about Tesla is how far out into the future one can do such estimation with quite meaningful confidence. Being able to see 30-50% growth for its business (auto business) in terms of the next decade plus rather than year plus with extremely high probability is arguably once in a generation, perhaps even once in a lifetime, uncommon.

How do you make this valuation? Build your own model of future earnings. How? In the case of Tesla I got a big hand in doing this by finding a report on Tesla from Adam Jonas c. 2011 posted here on TMC. This gave me a framework for modeling the business, of course, with the ability to play with different assumptions re vehicle models, avg price/vehicle, units sold (reading their 10Ks in 2012 and their discussion of the business generally and various expense items also helped). It's considerably easier in my view to do this with the vehicle business than Tesla energy or the planned Tesla Network. As it turns out though, I still find Tesla undervalued currently (though no longer at "aggressive buy" prices) on the backbone of the auto business. Of course, others will express different views, lols. I have no idea if Ford is overvalued or undervalued vs the market. I've only invested in two stocks since the end of 1999, because only the very rare stock like Tesla that has the potential to value it based on events to come for 5-10 years out may possibly spark my investing interest. Ford, like nearly all companies, doesn't fall into that category of possible interest for me. fwiw, I have little to no inclination to "find the next Tesla", and Tesla basically found me while I was actively trying not to push things and lose large sums of money by trying to "find the next Celgene" (the other individual stock I invested in post '99).

I think your so on the right track with this : ) !

 

[daniel]

Valuing a company is part economics (the fundamentals of a company), part sociology (will the public buy the product?) part psychology (how will other investors view the company: will they bid it up or down?) and part dumb luck (will some unforeseen event event throw a monkey wrench into the works or catapult the company to super-star status?).

It's a lot like poker: A good player will win more often than a bad player, but even the best player will get wiped out sometimes. I own a few hundred shares because I love what the company is doing, and I own some solar bonds for the same reason. But I would never bet large on any company. Mutual funds are much safer. Tesla has been successful up to now and everyone investing in it has done well. But it's still a gamble and unforeseeable events could bring the whole house down. Diversify!