NW-Bound
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jul 3, 2008
- Messages
- 35,712
How can Microsoft have such a big market cap when they produce no cars?
Yes, Tesla does build cars and they do a lot of other things too.
In addition, they are seen as the market leader in a market that has a huge amount of potential, with very little competition.
Analysts that consider Tesla only on the number of cars they build have been wrong for years. Analysts who also consider the state of competition, the energy side of the business, the cost savings/margin of sales, and Tesla’s infrastructure plans, those are the ones that are generally closer to the mark.
Some people have been stating that the “competition” will chew up Tesla have been stating that for 8 years. They don’t seem to realize that Tesla wants competition. I think Elon is getting frustrated with how long it is taking for the competition to get their act together.
I have read that sales of Tesla cars in China is under fierce competition from domestic car makers. European car makers are also ramping up quickly.
Yes, Tesla is involved also in residential solar energy, and solar energy storage. But here, it is not without competition. Tesla has the unique roof tile solar cell, but it is expensive. Existing solar panel makers are cranking out conventional solar panels so cheap, this sector has been going through huge consolidation.
Tesla is trying to make its own lithium cells, and promises some advantages over the existing cells, but Musk admitted there was a lot of work to be done. Given that he is usually more gung ho about other things that have not worked out well, I suspect that it is not going to be that easy at all. Existing lithium cell makers like LG Chem, Panasonic, BYD, CATL, are not sitting still.
About system integration and large commercial battery banks, much publicity was given to Tesla's installation in Australia, but there are larger battery storage projets going on right in California that people do not talk about. And I was surprised to learn from Alan in the UK that he was enjoying a residential battery storage that was Chinese made. As I recalled, it was a lot less expensive than Tesla's Powerwall.
About the comparison to Microsoft which has a market cap of $1.6 trillion compared to Tesla's $465 billion (29% of MS), MS has trailing annual sales of $143 billion and revenues of $44 billion (huge profit margin!), while Tesla's numbers are $24 billion and barely breaking even.
I myself think MS is also overvalued, but it is entrenched in a business that has a wide moat. Tesla on the other hand has too many competitors to count. Tesla is not a bad company, but way overvalued at this price. It will have to keep executing extremely well and meet all promises in order to earn its current price.
With the price running up so much, I think it's hard for it to go even higher for the next few years. Before bidding the shares even higher, investors will want to see how it fulfills the promises. The risks Tesla is faced with are not small.
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