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$1 Trillion of Speculation

$1 Trillion of Speculation

Posted November 11, 2021 at 10:30 am
Kyle Guske
New Constructs

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

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.

The information and opinions presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or solicitation of an offer to buy or sell securities or other financial instruments. New Constructs has not taken any steps to ensure that the securities referred to in this report are suitable for any particular investor and nothing in this report constitutes investment, legal, accounting or tax advice. This report includes general information that does not take into account your individual circumstance, financial situation or needs, nor does it represent a personal recommendation to you. The investments or services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about any such investments or investment services.

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