I’ve been asked about Tesla several times the last few weeks so time for an update. This is a wonderful discussion that provides some perspective on the economics of automakers in general and the highly improbable events that would have to materialize to justify a valuation for Tesla at even 1/10th its current value.
In Mid-November it was announced that Tesla would be added to the S&P 500. Tesla stock is up over 70% since the announcement…not because of any fundamental change in the company, mind you, but simply because of speculators front-running index funds’ required purchases at any price.
The gain since the announcement alone in one month’s time (adding almost $300 billion of market cap) amounts to more than the entire Toyota company! Think about that for a moment. Tesla has added the value of the world’s most profitable and largest automaker in the blink of an eye on no fundamental news whatsoever. Continue reading “Tesla: Some Perspective”