Tesla: A Story Stock but what's the story?

Tesla is a story stock, i.e., a stock whose value and price are driven more by the story told about the stock and changes to that story than the numbers that you see the company reporting. In this webcast, I look at how different story lines play out as valuations of Tesla and why you my choose one over the other.

[valueStocks]

Very interesting. Tend to agree. I looked at it from the perspectives of these analysts that are giving it something like a 3000/ share price target. I looked at the numbers they would have to get and assigned a multiple.

[darinpearson]

People can disagree on what business Tesla is in, unless you actually look at their financial statements, and then you go, oh yeah, just like I thought: Automobiles.

[wildreams]

By the way Professor, would you say you are "pricing" the stock or "valuing" the company?

[wildreams]

I'm lazy to cite the source, but right now we are at an inflection point of 3 technologies:
1. Renewable energy adoption (namely Solar)
2. Electric Vehicle Adoption (mainly by BYD in China and Tesla in the western world)
3. Autonomous Vehicle (probably in service by 2021).

All these 3 are trans-formative, disruptive, technology that is (like how Charlie Munger puts it) so obvious. Why? because they are much better than the incumbent technology (cleaner more efficient, and in 2016, cheaper). And Tesla is in the crossroads of all 3 technology. With the visionary in Elon Musk and brand name to boot. That my friend, is the story.

[simonnielsen]

I would love to see a new Valuation for 2020 with autonomy coming very soon and updated margins above 20-30 %

[blackmamba]

Professor, thoughts on Nintendo and the recent market cap jump resulting from Pokemon GO? I'm curious what forward revenue/cash flow expectations market participants are pricing into Nintendo's equity given the current market value, and whether those implied targets are even attainable?

[guitarwinds]

Very interesting valuation and another great video, I always learn a lot watching these. It seems a bit odd that you would improve their sales to capital ratio but not their revenue. Personally I still think of TSLA as a automobile company with a visionary story so even if you look at one of the most efficient supply chain car manufacturers Toyota a 2.0+ sales to capital ratio seems very extreme. From Elon's own master plan it does not seem like his vision is to outsource but rather with bringing in SolarCity the vision is to manufacturer in house can control more which again would push the sales to capital to me to something more like a auto manufacturer. Where TSLA would need to pick up the difference is in its margins, being able to charge a higher price for its brand name. With all of its recent stumbles in supply chain its very likely that TSLAs asset efficiency would be worst than other manufacturers for quite a while because as you stated it seems Elon doesn't really care about it. From your valuation much of the value based on the slides appears to be coming from capital efficiency but maybe it should be flowing from margin expansion (less R&D expense in the future perhaps when the tech is "perfected"). Obviously your implied price is still much lower than the actual stock price so who knows what is really baked into the price but it might be something to think about for when you update your valuation again next time.

[karanarora]

funny looking at this now that tesla is > $3000 / share (pre-split)

[wildreams]

Electric Vehicle company is always a clean company (they only manufacture EVs).
Elon Musk message has always been the same: he is there to assist the Advent of the Electric Vehicles.

[pvdl]

Interesting: Prof. Damodaran keeps shifting higher his valuation for tesla as the stock price and hype increase. He says it has to do with a shifting story, but no significant news has come out to justify this shift. After all: Elons "master plan" has been out for years. The number of reservations might be impressive, but could have been expected. I think he feels pressure from the market and rationalizes his emotional impulse to move in the same direction as the market. He even calls Tesla a tech company, which is absurd.