Comment by marcusverus
6 hours ago
Fair market value: the price at which a thing would change hands between a willing and informed buyer and seller.
A company's market cap is, by definition, its fair market value.
> Tesla is not priced according to its underlying assets or technical analysis (e.g. P/E ratio), but solely based on hype/sentiment.
You're right that it's not priced according to underlying assets, but it doesn't follow that it is priced on vibes. Its price is based on potential future earnings; the expectation that Elon can pull off his plans for a robotaxi fleet or building an Optimus robot that might unlock the massive demand for household and/or general use commercial robots. Both offer the prospect of being the first mover into markets which could be worth trillions. It's speculation, sure, but not mere "vibes". The company is also led by a man who has made and delivered on massive, seemingly impossible promises, which adds credibility to the idea that Tesla might actually bring these markets into existence.
That's actually not quite what FMV is: https://www.investopedia.com/terms/f/fairmarketvalue.asp
> Fair market value (FMV) is similar to market value, which is the price that the asset would trade for in the open market under current conditions. However, fair market value has the following additional assumptions: Both buyer and seller are reasonably knowledgeable about the asset, Buyer and seller are behaving in their own best interests, Both parties are free of undue pressure, Each is given a reasonable period for completing the transaction.
However that's why I said "something closer to FMV" as yes - what you described is generally how FMV is calculated for things like stock options.
> but it doesn't follow that it is priced on vibes. Its price is based on potential future earnings
To be clear, I also didn't use the word "vibes," but rather "hype/sentiment" which refers to things like "the expectation that Elon can pull off his plans for a robotaxi fleet or building an Optimus robot that might unlock the massive demand for household and/or general use commercial robots." I'm not sure where you got "vibes" that you quoted in your reply.
Technical analysis uses statistics (e.g. P/E ratios) and marketplace analysis to determine if future potential earnings are worth the price of the stock. TSLA's price is far in excess of any technical analysis I have seen.
> The company is also led by a man who has made and delivered on massive, seemingly impossible promises, which adds credibility to the idea that Tesla might actually bring these markets into existence.
We might have to agree to disagree on this one. (Are we FSD yet?)
Talk about market cap, especially meme stock maket cap, reminds me of that old XKCD comic on extrapolation. Market cap is what you get when you extrapolate the fair market value for the 1% of a company's shares currently on the market all the way out to 100%. But demand doesn't work that way - it doesn't scale linearly.