So, I understand that Tesla is a company that has a possibility of shaping personal transportation in the future, but how can people think it is worth the insane amount it is currently valued at? They do not have much in the way of production facilities compared to established automakers, their competition is advancing rapidly and their market share is decreasing. I’m just baffled by their valuation as a company.
In: 2
The value of the stock isn’t the same thing as the value of the company. The value of the stock is about how in demand the stock is, which represent more the confidence of investor than anything else.
For example, GM asset value is 235 billions and their revenue is 122 billions, but the value of their stock is only 90 billions. And it’s not because their stock is not well valued. The value of their stock almost doubled in the last 5 years or so. But GM is not really involved that much in other industry than cars, which limit their potential growth. It’s not necessarily bad, but it’s a well known industry with a lot of well established competition and very little chance of dominating the market.
Tesla is actually smaller than GM with asset value of 52 billions and a revenue of 3 billions, bu the value of their stock is 1 trillion. Tesla isn’t just a car manufacturer like GM, they are also involved in high technology like software, batteries, space technologies, communication, etc. They are innovating in different field that attract the attention and with big hope of growth.
The stock value is in part a big popularity contest and tesla is shiny and hopeful, so people buy their stock. It’s a gamble for sure, maybe it’s gonna pay out, maybe not. Nobody can know for sure. But nobody is saying that currently Tesla is worth 1 trillion, it’s just the value of their stock and that’s an important difference.
Latest Answers