Declining core enterprise in a brutally aggressive trade, a lot smaller secondary enterprise additionally now going through development challenges, and a trial of a brand new product in a single metropolis that’s garnering combined evaluations. Will that be all, Sir? A trillion {dollars} please, and I’ll throw in some concepts for a robotic enterprise without spending a dime. Sound loopy? The inventory market capitalisation of Tesla (NASDAQ: TSLA) is presently simply over $1trn.
Am I lacking one thing – or does this appear crazy?
Determining what Tesla truly is
The important thing to unlocking this puzzle, I reckon, is determining what Tesla truly is.
Is it a automobile firm (with sharply declining gross sales volumes within the first half of this yr), with a a lot smaller energy technology division in addition?
In that case, trying on the $45bn market cap of Ford or $51bn market cap of Common Motors, Tesla’s $1trn seems to be ludicrous even when the car enterprise confirmed indicators of sturdy development, which it doesn’t.
Trying to the long run
Alternatively, what if Tesla is not only a car firm?
Following this line of pondering, possibly it has been spending years studying methods to construct self-driving methods, harvesting information to optimise its efficiency.
That have has additionally taught the corporate precious classes, in vertically built-in manufacturing, strengthening buyer loyalty, and robotics.
By making use of this information extra broadly, such an evaluation suggests, Tesla might maybe carry out nicely in a number of rising and presumably huge industries, resembling robotics, self-driving taxis, and even AI.
An inflection level
The essential query relating to valuing Tesla inventory is: which of those two approaches is right?
For now, I feel both may very well be. Or, to place that one other approach, it’s too early to name.
The automobile enterprise has hit sizeable bumps within the street this yr. However it’s large, has repeatedly demonstrated its resilience, and has aggressive benefits together with a big put in consumer base.
In the meantime, the opposite companies are smaller. Energy technology and storage is at the least a enterprise, albeit a lot smaller than the automobile division (although nonetheless important).
Against this, self-driving taxis like those presently in trial (below human supervision) in Texas and robotics really feel to me extra like concepts at this stage. They’re being labored out but it surely stays to be seen what, if any, long-term business potential they might actually have.
Sooner or later, maybe over the subsequent yr or two, I feel we could begin to get a firmer deal with on what Tesla actually is: a automobile firm with another odds and ends connected, or a wide-reaching enterprise centred on digital experience discovered from flogging motors.
I’m in no rush to take a position
If it seems that automobiles are certainly solely the launch pad for a much more expansive set of enterprises, I feel Tesla inventory might doubtlessly find yourself shifting far past its present degree.
Primarily based on what we all know now, although, that looks like a leap to me.
I see loads of potential exterior the automobile and energy technology enterprise – however far much less by way of tangible business prospects.
On that foundation, Tesla inventory seems to be too pricy to me. I received’t be investing.
