Tesla's success is exciting, but they are still an automotive manufacturer that
$Tesla(TSLA.US$I don't hate TSLA or growth companies; what I hate is paying too much for growth. TSLA is doing all the right things, their revenue, net income, and free cash flow are growing considerably, but at today's levels, investors are paying way too much for TSLA's future growth as a tremendous amount is priced in. A report came out the other day where Bernstein went on a fact-finding mission. Their firm determined that 99% of global car sales originated from traditional auto OEMs. Internal combustion engines accounted for 97%, while battery electric vehicles came in at 2%. The most interesting thing about the report was that the top 15 OEMs had a collective market cap of $1.2 trillion while the pure-play EV companies, with TSLA at the helm, had a collective market cap of $1.1 trillion, yet they sell 1% of all cars today.
Currently, TSLA has a market cap of $890.5 billion while the combination of $Ford Motor(F.US$, $General Motors(GM.US$, $Toyota Motor(TM.US$, $VOLKSWAGEN A G(VWAGY.US$, $BAYER MOTOREN WERK(BMWYY.US$, $Honda Motor(HMC.US$and $MERCEDES-BENZ GROUP AG(DDAIF.US$have a combined market cap of $746.62 billion. TSLA in the TTM has generated $46.85 billion in revenue, $3.47 billion in net income, and $2.57 billion in FCF, while the combined entity of F, GM, VWAGY, BMWYY, TM, HMC, and DDAIF generated $1.13 trillion in revenue, $102.27 billion in net income, and $79.51 billion in FCF. People who are investing in TSLA today are paying too much for their growth. It's perplexing, and the numbers don't make sense. By these numbers, TSLA would need to increase their revenue by $1.08 trillion (2,316%), net income by $98.8 billion (2,849%), and their FCF by $76.95 billion (2,997%) to equal what these companies are producing currently, yet TSLA's market cap is $143.88 billion larger than these companies combined. There is no justification for TSLA's market cap, and all of the innovative ways they are potentially going to generate revenue from aren't filling this void anytime soon. The premium on TSLA's growth is dangerous, and there isn't a single logical justification that has been made to support their market cap.
TSLA has a current P/S of 18.48 ($892.28 / $48.28 (revenue per share)) and a current EPS of 249.94 ($892.28 / $3.57). TSLA is in the middle of the pack as its net income conversion ratio is 7.4%. I know what the bulls are going to say, TSLA is growing more than everyone else, and I don't understand growth. I have a question, are they? I used many companies here, but let's look at just VWAGY for a one-to-one comparison. TSLA has increased its total revenue by $39.85 billion over the past five years and it's grown from $7 billion to $46.85 billion in the TTM. I admit that's incredible, but so is what VWAGY did. In the same period, VWAGY has increased its revenue by $55.78 billion as it went from $195.79 billion to $251.56 billion. Sure, TSLA has a much higher percentage from a percentage base, but VWAGY, as an established company, grew by more than $8.2 billion over the same period. The same goes for net income, as VWAGY saw its net income increase by $15.94 billion over the past five years while TSLA's increased by $4.14 billion. VWAGY has a 13% ROE ratio, while TSLA's is 12.17%. VWAGY saw its FCF increase by $33.71 billion in the last five years while TSLA's grew by $3.88 billion, yet VWAGY trades at a 4.6x price to FCF multiple while TSLA's multiple is 346.9x. Mr. Market has also placed a 0.83x value on VWAGY's equity regarding its market cap, while TSLA trades at 31.25x. The kicker is that TSLA has diluted shares as they have increased the amount of TSLA shares outstanding by 23.45%, and VWAGY has done all of this while keeping outstanding shares the same. TSLA's market cap is $753.49 billion larger than VWAGY, and if you think VWAGY is standing still in the EV market, they aren't.TSLA's valuation doesn't work, and it's not justifiable as an automotive company.
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Pcube : too small, can't see the table. Can you post as 2 separate smaller tables?
godhand999 : I am totally agree with you. Hertz business is only 4.2 billions and increase Tesla market cap by 100 billions. Furthermore Tesla growth is limited by deliverables and not demand.
Tiptopptrader : Tesla is not an overvalued auto company.
It's an undervalued disruptive technology company.
Sam White Tiptopptrader: sold out 100%?
You will be very happy that you sold before Elon
Mistake, but it's not too late to get in again
JChristian : I can see something in the table but, it would be very helpful to load the table in a link
Str8Up : Helen this is an excellent perspective you have taken. Thank you for taking your time to put such valuable information out there for all who need to know can now know what they should know now (VP Swag).. anyways great piece of writing
