Quote:
Originally Posted by formula72
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Please explain this.
OK you want me to proceed and explain based on us agreeing to a future where Tesla is only a winner in Auto's only and all the other Convergence lines fail to be contributors to forward earnings and growth. Sure, I can do that.
If we assume Tesla is outcompeted in all of its areas outside basic Auto, which means for instance
Google's Waymo delivers the Autonomous driving tech and dominates that market,
StoreDot delivers a battery tech that dominates the market and all the other businesses within Tesla outside basic auto's are shut down or don't contribute in any positive way to forward earnings, then we have a more direct apples to apples comparison between Tesla and Volkswagen and GM and the other Auto companies that will become the basis of their valuations.
Currently Tesla's valuation is based on all the unknowns and perceived potential of all the business units (speculative) but as 'just' an auto manufacturer they would be compared to other 'just' auto manufacturers.
So Tesla the auto manufacture has a P/E of 213.
Toyota has a
P/E of 9
GM has a
P/E of 7.07
Volkswagen a
P/E of 8
So using the
last complete year of car sales 2020:
Tesla 2020 Sales
OK. so on an apples to apples comparison of auto's only Tesla currently has a small market share. So you can reply 'ya but Tesla is solely in EV's and Ev's are gobbling up market share against the tradition Auto's, right?
So shouldn't Tesla still enjoy the much higher P/E, which is a prediction of which company is enjoying the higher growth as compared to the peers they compete with?
That answer is NO.
So again even in the best case scenario where we say Tesla remains the premium brand in EV's you still have those other huge Manufacturers continuing to flood the zone and soak up demand, from consumers who do not care about Brand and just care about price, etc. That is not going to change and in fact those other manufacturers are just at the beginnings of it. You will see hundreds more EV's come out from them to compete with Tesla.
So being a premium Brand is still good for Tesla but unless they are massively outselling and out growing the others in EV market share as it grows (and they are not currently and the future will be worse) there P/E ratio has to collapse to one more comparable to their peers.
Right now the reason Tesla enjoys such a high P/E is due to all the 'unknowns' of all its combined business lines and the speculation and belief that MULTIPLE grand slam homeruns, due to Convergence will make Tesla grow into it valuation.
Cathy Wood (Fund manager and Tesla booster) justifies it by saying
this ...
Quote:
... Tesla isn’t just a straight-up EV play; it’s a company that melds – or converges – multiple technology sectors and platforms into one entity. It’s a robotics company; it’s an energy storage specialist; it’s an Artificial Intelligence software developer. It even has its own glass technology group. And this plurality is what gives it its deep value and its exalted position in the market....
So you can see, in the above, her prediction is based on MULTIPLE grand slam wins. A grand slam win in the Dancing Robot segment above along with many other.
So do you see why, even Cathy Wood, Tesla's biggest booster would not suggest Tesla would keep its monstrous P/E in relation to other automakers if all the 'Convergence' plays failed to deliver and Tesla only continued in its core current business of Auto sales?