tesla

Tesla: The House of Cars

Tesla stock is down over 60% from its high. It was predictable this would happen: Way overvalued. People also seem to now understand why Elon was fired from PayPal. But there’s a bigger problem: Elon’s loans.

As of June of this year, Elon has used over half of his Tesla stock as collateral for loans. This is why he didn’t use his own money to buy Twitter. He didn’t want to use even more of his stock. (Or banks wouldn’t let him.)

Whelp, on June 30th, Tesla stock was at $225. Which means, by the time it hits $112.50, Elon would be getting margin calls. Twitter is bleeding money (he’s even looking for new money already) and SpaceX is private and is a cash user. He’s sold all of his houses.

Thus, if Tesla stock drops much farther, it seems likely that Elon will get margin calls which he will need to sell Tesla stock to fulfill. This will push the stock down more, which will lead to more margin calls.

At least he only owns like 25-30% of the stock…

By Christopher Schwarz, ago

The Definition of “Priced In”

In finance, we talk about how future growth is “priced in.” Whelp, Tesla has priced in becoming the entire car industry. In fact based on industry multiplies, it’s overpriced even if it was the entire industry.

This graph has the market cap, sales, and net profits for Tesla versus the 12 largest car manufacturers in the world (not Tesla) – Toyota, VW, Daimler, BMW, Ford, GM, Ferrari, Honda, Subaru, Nissan, Hyundai/Kia, and Mazda.

The graph tells the story. All other car companies have 97% of profits and sales, but are worth less than Tesla.

In fact, if Tesla were to become the entire car industry – $1.542 trillion in sales and $110 billion in profit – based on the price ratio for the rest of the industry, it should sell $926 billion (Sales) and $937 billion (earnings).

This price is not justified by margins: Tesla’s profit margin is average for the industry. And it’s not due to the industry high growth, which is 4% per year on average over the last 5 years. The actually capabilities of its self driving software are ranked well below companies like Waymo and GM.

I guess investors really like the solar business.

By Christopher Schwarz, ago