Tesla’s Market Cap (TSLA) has surpassed $1 trillion, driven by a post-earnings rally stimulated by the announcement of orders for 100,000 Hearts (HTZ) units.
Even if it did, the Hearts order was a drop of hope for growth that burned Tesla’s reputation. Tesla needs a 305 Hz order to meet its earnings forecast for its share price. In other words, an estimated $1.2 trillion means Tesla owns 118% of the global electric car market and will be more profitable than Apple (AAPL) by 2030.
This report provides an objective view of how Tesla’s stock is overvalued and how impractical it is for the company to live up to the expectations embodied in its valuation.
Tesla’s rating compared to competitors doesn’t matter
Tesla’s market cap is now bigger than the next 10 largest automakers (ordered by market cap).
Figure 1: Tesla’s market cap and competitors
That estimate was made even though Tesla sold for less than 1/50th. NS In the last 12 months ending in the first half of 2021, more vehicles were sold than the next 10 major automakers combined. See figure 2.
I can’t imagine an open debate about the difference between Tesla’s reputation and vehicle sales compared to its competitors.
Figure 2: Tesla car sales and competitors
* Sales of Stellantis are estimated as sales of Fiat Chrysler and PSA Group in 2H20 and Stellantis 1H21. Stellantis was founded in January 2021 as a merger of the two.
Was the Hearts deal really worth more than $100 billion in market cap?
Although Hearts eventually agreed to buy 100,000 Tesla Model 3s, investors didn’t see Tesla’s market cap until after talks about a deal with Hearts. I don’t think it will cost $100 billion or $1 million per car.
Even Elon Musk questioned the rise in stock prices, saying the stock price movement was “weird” because Tesla was “not a demand problem, but a production light problem.”
That $100 billion jump in market cap makes no sense in the context of Tesla’s extremely high pre-announcement ratings. Obviously, Tesla’s ability to meet market cap sales expectations played no part in the assessment.
For those interested in the anticipated investment, I’ll count them and Tesla should manage to offer 305 Hz deals to cover the sale, which is estimated to be at a market cap of $1.2 trillion.
Do you make money trading Hearts? What if he succeeds?
The deal with Hearts reminded me of something else after Elon Musk tweeted on November 1, 2021 that “the deal hasn’t been signed”. Famous Tweets: “We are considering keeping the $420 Tesla private. We have the funds.”
Even if the deal closes, the terms of the price are very unclear. Elon claims that none of the cars are being sold at a discount. Hertz boss Mark Fields meanwhile announced that he was playing in the field and working on buying cars from all electric car manufacturers.
Tesla is selling cars at a discount (big and small), the terms of the deal aren’t right, or the deal isn’t met. When the deal was made, I didn’t expect it to be useful. Car rental companies are used to getting discounts on bulk orders, and I don’t think Hertz has to pay catalog prices for many car deals.
In the end, I don’t think the deal with Hertz is closed so I’m not sure if price matters. This case is more for headlines and speculation than real business.
Tesla’s global market share is shrinking
Tesla starters are eroding and their market share continues to decline. In the first half of 2021, Tesla sold 14.6% of electric vehicles sold worldwide, compared to 18.8% in the same period in 2020.
Early industries tend to see higher volumes and lower market shares. The problem is that Tesla is not being rewarded with a declining market share. Its price for such a significant market share is unprecedented in almost every industry in the world, especially one as big and competitive as an automobile.
Reverse DCF Math: Score means Tesla owns more than 100% of the global electric vehicle market
Tesla’s current Average Selling Price (ASP) is about $51,000, Tesla’s stock price is about 1,200 units per share, and by 2030 it will be 30.5 million units (approximately 800,000 TTM), or the estimated base value.
This translates to 118% of passenger electric car sales worldwide. For reference, Adam Jonas, an analyst at Morgan Stanley with a price target of $1,600 per share, predicts Tesla will sell 8.1 million cars by 2030.