Tesla Is Not Just An Automaker: Tesla Is A Tech Leader

8 months ago by EVANNEX 19

Typical Tesla Store

Typical Tesla Store

IT’S SETTLED, TESLA IS A TECHNOLOGY COMPANY

Investopedia* recently took issue with both Tesla [NASDAQ: TSLA] bulls and bears. Wall Street tends to be myopic when considering Tesla — most investors will view the company through an “automotive” lens only. It’s argued that all Wall Street “talks about [with Tesla] is cars and the auto industry. Is Apple a phone maker or is it a tech company that makes phones? There’s a big difference. A phone for the most part is a commoditized product. They are cheap to make and the barrier to entry seems pretty low. Or is Apple a tech company that makes software and an ecosystem that the phone serves as merely a gateway to the user?”

*This article comes to us courtesy of Evannex (which also makes aftermarket Tesla accessories). Authored by Matt Pressman.

Taking this into consideration, “is Tesla an automaker like Ford, GM or Daimler? Or does it resemble a tech company such as Google, Microsoft and Apple? It is an important question; valuations are very different. Sure, Tesla makes a car, just like Apple makes an iPhone. Tesla is, and does, have an ecosystem, with its software that runs the car, [its Superchargers and its] autonomous driving network with machine learning and over-the-air updates. When was the last [time] Ford, GM or Daimler pushed out an autonomous driving update over the air?” Indeed. Tesla’s emphasis on tech allows them key advantages throughout their ecosystem. For one, Tesla’s self-driving leadership position has (in and of itself) has significant value. Case in point — just this week, Intel bought Mobileye for a whopping $15 Billion.

Tesla Autopilot

Tesla Autopilot

So how do you value a company like Tesla? “Trying to value something that is changing the landscape of an industry is nearly impossible. The market has already told us what TSLA is worth: like it or not, $40 billion. Why? Because it has been trading in the same range for nearly three years. Knowing what it will be worth three years from now is the impossible task. I’d argue with anyone that tries to make a case for a Tesla valuation three years, let alone two years, out. It is nearly impossible to predict any of the variables that go into any of the models used to figure these valuations out. None. Can you tell us what the risk-free rate will be? How many cars Tesla can produce? What will be the demand for the cars? One can’t, so it is not even worth trying.”

Tesla Model 3

Model 3

And here’s the ongoing flaw: “analysts and investors get hung up with companies beating or missing analyst expectations because investing is all about expectations. In this case, despite beating or missing guidance and expectations, revenue growth has been consistent and stable. Revenue growth should be the main driving point when investing in a company like TSLA. Is the company consistently growing revenue at a faster pace, or is it stalling out and hitting stumbling blocks? Is the company consistently producing more cars and making more deliveries? TSLA has been growing all of these metrics regularly, which would indicate the company is producing cars into high demand.”

In blue, Tesla's steep revenue growth (Source: Investopedia*)

In blue, Tesla’s steep revenue growth (Source: Investopedia*)

Viewing Tesla as an automaker only is far too limiting, instead “TSLA is a technology company that is producing cars.” After all Tesla’s unique tech advantage allows them to go far beyond electric cars and self-driving leadership (and expertise). It allows the business to evolve into a superior battery manufacturing company, stationary storage provider and solar roof pioneer. Bringing all these disparate pieces together along with the much-anticipated Model 3 will be hard to forecast. That said, “how much is a company worth that is currently on an exponential growth curve, and about to do the impossible? It looks we are about to find out. Odds are the answer is: a lot more than its current value.”

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*Source: Investopedia

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

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19 responses to "Tesla Is Not Just An Automaker: Tesla Is A Tech Leader"

  1. Big Solar says:

    stock is at what looks like an all time high today

    1. Michael Will says:

      And there’s still 37 million shares borrowed and sold short that are begging to be bought back at a higher price 🙂 more than $8 billion worth of it. This is going to be awesome 🙂

      1. Ron M says:

        I’m not sure how shorting a stock works so your saying there’s 8 billion worth of stock still being shorted at a higher price. You mean people who have shorted the stock thought it was going to be $350.00, $400,00, $500.00? If you don’t reply I hope someone does because I’m confused how this works.

        1. TwoVolts says:

          A ‘short’ is a bet that a stock will go down. In a ‘short’, you sell a stock you have not yet purchased – with an obligation to purchase it at a future date. If the stock goes down, you make money because you bought low and sold high – just in reverse of the normal order. If the stock goes up – as Tesla stock has been recently – the investor eventually covers the short by buying the stock at the higher price – losing money for that investor. Some who have shorted Tesla have already sold and not yet purchased the stock – but are obligated to do so.

  2. Ron M says:

    I love Elon Musk’s tweet “Stormy weather for shortville”

    1. ffbj says:

      Seems like it’s raining all the time for legacy car-makers, who are really hurting, with unsold inventory and sales down. It’s
      Autumn for them…
      Meanwhile:It’s Springtime for Tesla and evs.

      https://www.bloomberg.com/news/videos/2017-04-03/how-tesla-s-market-cap-surpassed-ford-s-video

  3. ffbj says:

    Sort of makes Goldman Sachs sell rating on TSLA, look pretty dumb.

    1. Ron M says:

      Yeah how did you get a job at these Wall Street firms making millions, betting with other peoples money. I like gambling but I hate losing, if I didn’t have to use my money I think it would be a really fun job.

      1. ffbj says:

        Margin calls, resulting in a short squeeze.
        Shorts must buy more stock or cover some to maintain the required margin, written in terms of the percentage of the stock you short. 35-40%.
        Not difinitve since don’t short.

  4. Ron M says:

    Short sellers lost 488 million on Tesla today. They’ve lost 2.84 billion so far this year
    There still getting against Musk, hahaha I guess they like losing money.
    Wait until the earnings report is released. It will still be losing money but the batteries are gonna start helping the bottom line. Solar city will start taking orders for those beautiful solar roofs and I suspect some home builders will be placing orders. They’ll build at least one model home whenever they start a new project.

  5. Pushmi-Pullyu says:

    “is Tesla an automaker like Ford, GM or Daimler? Or does it resemble a tech company such as Google, Microsoft and Apple?”

    This is patently a false dichotomy. To use the example from the article, Apple isn’t a smartphone maker or a tech company; it’s both. Certainly it’s possible to be one without also being the other; Foxxconn makes phones for Apple, but I don’t think it’s a leader in developing new tech the way Apple is.

    Is Tesla an auto maker? Yes, of course. Is Tesla a tech company? Yes, of course.

    Claiming Tesla has to be just one or the other is a pretty desperate way for the writer of this Evannex article to gin up a false controversy.

    (Aside to Jay Cole: Yeah, I know, I’m taking things too seriously again. 😉 )

    1. ffbj says:

      The article did not originate with Evannex, so calling it an Evannex article, which you seem suggest is suspect, is inaccurate.

      1. ffbj says:

        Sorry. I see the chart was from Investopedia, not the article, itself.

      2. Pushmi-Pullyu says:

        To be clear, I’m not one of those who seem to think Evannex is the EV news source equivalent of pond scum. 😉 I just think this particular article isn’t worthy of attention from InsideEVs readers. Other articles I’ve seen there have been well written and informative.

        1. ffbj says:

          I’m fairly agnostic on that question. Though I sure do agree they, Evannex, are going to publish positive articles on Tesla, as they have dog in the hunt, that does not mean they are the other side of the Seeking Alpha coin.

  6. Mark.ca says:

    I remember when GoPro was at $90 and was not a camera company but a media company. TSLA has the potential to post an epic shot squeeze here and i really hope it does…too many haters out there.

    1. Four Electrics says:

      GoPro is only worth $8 today. Are you sure that’s the right example?

      1. Mark.ca says:

        Yeah, i’m sure. Tesla is a car company and that’s it…that is my point. Valuation is absurd but I support then because what they stand for not because its stock is a good short term investment. As for the shorts, they are getting what they been asking for for years now.

        1. ffbj says:

          I have to agree with Four Electrics there, in that GPRO fell, along with other reasons, due to the fact that their product was not unique.