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What is up with Tesla’s Stock Price?

Posted: Jared Jameson

I ran across these charts on Twitter recently (@AlbertBridgeCap). The charts compare the enterprise values and sales of the entire auto industry vs. Tesla. Tesla is up over 400% this year and is now worth more than only a handful of companies in the entire world.

In reviewing the first chart, one might infer Tesla sold a similar amount of cars as the rest of the auto industry combined. Your inference would be wildly wrong. The second chart shows Tesla sells only a fraction of the amount cars as the rest of the auto industry. What is going on? The simple, knee-jerk reaction is the market has gone crazy and is so enamored with Elon Musk it has wildly overpriced the stock. This certainly could be the case. Another explanation is the comparison between Tesla and the auto industry is apples to oranges. The market seems to view Tesla, as not only an auto company, but an energy/battery company, a self-driving car technology company and/or a first car on mars company. Even with this broader view of the Tesla’s potential, it still seems to be priced very optimistically. Eventually, the market will assign a “proper” valuation to the company as has always been the case. My guess would be it will be worth a lot less than the market currently assumes. Time will tell.

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