Originally Posted by
Trip7
You can say traditional metrics are out of the window, but at the end of the day the basic principle of investing remains forever. When placing their capital with a company, an investor is buying a piece of a company and the goal is to get a return on their investment.
Right now when you buy a piece of Tesla'a business without growth you will get your money back in 358 years based on current earning(FCAU 8.3 yrs for comparison). Moreover, the intrinsic value of a stock is it's future free cash flows discounted to the present value. Right now Tesla is priced as if 90% of the world's cars will be Tesla and then some to achieve the required cashflow. Will Tesla out innovate every car company in the world for the next 10 years and have monopoly status in the auto industry? All self driving cars will be Tesla? Everyone's home will be powered by Tesla? All cars will have Tesla battery technology? There are some pretty bold bets given the current price
I'm not saying Tesla won't be a successful company. I think it will be. Do I think 10 years from now Telsa investors will make any money if they buy today and hold? Absolutely not. Right now successful investing in TSLA is based on the greater fool theory. Eventually the price will become so absurd there won't be any fools left to trade to. On that day, I wouldn't want to be stuck holding the bag
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The point I’m raising is that you cannot attempt to value Tesla like you would fiat-Chrysler or GE. The other point and the important one is that you cannot value the leadership and vision someone brings to the table. Starlink, Space X, subscriptions etc etc. How do you value these? Who would have thought in a matter of months Apple would go from a $1 trillion company to $2 trillion. Is that warranted? Is that a fair value for Apple? I’d say yes but plenty can say no.
Tesla has a wild amount of levers it can pull still. Time will tell. You say in the next 10 years investors today will not make money, but I say their market cap and value will grow at least 5 fold, possibly more. Let’s check back in 10 years and see who is right? For me, my money is on that lunatic Elon!
As for Morningstar valuations, they’re #1 on the list of services that, if I’d followed and based my investing on their metrics I’d be so much further behind than I am today. By a lot. Not one company I hold is what they consider “fair value”. They have said and continue to say the same things about the FAANG stocks, but oddly enough their “fair value” keeps going up in unison with the stock price as time ticks on. The reason? Their metrics are so short sighted they can’t possibly identify a 10-100x company because they rely on, you guessed it! “Traditional metrics”. It’s almost as if they don’t want you to succeed with investing via long term buy and hold.
I get it, I’ve been there too. It can’t be as easy as buying and holding when Cramerica says companies are over valued or JP Morgan says Tesla is worth $70/share. How can they be wrong? They’re massive companies and successful investors, why do I think I know better than them? The answer is, they haven’t grown to what they are today because of investing, it’s because they charge us for everything. Fees; that’s how they get us.
This brings us back, full circle, if you invest with JP Morgan your assumption is you are safe. They’re massive, can’t go wrong. But this is exactly what they want you to think. They’ve drilled into our heads you cannot beat the market. Investing is hard. Investing is scary. Investing is risky. BUT, if you send us your money we will keep it safe! (And we will collect our fees).