Elon Musk’s clown show is undermining Tesla’s global value
You may recently have seen a fair amount of Mr. Musk in his
That analysis, of course, is coming from the reality-based community. That’s not where Tesla shareholders have hung their hats. Tesla is not an auto company; it’s the future of tech, they say. Adam Jonas, an analyst at Morgan Stanley, derives his current US$220 price target by putting a value of US$116 per share on the car operations, plus US$104 on Tesla businesses like “mobility,” “energy,” “insurance” and “network services,” none of which really exist today in any meaningful way.
That works at early stages of rapidly increasing demand. But typically, with a mix of fixed costs and variable costs, cutting around 15 per cent from the average selling price – as it has just done – whacks the per-car operating profit. You have to sell a lot more cars to get back to your previous level of profitability.
So while Tesla’s reported 2022 net income of US$3.62 per share was double that of the prior year, it’s worth asking what happens if that growth slows markedly, or even stalls. Tesla’s forward price-to-earnings ratio is roughly 45, according to S&P Global Market Intelligence; the average P/E for 10 global automakers with greater annual sales than Tesla is 5.9.
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