https://www.macrotrends.net/stocks/stock-comparison?s=net-income&axis=single&comp=TM:TSLA
Is there a reasonable explanation for this, or is it a complete bubble?
Stock price is purely a function of supply and demand, and the demand does not have to be based on any sort of rational expectation of earnings. Price psychology is the biggest factor in my experience. People often buy for no reason other than the price moving up, which creates a cycle of upward price pressure which continues until enough decide to sell to take a profit, or there are no more buyers. This usually has little to do with company fundamentals like earnings. Day trading is pretty much based entirely on this logic, looking only at price and volume.
The lack of past profit actually fuels a higher price for Tesla, because it allows for imagining bigger profits in the future. A company that has a history of profits leaves little to the imagination. The story matters more than reality.
At the macro level, yield had dried up everywhere but stocks, combined with the Fed giving money to prop traders and signaling that they will buy junk assets and attempt to stop the market from crashing through any means possible. The market has become saturated with day traders and swing traders (retail and institutional) looking for volatility and price movement more than earnings or fundamentals, and newer stocks like Tesla attract them over established stocks like Toyota.
Model Y, Semi, Truck and Model 3 will being in 5x the revenue, RoboTaxi, Lv5 AV coming in anytime, Tesla has the largest Battery Manufacturing Plant on the Planet, Tesla has 5 years lead in Battery Production, SolarCity taking over Solar Energy production, Elon Musk.....
But Yes... I still dont understand how on earth is it worth $200B.
There is a bit on this here: https://mondaynote.com/tesla-and-apple-valuation-questions-c... apparently for Ford it’s pension liabilities are more than 2x it’s market cap; so if you were to exclude them, the company is worth 3x more. Tesla, as a young company (and born in a different era) doesn’t have such liabilities. Etc etc
Basically, people buying TSLA stock believe future sales will be larger than Toyota.
I have a hard time seeing how future earnings of Tesla even exceeds the liquidation value of Toyota, given the stock has never made earnings a year in its life.
You recognize the valuation premise is based on expectations of future results, then you nail Tesla for its past results (no history of annual profit) for a supporting argument ("given the stock has never...").
... until the day they sell
From my limited perspective it sure looks like there's so much play money seeking return that "brand recognition" is the only real reason to choose between one offering and another.
stock is held by founders and fans ==> few sellers
more buyers than sellers ==> stock price goes up ==> inflates worth
Company worth is an imperfect metric at best and non-sensical at worst.
Stockholders are not free to sell, technically or for practical purposes. Many stockholders are under restrictions to hold like employees, founders, index funds etc. Most non-index institutional holders have to hold TSLA if they want exposure to Automotive, EV, Battery industries. There is simply no option.
On non-technical restrictions, what do you think will happen to TSLA,FB or AMZN stock if Musk, Zuck or Bezos started dumping their holdings respectively. The stock holds up precisely because the the founder is holding it. Necessary but not sufficient.
Finally not everyone who wants to sell can avail the last price. Every bid taker (seller) causes a price impact. This has been explored extensively by academics in Market impact models and Optimal execution of block trades. See [1] and [2]. This is the financial econometric model of "a rush for the exits will cause a stock to crater".
Last price is imperfect but not useless. Depends on how much signal vs. noise you attribute to the sale price in the value discovery process.
Enterprise value of Toyota: $318B
Enterprise value of Tesla: $205B
Toyota Market Cap: 171.994B
Tesla Market Cap: 205.619B
> Market capitalization, commonly called market cap, is the market value of a publicly traded company's outstanding shares
> Market cap is given by the formula MC = N * P, where MC is the market capitalization, N is the number of shares outstanding, and P is the closing price per share
> A more comprehensive measure is enterprise value (EV), which gives effect to outstanding debt, preferred stock, and other factors
Basically, Toyota has more debt, therefore its future earnings are assumed to be greater, because the market is valuing it at the current price, even knowing its debt burden. (Though there is alot of problems with this analysis based on how debt is accounted for, especially given companies like Toyota that have large financial units attached to them for loans).
You can go down rabbit holes of apparent market manipulation, seeming fraudulent financial statements, an unquestioning media, toothless and out to lunch regulators, bubble inducing liquidity pushed by central banks but that stuff doesn't matter until it does. See Wirecard, Enron, Et al.
That would be my guess.
Is that simply a perception you think many might investors have? Tesla has lost money every year, while Toyota has showed substantial profit. Without knowing anything else about these companies, an outside observer might think Tesla was the "bloated" of the two.
