In 2021, I wrote two posts on Tesla valuation issues. This was the second of the two.
Now, 30 months later, the cracks have finally started to emerge and while the market remains near all time highs, Treasury yields are headed back towards 5% and the VIX is showing that fear is re-emerging.
For Tesla, from a high of $407/share 2 weeks after I wrote the article in October 2021, today sits at ~$156/share on it’s way to my target of $54.50/share (not investment advice!). How do I arrive at that number? In 2018, Elon tweeted “Funding secured” for a $420/share take private price. Split adjusted (once in 2020 5:1 and once in 2022 3:1) that translates to $28/share. Appreciating that price at 10% a year for 6 years…. You get $54.50 a share or a market cap of $171 billion. Amazingly, this correlates well with Toyota which had $311 billion in 2023 revenue as compared to a market cap of $390 billion and LTD of $130 billion. That’s a 1.67 EV/sales ratio. Tesla should generate around $100 billion of revenue in 2024 which equates to ~1.7 EV/sales. Tada! A valuation that makes sense!!
Companies that make cars should trade like other companies that make cars. And in the case of Nvidia, it should trade like other makers of chips. Is Intel the right comparison? It trades with a market cap of ~$150 billion against ~$60 billion in revenue, so 2.5x sales? Nvidia trades at 33x so politely would imply a 90% price drop from here… not investment advice, just musing.
Yes, market may stay irrational for longer than you can stay liquid but mark it on the calendar to look at Nvidia in 30 Months and I suspect their stock performance will look a lot more like Tesla and the valuation will look more like Intel, implying a 90% drop. Buyer beware. The stock is down 9% since I wrote about it.
So my money is almost always bullish and long on natural gas. Love tech and big ideas but where (not advise) do you like the hope for money to be put in to our markets? Mining industry looking good in the future?