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Tesla Tops GM by Market Value as Investors See Musk as Future (bloomberg.com)
Tesla became the largest U.S. auto maker by market value on Monday, overtaking General Motors -- a feat that would have seemed highly improbable 13 years ago when the electric-car maker first began tinkering with the idea of making a sports car. From a report: Tesla climbed as much as 3.4 percent in early Monday trading, boosting its market capitalization to about $51 billion. The company was valued at about $1.7 billion more than GM as of 9:35 a.m. in New York. The turnabout shows the extent to which investors have bought into Musk's vision that electric vehicles will eventually rule the road. While GM has beat Tesla to market with a plug-in Chevrolet Bolt with a price and range similar to what Musk has promised for his Model 3 sedan coming later this year, the more than century-old company has failed to match the enthusiasm drummed up by its much smaller and rarely profitable U.S. peer. No matter, say investors who like the stock. Tesla is a technology player with the ability to dominate a market for electric cars and energy storage. To those same investors, GM and Ford are headed for a slowdown in car sales that will erode profits. "Is it fair? No, it isn't fair," Maryann Keller, an auto-industry consultant in Stamford, Connecticut, said of GM ceding the market-cap crown. "Even if Tesla turns a profit, they will eventually have to make enough to justify this valuation."
Large American car companies have been a cluster fuck since the 70s. GM could have dominated this market starting with the EV1 years ago. Idiots.
When this company goes under it's going to take so many people's life savings with it it'll look like Madoff's schemes were nothing. And it's all completely legal. I guess it's survival of the fittest; economic darwinism. The smart ones won't get sucked in and will live to invest another day.
If you made money on it, good for you. The company is grossly overvalued. Get out while you can.
It's shocking how much faith investors seem to have in what is essentially a Ponzi scheme with stockholder money despite how obvious it is. There is no way Tesla is ever going to make a profit in many years to come, even if it manages to pour more money into it several more times. The hallowed Model 3 will get trampled in the mass market. Several major companies that actually know how to build cars will have competing electric cars right around the time the Model 3 will be available in significant numbers, with probably very few redeeming features to set it apart, but with Tesla's famously lacklustre build quality. The Model S has been aging for a while and its target market is saturating. Moreover, it will get just as much competition as the Model S, with Audi, Mercedes-Benz and BMW all working on luxury electric vehicles that will put the Model S to shame.
Apart from two quarters artificially made profitable by accounting tricks, Tesla has never been able to make a real profit selling expensive cars in a niche market without any real competition, where buyers are Tesla fans and typically willing to forgive the shortcomings of Tesla's products. There is no way they can succesfully compete in the mass market, where margins are razor thin and customers tend to depend on a car they buy as their only vehicle, even if they can somehow stay afloat while trying.
Tesla "worth" $51 billion? Pfft. Back in the dot bomb bubble days AOL was "worth" $224 billion, now it's under $5 billion. We'll see how Tesla holds up.
I'm trying to find the current backlog for Tesla cars and it seems to be somewhere north of 400k vehicles with close to a billion in deposits for the orders. Nobody else has that kind of traction (if you'll excuse the pun) for current, announced or planned vehicles - in comparison, in 2016 Mercedes sold 374k vehicles in the US.
Yes, the investors are taking a risk on Tesla, but isn't that part of the job description?
Along with this, there seems to be a significant demand for electric vehicles. I don't expect them to overtake fossil fueled vehicles any time soon, but at least 10% of buyers are seriously interested in EVs and Tesla is the number one name there with generally great reviews for products compared to the competition (ie the Leaf makes you feel like you're settling for less and the Volt/Bolt just don't have the cachet), the company is serious about renewables/reducing customers' carbon footprint and a rock star CEO.
You can say it's a fad stock, but there are some solid fundamentals there in terms of backlog and customer demand which justify a high stock price.
Maybe if the Model 3 turns out to be a lemon, things will change with regards to the stock, but as I said, part of the job description for an investor is to take risks and people seem to think that there will be a reward at the end of the day.
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