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What should TSLA be worth?

daniel

Well-Known Member
May 7, 2009
5,092
4,215
Kihei, HI
First let me say I'm a total Tesla fanboy. I hate gasoline and cars that burn it. I've been driving electric for fifteen years, since I got my Zap Xebra. Then I got the Roadster. Now I have a Model 3, LR RWD with EAP and the fancy interior. And I love it. I also own some shares of TSLA which I bought because I loved my Roadster so much. I think my basis after the split is around $7. Not sure, though. Could be as much as $10 or $12 because some of it comes from the merger with Solar City.

But...

The internet tells me that Ford makes around 11 million cars a year and has a market cap of around $253 billion; GM makes around 6.8 million cars a year and has a market cap of around $74 billion; and Toyota makes around 11 million cars a year and has a market cap of around $253 billion. Tesla makes around 200,000 cars a year and has a market cap of $746 billion.

Toyota's market cap is equal to about $23,000 times the number of cars made per year. Teslas are twice as good as Toyotas (that's my opinion and I'm sticking with it!) so its market cap should be by this measure, $50,000 times the yearly car output, or around $10/share. But it's not. It's $3,730,000 times the number of cars made per year. As I write this, the share price is $744.49.

My question for people who understand this stuff is "Why?" Why is TSLA worth 162 times as much as TM per car built per year? Five times I could understand, because Teslas are (IMO) so much better. Ten times maybe, for the growth potential of the BEV market. Twenty-five times if the market really believed Tesla was going to solve FSD before anybody else, maybe. There are folks here who believe that, but does the market believe it?

Is the stock market just totally illogical? Or are there fiscal/financial reasons for it?

You don't have to convince me that Tesla is the best thing since sliced bread, because I'm totally on board with that. I'd like to understand why the stock market, with its financial analysts and its fund managers and its brokers and market makers and all the rest, values TSLA so high.

Thanks in advance for any insights you choose to offer me.
 

Tam

Well-Known Member
Nov 25, 2012
9,471
8,627
Visalia, CA
...Is the stock market just totally illogical? Or are there fiscal/financial reasons for it?...

Maybe because investors are just as enthusiastic as those who thought by investing $10,000 for FSD, it's a bargain because that same one-time $10,000 would repeatedly make about $30,000 annually by picking up rides all on its own without a driver.
 

daniel

Well-Known Member
May 7, 2009
5,092
4,215
Kihei, HI
Maybe because investors are just as enthusiastic as those who thought by investing $10,000 for FSD, it's a bargain because that same one-time $10,000 would repeatedly make about $30,000 annually by picking up rides all on its own without a driver.

But is the investment community as optimistic about Tesla's prospects of developing FSD as the Tesla enthusiasts who bought a Tesla with FSD? And even if they are, are they optimistic enough to value that possibility so highly that they value Tesla at 162 times as much per car manufactured as Toyota, one of the most highly-regarded of the legacy car makers?

Remember that Tesla only stands to gain, with respect to other car makers, if those other car makers don't also have FSD of their own. So the above optimism is not only optimism regarding Tesla's development of FSD, but it must be combined with an equal pessimism about other car companies also having it. If Tesla becomes the only company to offer FSD it surges way above all other car makers. But if all car makers have it, then it's just another feature available on any car.

The supercharger network adds value to Teslas, but 162 times more than Toyota?
 

Big Earl

bnkwupt
Supporting Member
Jul 12, 2017
5,954
11,243
Springfield, VA
Tesla is more than a car company and they stand to disrupt multiple industries (cars, battery production, energy production, energy storage, autonomy, AI, thermal management systems, production line design and probably several others that I’m forgetting or that have yet to be revealed).

There are numerous discussions on Tesla’s valuation on various platforms - threads here in TMC, YouTube videos and in depth reports from firms like Cathie Wood’s ARK Invest.
 
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UltradoomY

Supporting Member
Supporting Member
Mar 13, 2020
350
1,666
Tampa, FL
First let me say I'm a total Tesla fanboy. I hate gasoline and cars that burn it. I've been driving electric for fifteen years, since I got my Zap Xebra. Then I got the Roadster. Now I have a Model 3, LR RWD with EAP and the fancy interior. And I love it. I also own some shares of TSLA which I bought because I loved my Roadster so much. I think my basis after the split is around $7. Not sure, though. Could be as much as $10 or $12 because some of it comes from the merger with Solar City.

But...

The internet tells me that Ford makes around 11 million cars a year and has a market cap of around $253 billion; GM makes around 6.8 million cars a year and has a market cap of around $74 billion; and Toyota makes around 11 million cars a year and has a market cap of around $253 billion. Tesla makes around 200,000 cars a year and has a market cap of $746 billion.

Toyota's market cap is equal to about $23,000 times the number of cars made per year. Teslas are twice as good as Toyotas (that's my opinion and I'm sticking with it!) so its market cap should be by this measure, $50,000 times the yearly car output, or around $10/share. But it's not. It's $3,730,000 times the number of cars made per year. As I write this, the share price is $744.49.

My question for people who understand this stuff is "Why?" Why is TSLA worth 162 times as much as TM per car built per year? Five times I could understand, because Teslas are (IMO) so much better. Ten times maybe, for the growth potential of the BEV market. Twenty-five times if the market really believed Tesla was going to solve FSD before anybody else, maybe. There are folks here who believe that, but does the market believe it?

Is the stock market just totally illogical? Or are there fiscal/financial reasons for it?

You don't have to convince me that Tesla is the best thing since sliced bread, because I'm totally on board with that. I'd like to understand why the stock market, with its financial analysts and its fund managers and its brokers and market makers and all the rest, values TSLA so high.

Thanks in advance for any insights you choose to offer me.
Always a fun way to look at why Tesla's valuation is so high is to look at other markets.
Take the difference in Macy's and Dollar General -
Macy's is huge and pulls in giant revenues
Dollar General is puny in comparison and revenue is way behind as well.
Why is that???
It's because Dollar General is insanely profitable and growing exponentially.

This is the same for Tesla vs. any Auto Manufacturer.
Most other companies - Toyota or Ford in your examples make a tiny if not negative profit on their vehicle sales, they make most of their money on financing them.

Tesla is alone in having margins over 20% and growing just on cars, not including energy and software.
Tesla is also growing at 50%+ every year.
You mention Tesla sells about 200k cars a year.... maybe 2 years ago.
Last year was 500k
This year they have already sold 495kish
Last quarter alone Tesla made more than the 200k you mentioned. THAT is exponential!

Absolutely bonkers the free cash flow is when you start extrapolating.

In summary, you don't have enough invested in Tesla, neither do I, nor anyone reading this.
Cheers!
 
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ZeApelido

Active Member
Jun 1, 2016
3,313
30,236
The Peninsula, CA
First let me say I'm a total Tesla fanboy. I hate gasoline and cars that burn it. I've been driving electric for fifteen years, since I got my Zap Xebra. Then I got the Roadster. Now I have a Model 3, LR RWD with EAP and the fancy interior. And I love it. I also own some shares of TSLA which I bought because I loved my Roadster so much. I think my basis after the split is around $7. Not sure, though. Could be as much as $10 or $12 because some of it comes from the merger with Solar City.

But...

The internet tells me that Ford makes around 11 million cars a year and has a market cap of around $253 billion; GM makes around 6.8 million cars a year and has a market cap of around $74 billion; and Toyota makes around 11 million cars a year and has a market cap of around $253 billion. Tesla makes around 200,000 cars a year and has a market cap of $746 billion.

Toyota's market cap is equal to about $23,000 times the number of cars made per year. Teslas are twice as good as Toyotas (that's my opinion and I'm sticking with it!) so its market cap should be by this measure, $50,000 times the yearly car output, or around $10/share. But it's not. It's $3,730,000 times the number of cars made per year. As I write this, the share price is $744.49.

My question for people who understand this stuff is "Why?" Why is TSLA worth 162 times as much as TM per car built per year? Five times I could understand, because Teslas are (IMO) so much better. Ten times maybe, for the growth potential of the BEV market. Twenty-five times if the market really believed Tesla was going to solve FSD before anybody else, maybe. There are folks here who believe that, but does the market believe it?

Is the stock market just totally illogical? Or are there fiscal/financial reasons for it?

You don't have to convince me that Tesla is the best thing since sliced bread, because I'm totally on board with that. I'd like to understand why the stock market, with its financial analysts and its fund managers and its brokers and market makers and all the rest, values TSLA so high.

Thanks in advance for any insights you choose to offer me.


There are a few actual math / game theory reasons why TSLA is valued as it is.

1. Valuation is about earnings & profits, not about how many widgets are sold. TSLA makes a lot of profit on relatively few vehicles. When they report Q3 earnings, they may report around 2 billion in non-GAAP income. Annualized that's around 8 billion / year right now, say nothing of what will happen as the company grows further. That's more than most automakers on fewer vehicles.

2. P/E ratios can sustain higher than historical levels because interest rates are so low. If we take current estimated state of profit generation, TSLA is currently operating around P/E of 100. I prefer to look at earnings yield, which is essentially the inverse - basically at current share prices, if you invest you will "earn" 1% profit. That is small, but risk-free interest rates are also around the same level (or even lower), so people may still choose to invest in stocks that give them better earnings yield than the risk-free rate. Compare that to the 2001 bubble, where risk free rates were around 5-6%. Certainly you wouldn't choose to invest in a company at a price that only gives you 1% when you can get 5-6% risk free? So I would say in current macro environment, if you have a stable company making steady profit, people could be happy getting 2-3% yield since it's better than the risk free even accounting for some risk. That's a P/E of 33 - 50.

3. Most important, valuation has to be about future expected earnings with high growth companies. Why? Game theory. Let's say you have a company that is making 0 profit and has no assets, but you know in 5 years they have a guaranteed contract that will net them 10 billion a year in profit. Would you give them a small valuation because their current year and next year profits are 0? No! Because if you did, someone else is smart enough to see that in 5 years the company is making enough money to be worth say 400 billion dollars (P/E of 40). If we know it's gonna be worth 400 billion in 5 years, certainily you'd be willing to pay at least 50 billion for it now. And 100 billion. Wouldn't you say a guaranteed 4x in 5 years is worth it? Yup.

So how do we determine what people are willing to pay? Discounted cashflow models. Basically, you have to compare how much you could earn if you invest elsewhere and compare what you would earn / year on the stock given current price level and eventual target. So even if you think you can earn 10% elsewhere, you would still be willing to buy that stock at around 250 billion in value because you would still earn more per year in the gains to reach 400 billion.

So that stock, which is earning nothing right now, is still worth 250 billion in the market. And it has to be, because even if you don't believe it, others see the future value and will arbitrage it to that price point.

So how does that relate to TSLA? The market has estimated the chances are high that in some future year, Tesla will make at least 25 billion in profit. 30 billion in annual profit is about a P/E of 30, totally reasonable future value if not cheap.

Is that reasonble? Well again Tesla is currently making ~ 8 billion per year on 1 million vehicle / year run rate. What happens when they grow to 5 million vehicles per year (almost assuredly going to happen in 5 years)? What happens if more income comes from software packages like FSD? What about the energy sector?

One could certainly argue that Tesla's 2026 earnings could be much higher than 25 billion in profit, and if you discount that back to today, Tesla is undervalued.

And why are other automakers valuations so low? Well again it's about future expected profits, not just current ones. So even if Ford is making billions in profit right now - if the market thinks their profit is going to 0 in 5 years...well the discounted value of 0 is still 0...
 

daniel

Well-Known Member
May 7, 2009
5,092
4,215
Kihei, HI
Always a fun way to look at why Tesla's valuation is so high is to look at other markets.
Take the difference in Macy's and Dollar General -
Macy's is huge and pulls in giant revenues
Dollar General is puny in comparison and revenue is way behind as well.
Why is that???
It's because Dollar General is insanely profitable and growing exponentially.

This is the same for Tesla vs. any Auto Manufacturer.
Most other companies - Toyota or Ford in your examples make a tiny if not negative profit on their vehicle sales, they make most of their money on financing them.

Tesla is alone in having margins over 20% and growing just on cars, not including energy and software.
Tesla is also growing at 50%+ every year.
You mention Tesla sells about 200k cars a year.... maybe 2 years ago.
Last year was 500k
This year they have already sold 495kish
Last quarter alone Tesla made more than the 200k you mentioned. THAT is exponential!

Absolutely bonkers the free cash flow is when you start extrapolating.

In summary, you don't have enough invested in Tesla, neither do I, nor anyone reading this.
Cheers!

Thanks for the corrected numbers. My googling didn't find numbers later than 2019. And I didn't realize Tesla's profits were so high. It seems like just yesterday they were not making any profits at all.

As for me personally having "enough" invested in Tesla, I'm 73 years old and living on the returns of my investments. Without dividends, TSLA is more of a toy for me: Something I own because it's fun to own a tiny piece of it. I'll probably never see any return on it. It's my heirs who will benefit.

In fact, when it dropped almost down to $500 after hitting $880 I felt bad for not having gotten out above $800 (which would have been a 10,000% profit.) Now that it's back well over $700 I'm glad I didn't. But I'm not a risk-taker. It wouldn't do me any good to make another 1,000% profit over the next decade if I don't live that long.

There are a few actual math / game theory reasons why TSLA is valued as it is.

1. Valuation is about earnings & profits, not about how many widgets are sold. TSLA makes a lot of profit on relatively few vehicles. When they report Q3 earnings, they may report around 2 billion in non-GAAP income. Annualized that's around 8 billion / year right now, say nothing of what will happen as the company grows further. That's more than most automakers on fewer vehicles.

2. P/E ratios can sustain higher than historical levels because interest rates are so low. If we take current estimated state of profit generation, TSLA is currently operating around P/E of 100. I prefer to look at earnings yield, which is essentially the inverse - basically at current share prices, if you invest you will "earn" 1% profit. That is small, but risk-free interest rates are also around the same level (or even lower), so people may still choose to invest in stocks that give them better earnings yield than the risk-free rate. Compare that to the 2001 bubble, where risk free rates were around 5-6%. Certainly you wouldn't choose to invest in a company at a price that only gives you 1% when you can get 5-6% risk free? So I would say in current macro environment, if you have a stable company making steady profit, people could be happy getting 2-3% yield since it's better than the risk free even accounting for some risk. That's a P/E of 33 - 50.

3. Most important, valuation has to be about future expected earnings with high growth companies. Why? Game theory. Let's say you have a company that is making 0 profit and has no assets, but you know in 5 years they have a guaranteed contract that will net them 10 billion a year in profit. Would you give them a small valuation because their current year and next year profits are 0? No! Because if you did, someone else is smart enough to see that in 5 years the company is making enough money to be worth say 400 billion dollars (P/E of 40). If we know it's gonna be worth 400 billion in 5 years, certainily you'd be willing to pay at least 50 billion for it now. And 100 billion. Wouldn't you say a guaranteed 4x in 5 years is worth it? Yup.

So how do we determine what people are willing to pay? Discounted cashflow models. Basically, you have to compare how much you could earn if you invest elsewhere and compare what you would earn / year on the stock given current price level and eventual target. So even if you think you can earn 10% elsewhere, you would still be willing to buy that stock at around 250 billion in value because you would still earn more per year in the gains to reach 400 billion.

So that stock, which is earning nothing right now, is still worth 250 billion in the market. And it has to be, because even if you don't believe it, others see the future value and will arbitrage it to that price point.

So how does that relate to TSLA? The market has estimated the chances are high that in some future year, Tesla will make at least 25 billion in profit. 30 billion in annual profit is about a P/E of 30, totally reasonable future value if not cheap.

Is that reasonble? Well again Tesla is currently making ~ 8 billion per year on 1 million vehicle / year run rate. What happens when they grow to 5 million vehicles per year (almost assuredly going to happen in 5 years)? What happens if more income comes from software packages like FSD? What about the energy sector?

One could certainly argue that Tesla's 2026 earnings could be much higher than 25 billion in profit, and if you discount that back to today, Tesla is undervalued.

And why are other automakers valuations so low? Well again it's about future expected profits, not just current ones. So even if Ford is making billions in profit right now - if the market thinks their profit is going to 0 in 5 years...well the discounted value of 0 is still 0...

Thanks for that explanation. That's basically what I was looking for. It clears up a lot for me.
 

daniel

Well-Known Member
May 7, 2009
5,092
4,215
Kihei, HI
Looking at the chart, in 2010 TSLA was $4 (adjusted for the split). In 2013 it went up to around $40, where it stayed until five years ago. One year ago it was around $48. Then around half a year ago it began a ten-month meteoric rise to the present level, which, with huge fluctuations, looks like a plateau that has lasted for basically this entire year.

So, was half a year ago when Tesla really started becoming profitable and finally got its production numbers up?
 

EV forever

Supporting Member
Supporting Member
Apr 23, 2016
783
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Irvine, CA
Check out David Lee's YouTube video discussing EBITDA as a appropriate tool to evaluate as multiple for market cap for extreme high growth companies that are executing well. He uses Amazon as an example to show that all the while when people were claiming Amazon was overvalued based on standard metrics like P/E ratio, the valuation was actually within a narrow range as a multiple of EBITDA ~ 30X-60X.

I would think same applies to TSLA - as a multiple of its annualized EDITDA and then taking into account its tremendous growth potential, it is not really overvalued.
 

Chunky Jr.

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Mar 9, 2018
1,607
24,039
CA
One year ago it was around $48.

one year ago it was around $400 (note 52 week low). Two years ago it was around $48. It really started going crazy after the split announcement in August 2020, then again when the S&P speculation was in full force

Screen Shot 2021-09-24 at 8.18.08 PM.png
 

Chunky Jr.

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Mar 9, 2018
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24,039
CA
I think Tesla will be making a ton of money from subscriptions in a few years, and hardly anyone is thinking about that. Plus Tesla Energy is going to grow like crazy once battery production ramps significantly higher. So anyone who values Tesla as a car company is in for a world of hurt.
 

daniel

Well-Known Member
May 7, 2009
5,092
4,215
Kihei, HI
Check out David Lee's YouTube video discussing EBITDA as a appropriate tool to evaluate as multiple for market cap for extreme high growth companies that are executing well. He uses Amazon as an example to show that all the while when people were claiming Amazon was overvalued based on standard metrics like P/E ratio, the valuation was actually within a narrow range as a multiple of EBITDA ~ 30X-60X.

I would think same applies to TSLA - as a multiple of its annualized EDITDA and then taking into account its tremendous growth potential, it is not really overvalued.

Thanks. I'll check this out later today when I have more time.

one year ago it was around $400 (note 52 week low). Two years ago it was around $48. It really started going crazy after the split announcement in August 2020, then again when the S&P speculation was in full force

Oops. You're right. Somehow I misread the timeline.

I think Tesla will be making a ton of money from subscriptions in a few years, and hardly anyone is thinking about that. Plus Tesla Energy is going to grow like crazy once battery production ramps significantly higher. So anyone who values Tesla as a car company is in for a world of hurt.

This may be, but it's speculation, and unless the market shares your belief it does not explain the market valuation, which was my question. I'm not looking for investment advice because I'm at an age where investing for growth won't help me. My investments are for income that I live on now, in my declining years. I just want to understand why the market, which valued Tesla so poorly for so long, has suddenly decided that it's worth so much. The fact that Tesla is so much more than a car company only helps to answer my question if the market recognizes and values that fact.

In addition to owning my second Tesla, I also have Tesla Powerwalls and Tesla electronic thingies that tie my solar panels to the grid, the Powerwalls, and the house. So I know that Tesla is much more than just cars. But this was the case all the way back when Tesla first acquired Solar City, and the market didn't react back then.
 

Chunky Jr.

Supporting Member
Supporting Member
Mar 9, 2018
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24,039
CA
I just want to understand why the market, which valued Tesla so poorly for so long, has suddenly decided that it's worth so much. The fact that Tesla is so much more than a car company only helps to answer my question if the market recognizes and values that fact.

I think more and more people are realizing it is much more than a car company. Cathy Wood and Ron Baron for example are very influential based on their correct predictions of where TSLA would be.
 
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Featsbeyond50

Member
Apr 27, 2019
317
1,115
Washington
Thanks. I'll check this out later today when I have more time.



Oops. You're right. Somehow I misread the timeline.



This may be, but it's speculation, and unless the market shares your belief it does not explain the market valuation, which was my question. I'm not looking for investment advice because I'm at an age where investing for growth won't help me. My investments are for income that I live on now, in my declining years. I just want to understand why the market, which valued Tesla so poorly for so long, has suddenly decided that it's worth so much. The fact that Tesla is so much more than a car company only helps to answer my question if the market recognizes and values that fact.

In addition to owning my second Tesla, I also have Tesla Powerwalls and Tesla electronic thingies that tie my solar panels to the grid, the Powerwalls, and the house. So I know that Tesla is much more than just cars. But this was the case all the way back when Tesla first acquired Solar City, and the market didn't react back then.
They needed to prove they wouldn't go belly up. The successful ramping did that.
 

adiggs

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Sep 25, 2012
5,018
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Portland, OR
I've got a thumb in the wind of around $900 to $1000 today. That comes from thinking around $1200 in a year and asking myself - how much would I pay today for an asset that I had a high belief in being worth $1200 in a year. I know that there are more precise ways of measuring this, and the audience I see being drawn in by this argument will mostly be acting based on the more precise measurement.

More thumb in the wind calculations - what PE or similar metric would one use to size a company growing units 50% yoy, has line of sight to continuing that for years to come, and is seeing margins increase as the units and revenue increases? For a company of Tesla's size, there is no comparable. But much smaller companies doing something similar - 100 PE? 200? Is fully self funding the ongoing cap-ex and research, and has no obvious need to return to the capital markets, ever?

We'll have a 2nd highly profitable data point in a month with Q3 financials. I'm expecting something around $2 non-GAAP earnings to go with the 1.41 non-GAAP from Q2. I don't have any problem projecting that out to $8 over Q2 '21 - Q1 '22, and expect it to be a fair bit higher. $8 in easily projectable earnings and a 150 PE gets me to a $1200 share price in early Q2 next year.


If I'm right, then this mechanism won't lift the share price because all of us current owners feeling justified in our position and now we know it. The mechanism that will lift the share price are people doing this calculation, deciding that $1200 in <1 year is completely reasonable, and realizing they can buy a $1200 asset on sale today at $800. This means new buyers, and new buyers that keep buying as the share price goes up - that's what will drive the share price up.

There is a BIG pool of investors that are driven by financial metrics. Tesla is starting to transition from a purely story driven investment, to a story + realized financial results investment.
 

daniel

Well-Known Member
May 7, 2009
5,092
4,215
Kihei, HI
... fully self funding the ongoing cap-ex and research, and has no obvious need to return to the capital markets, ever ...

Is this true? I've been so used to thinking of Tesla as a company with big dreams and goals but no money coming in since I bought my shares in 2010 or 2011 or thereabouts. It's hard to wrap my mind around the idea of Tesla being self-funding. I've always believed in Tesla ever since I bought my Roadster (since replaced with the Model 3) but never expected this kind of rise. (Well, if I'd expected it I'd have bought a lot more. ;) )
 

adiggs

Well-Known Member
Supporting Member
Sep 25, 2012
5,018
15,507
Portland, OR

Here is the Q2 2021 shareholder deck. Page 3 - the simple # to track is free cash flow, defined as operating cash minus CapEx.

The larger idea I keep track of is whether company cash is being maintained quarter to quarter via borrowing money (primarily long term, >1 year loans) and/or stock sales, or whether the company is funding its operations out of operations. Looking at a single quarter doesn't answer that question - it'll be many quarters in a row, though any individual quarter can be used to get a sense of direction.


For my part, the cash balance has become so large due to recent capital raises, that I like seeing it shrink quarter to quarter. In Q2 (slide 4) is a note that cash shrank in the quarter due to debt repayment, partially offset by that free cash flow. That's a net reduction in the long term debt - something that pretty much nobody in the car industry is doing (or O&G for that matter).

A company using free cash (and admittedly a large pile from a capital raise) doesn't spend that down when it's still short on infrastructure / capability expansion.


The more germane idea to start wrapping your brain around. Your company is in danger of generating so MUCH free cash that we start having an Apple like problem. Investing in anything and everything Elon wants to be investing in, and STILL having so much left over that the company will need to start paying a dividend. Companies growing 50% plus year over year don't pay dividends. Most companies growing that fast are consuming capital to fund that growth (the value of the inventory on the books gets larger and larger).

An interesting sidebar about Tesla's business model - I don't have specifics, but I've seen this idea -- Tesla is turning products into cash, faster than its turning cash into products. Directionally correct, with the details probably wrong, is getting 60 day payment terms from suppliers, while receiving customer payments on delivery. If there's a month from arrival of parts to a built car, to a car at a delivery center for pickup, then that's a net -30 day cash cycle.

Back in the 90s, this sort of cash conversion cycle was a BIG part of Dell's business model advantage. Their competitors were building systems to go out onto shelves and then sell sometime later. Something like a 3-6 month cash conversion cycle, which mean that all of that inventory had to be finances as the companies got bigger and bigger / grew faster and faster.

For Tesla the conversion cycle doesn't need to be negative - any small number provides yet another big advantage over the competition. Other car makers get the appearance of a small cash conversion cycle by recognizing cars as sold when they are delivered to a dealership. The real sale doesn't happen until somebody actually drives it home though and that can take months.
 

daniel

Well-Known Member
May 7, 2009
5,092
4,215
Kihei, HI
I knew when I bought my shares that Tesla would probably never pay dividends in my lifetime. I knew that growth, rather than dividends, was the goal. Still, it would be nice to get dividends, since unless I end up selling I will never get any benefit from my shares other than knowing I own a little bit of the company. I've thought of selling. At my age growth does me no good.
 
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