It's generally difficult to do. The problem is you have no idea when the collapse in value will happen, or even if it will.
A lot of the companies I'd have bet against in the past, like AOL, sold for huge sums of money, and the purchasing company ended up regretting their decision. The actual AOL stock never collapsed.
Often the difficult thing isn't predicting "this bubble will collapse eventually"; it's predicting the _date_ of the collapse. You really need both, to short.
> never understood why Tesla valuation is orders of magnitude higher than honda
Tesla has solved the problem of unit profitably manufacturing EVs. Outside America and other petrostates, these are broadly accepted to be the future of transportation. (It’s getting its ass kicked by BYD, which didn’t distract itself with a Cybertruck or what increasingly looks like an Optimus follow-on. But being the only American challenger in a new economy is not worthless.)
Tesla’s also lead by a man who has consistently made money for his investors. Even when bets are bad, e.g. Twitter, he’s financially engineered an outcome that ensured, at the very least, nobody who backed him lost money.
Tesla being public, he can’t provide that sort of assurance to everyone who buys at any price. But he can at least credibly pretend to do that for anyone who buys in or near a primary.
> Tesla has solved the problem of unit profitably manufacturing EVs. Outside America and other petrostates, these are broadly accepted to be the future of transportation. (It’s getting its ass kicked by BYD, which didn’t distract itself with a Cybertruck or what increasingly looks like an Optimus follow-on. But being the only American challenger in a new economy is not worthless.)
They solved it by borrowing from the future and gutting their R&D. That's the main cost in the car industry and Tesla basically just stopped developing new models many years ago, to the point that they struggle with a simple refresh.
> Tesla’s also lead by a man who has consistently made money for his investors. Even when bets are bad, e.g. Twitter, he’s financially engineered an outcome that ensured, at the very least, nobody who backed him lost money.
That man also walks a very thin line between engineering outcomes and fraud, let's not forget that.
> solved it by borrowing from the future and gutting their R&D
Not relevant to unit profitability. Tesla’s American competitors can’t turn a profit on each car production-wise.
> man also walks a very thin line between engineering outcomes and fraud
Sure. But the point is to the degree investors were misled, they were made whole and then some. That’s why they keep backing him. He’s done well by them, regardless of the methods.
> Tesla has solved the problem of unit profitably manufacturing EVs.
Well, you can say "profitably" because Tesla drivers seem to be surprisingly willing to put up with corners being cut in order to achieve said "profitability" ... panel gaps, cheap interiors and lousy software. :)
> you can say "profitably" because Tesla drivers seem to be surprisingly willing to put up with corners being cut in order to achieve said "profitability"
Low-end Chinese EVs feel like cheap Teslas. But they’re under $15k. Are panel gaps really worth tens of thousands of dollars to most car buyers?
Usually people respond to this by questioning Tesla's high valuation, and that's fair.
TBH, though, I also wonder why auto companies tend to be valued so lowly. Often P/E ratios are in the single digits, and frequently paired with high dividends.
Auto companies aren't valued as lowly as the P/E ratio indicates. Auto companies have massive amounts of debt, and debt has higher priority than equity.
Instead of "P" you should use "Enterprise Value", which is Equity + Debt - Cash. (cash subtracted to prevent double counting it).
Their EV/E ratios are much more reasonable. And Tesla's used to be only a small multiple of traditional companies, when I owned shares. Now they aren't, and I don't own shares.
Besides being a meme stock, Tesla is also in the enviable position of owning its entire stack - software, hardware, chips, manufacturing etc., unlike Honda that has many critical components built by other manufacturers and not tightly integrated with the software. It is therefore well placed to make much more revenue per vehicle, if only the owner of the company can get out of its way.
Owning entire stack has benefits for sure, especially if you're dominating market. But it also comes at a huge cost - you now need to pay for R&D for the whole stack yourself.
Tesla was dreaming of dominating market. But it looks like it peaked already and its sales are falling. Having to do R&D for entire stack without growth is a very very costly proposal. It often results in just not doing R&D, and falling behind.
For the same reason that Bitcoin is valuable and property prices in many markets are insane. It's valuable because other people consider it valuable. The stock market stopped being an accurate measure of the underlying value of the assets it tracks decades ago, if it ever was.
I understood it when Tesla was the path towards widespread electric car adoption. Now they have tons of competition and an aging lineup, I'm amazed they're competitive at all in East Asia.
The current valuation is largely driven by a future in robotics, not in traditional consumer vehicles. Both in driverless cars and the humanoid form factor. There is not another US company with anything near the position of tesla in terms of vertical integration, in-house self driving technology, manufacturing advancements, ambitious leadership, engineering talent, etc etc.
Chinese companies are the only large threat on the horizon.
> current valuation is largely driven by a future in robotics
It probably isn’t, given Tesla has no unique lead in robotics and its recent news of setbacks didn’t move the market.
Tesla stock is a bet on Musk. It’s why the Board pays him hundreds of billions of dollars to not lose focus on a business he’s very obviously bored with.
Me neither. Which is prob why I remain poor (comparatively).
Now that our domestic grid storage market has "crossed the chasm" -- new energy with solar & battery is cheap enough and quickest to deploy -- methinks future Tesla will do fine. Surely making up for any lost vehicle revenue.
The answer is fairly obvious, humanity is always more obsessed with potential value than actual value. Elon sells that potential very well, but he does actually follow up in a decent way.
Turning the impossible into late is a legitimate business strategy, because you create markets that weren't there before (like cheap satellite launches).
And he has a history of doing this, and he's trying to do it again with optimus and robotaxi. There's massive potential in humanoid robots and robotaxis, which is why people are willing to take a risk. You might think that's irrational, and that's fine. Others do not.
Compare this to other car companies, they don't offer any vision of changing the future in any major way or bringing new products to market. That is boring and predictable. Still valuable, but not as much as Tesla.
Because it isn't a car company, it feels more like a fraud funnel for retail investor funds into multi-billion special dividends and bonuses for Musk.
You're welcome to short it and make lots of money if you are correct!
It's generally difficult to do. The problem is you have no idea when the collapse in value will happen, or even if it will.
A lot of the companies I'd have bet against in the past, like AOL, sold for huge sums of money, and the purchasing company ended up regretting their decision. The actual AOL stock never collapsed.
“Markets can remain irrational longer than you can remain solvent.” - John Maynard Keynes
Enron was going up for years and years before the fraud could not be hidden anymore.
A short Tesla position is correct. The question is at what expiration date ?
When it peaks like the beginning of this month or late last year, I prefer to write naked calls. (Don't try this at home.)
Why would shorting TSLA make him lots of money if he is correct?
If he's correct, the fraud is working. He hasn't staked out a position on what might stop it and when.
The market can remain fraudulent longer than you can stay solvent.
Often the difficult thing isn't predicting "this bubble will collapse eventually"; it's predicting the _date_ of the collapse. You really need both, to short.
This is always a shit argument.
Timing the market is incredibly hard. Investors can be extremely irrational.
Haven't we learned anything with the GameStop bullshit from a few years ago?
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Its a meme stock kept at stratospheric heights by hype. It's only built 1 new vehicle in the last decade and that was the CyberFlop.
Watch the stock on any news. Completely disconnected from reality.
> never understood why Tesla valuation is orders of magnitude higher than honda
Tesla has solved the problem of unit profitably manufacturing EVs. Outside America and other petrostates, these are broadly accepted to be the future of transportation. (It’s getting its ass kicked by BYD, which didn’t distract itself with a Cybertruck or what increasingly looks like an Optimus follow-on. But being the only American challenger in a new economy is not worthless.)
Tesla’s also lead by a man who has consistently made money for his investors. Even when bets are bad, e.g. Twitter, he’s financially engineered an outcome that ensured, at the very least, nobody who backed him lost money.
Tesla being public, he can’t provide that sort of assurance to everyone who buys at any price. But he can at least credibly pretend to do that for anyone who buys in or near a primary.
> Tesla has solved the problem of unit profitably manufacturing EVs. Outside America and other petrostates, these are broadly accepted to be the future of transportation. (It’s getting its ass kicked by BYD, which didn’t distract itself with a Cybertruck or what increasingly looks like an Optimus follow-on. But being the only American challenger in a new economy is not worthless.)
They solved it by borrowing from the future and gutting their R&D. That's the main cost in the car industry and Tesla basically just stopped developing new models many years ago, to the point that they struggle with a simple refresh.
> Tesla’s also lead by a man who has consistently made money for his investors. Even when bets are bad, e.g. Twitter, he’s financially engineered an outcome that ensured, at the very least, nobody who backed him lost money.
That man also walks a very thin line between engineering outcomes and fraud, let's not forget that.
> solved it by borrowing from the future and gutting their R&D
Not relevant to unit profitability. Tesla’s American competitors can’t turn a profit on each car production-wise.
> man also walks a very thin line between engineering outcomes and fraud
Sure. But the point is to the degree investors were misled, they were made whole and then some. That’s why they keep backing him. He’s done well by them, regardless of the methods.
3 replies →
> Tesla has solved the problem of unit profitably manufacturing EVs.
Well, you can say "profitably" because Tesla drivers seem to be surprisingly willing to put up with corners being cut in order to achieve said "profitability" ... panel gaps, cheap interiors and lousy software. :)
> you can say "profitably" because Tesla drivers seem to be surprisingly willing to put up with corners being cut in order to achieve said "profitability"
Low-end Chinese EVs feel like cheap Teslas. But they’re under $15k. Are panel gaps really worth tens of thousands of dollars to most car buyers?
Nice to see some rational thought around here about Tesla and Musk's role.
Usually people respond to this by questioning Tesla's high valuation, and that's fair.
TBH, though, I also wonder why auto companies tend to be valued so lowly. Often P/E ratios are in the single digits, and frequently paired with high dividends.
Maybe both valuations are really wrong.
Auto companies aren't valued as lowly as the P/E ratio indicates. Auto companies have massive amounts of debt, and debt has higher priority than equity.
Instead of "P" you should use "Enterprise Value", which is Equity + Debt - Cash. (cash subtracted to prevent double counting it).
Their EV/E ratios are much more reasonable. And Tesla's used to be only a small multiple of traditional companies, when I owned shares. Now they aren't, and I don't own shares.
Cars are a mature market, with lots of competitors and flat overall sales. Many brands are consolidating or contracting.
US total vehicle sales, historical: https://fred.stlouisfed.org/series/TOTALSA
Growth markets like China have stiff domestic competition and many barriers to entry.
Some of those companies have an awful lot of debt on their balance sheets.
Besides being a meme stock, Tesla is also in the enviable position of owning its entire stack - software, hardware, chips, manufacturing etc., unlike Honda that has many critical components built by other manufacturers and not tightly integrated with the software. It is therefore well placed to make much more revenue per vehicle, if only the owner of the company can get out of its way.
Owning entire stack has benefits for sure, especially if you're dominating market. But it also comes at a huge cost - you now need to pay for R&D for the whole stack yourself.
Tesla was dreaming of dominating market. But it looks like it peaked already and its sales are falling. Having to do R&D for entire stack without growth is a very very costly proposal. It often results in just not doing R&D, and falling behind.
It's a meme stock, like an NFT with a ticker.
For the same reason that Bitcoin is valuable and property prices in many markets are insane. It's valuable because other people consider it valuable. The stock market stopped being an accurate measure of the underlying value of the assets it tracks decades ago, if it ever was.
I understood it when Tesla was the path towards widespread electric car adoption. Now they have tons of competition and an aging lineup, I'm amazed they're competitive at all in East Asia.
Look at their sales numbers ... they aren't.
The current valuation is largely driven by a future in robotics, not in traditional consumer vehicles. Both in driverless cars and the humanoid form factor. There is not another US company with anything near the position of tesla in terms of vertical integration, in-house self driving technology, manufacturing advancements, ambitious leadership, engineering talent, etc etc.
Chinese companies are the only large threat on the horizon.
> current valuation is largely driven by a future in robotics
It probably isn’t, given Tesla has no unique lead in robotics and its recent news of setbacks didn’t move the market.
Tesla stock is a bet on Musk. It’s why the Board pays him hundreds of billions of dollars to not lose focus on a business he’s very obviously bored with.
3 replies →
Me neither. Which is prob why I remain poor (comparatively).
Now that our domestic grid storage market has "crossed the chasm" -- new energy with solar & battery is cheap enough and quickest to deploy -- methinks future Tesla will do fine. Surely making up for any lost vehicle revenue.
The answer is fairly obvious, humanity is always more obsessed with potential value than actual value. Elon sells that potential very well, but he does actually follow up in a decent way.
Turning the impossible into late is a legitimate business strategy, because you create markets that weren't there before (like cheap satellite launches).
And he has a history of doing this, and he's trying to do it again with optimus and robotaxi. There's massive potential in humanoid robots and robotaxis, which is why people are willing to take a risk. You might think that's irrational, and that's fine. Others do not.
Compare this to other car companies, they don't offer any vision of changing the future in any major way or bringing new products to market. That is boring and predictable. Still valuable, but not as much as Tesla.
Becaut Tesla is everything else (whatever is hot topic) than car manufacturer
/s