If Tesla (NASDAQ:TSLA) is just another car company, there’s no way it should be worth $724 billion, even if it keeps growing to .
But if Tesla isn’t just another car company, what is it? CEO Elon Musk talks about scaling to . But other auto CEOs are also working on that. He talks about making . But other auto CEOs are working on that as well.
Tesla is due to report its second-quarter earnings around July 20. , analysts are expecting $18.71 billion in revenue and earnings of $1.85 a share. This comes after a in which the company grew revenue by 80% year over year to $18.7 billion and delivered of $3.22 per share.
But if Tesla is just another car company, what are those sales and earnings worth?
| TSLA | Tesla | $699.00 |
Yup, Tesla Is Just Another Car Company
The argument of Tesla bulls has always been that it’s not just another car company. But just 10% of Tesla’s first-quarter revenue came from batteries and services, while 90% came from selling cars.
By way of comparison, General Motors (NYSE:GM), which most definitely is just another car company, earned about $2 billion, or $1.35 a share, on revenue of $36 billion during the first quarter, with coming from its financing arm.
The difference between Tesla and GM is growth. Tesla is half the size of GM but saw year-over-year revenue growth of nearly 80% in Q1 as it continued to build and open new “gigafactories.” GM only grew 10% and its profits fell slightly. GM is still making gas-powered cars. But is that worth $674 billion? General Motors’ market cap is just under $50 billion.
Then there’s Tesla’s affordability problem, the fact it’s missing the mass market. Tesla sells high-end merchandise, with prices starting at around $47,000. I’m not paying that for something that sits in a garage 90% of the time. Volkswagen (OTCMKTS:VWAGY), which does serve the mid-market, is expected to
in 2024. VW’s market cap is $117 billion.
If Tesla is just a car company, the valuation of TSLA stock makes no sense.
Tesla’s Reality Distortion Field
What Musk has is the biggest “reality distortion field” since Steve Jobs was suggesting “just one more thing” at Apple (NASDAQ:AAPL). The difference is that Jobs could scale, thanks to and Chinese factories. Musk has a Chinese factory, but there’s no Moore’s Law for cars.
There are indications Musk sees what’s coming, even if his fans don’t.
Musk is warning employees of a China’s lockdowns in the world’s biggest electric car market. Musk has told managers to and even to cut staff by 10% because he has a “super bad feeling” about the economy. Oh, and into Bitcoin (BTC-USD) last year.
If Elon Musk can see all this trouble ahead, why can’t you?
The Bottom Line on TSLA Stock
There’s a logic in bull markets and a logic in bear markets. Bull market logic is rooted in hope. Bear market logic is rooted in fear. Bull markets can take stocks to the moon. Bear markets bring them back to Earth.
We are in a bear market. The earnings multiples of even the best stocks are being compressed. Investors want dividends, and Tesla doesn’t have any.
Are you really going to pay 8 times revenue for any stock right now? Are you really going to pay 90 times earnings for any stock right now? That’s almost twice what Amazon (NASDAQ:AMZN) sells for and, unlike cars, their cloud scales.
means nothing. Amazon recently split 20-1 and is down 14% since then. If you have a profit in TSLA stock today, I recommend you take it. My spidey sense says things are about to get mighty ugly.
On the date of publication, Dana Blankenhorn held long positions in AMZN and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
