Tesla’s (TSLA: $1,200/share) market cap surpassed the trillion-dollar mark, driven by a post-earnings rally that got a boost from the announcement of a 100,000-vehicle order from Hertz (HTZ), which might not even happen.
Even if it does come to pass, the Hertz order is a drop in the bucket of growth expectations baked into Tesla’s valuation. Tesla needs 155 Hertz-sized orders to justify the revenue expectations in its stock price. Put another way, the $1.2 trillion valuation implies Tesla owns 60%+ of the entire global passenger EV market and becomes more profitable than Apple (AAPL) by 2030.
This report provides objective perspective on how outrageously high the valuation of Tesla stock is and the clear impracticality of the company meeting the expectations baked into its valuation.
Tesla’s Valuation vs. Competitors Makes No Sense
Tesla’s market cap is now greater than the next 10 largest (ranked by market cap) auto manufacturers combined.
Figure 1: Tesla’s Market Cap Vs. Competitors
Sources: New Constructs, LLC and company filings
This valuation comes despite Tesla selling less than 1/50th of the vehicles than the combined total sold by the next 10 largest automakers over the trailing twelve months ended the first half of 2021. See Figure 2.
We cannot conceive of a straight-faced argument for the disconnect between Tesla’s valuation and its vehicle sales compared to its competitors.
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This article originally published on November 2, 2021.
Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme.
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[1] Assuming sales equal to 2019 (pre-pandemic) levels.
[2] Calculated as 70% of Fiat Chrysler and Groupe PSA’s 2019 European vehicle sales and 40% of Fiat Chrysler and Groupe PSA’s 2019 North American vehicle sales. Stellantis was formed as a merger between the two in early 2021.
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Disclosure: New Constructs
David Trainer, Kyle Guske II, Sam McBride, Matt Shuler, Alex Sword, and Andrew Gallagher receive no compensation to write about any specific stock, style, or theme.
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