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Originally Posted by opendoor
You're ignoring debt though, which is one thing that significantly differentiates Tesla from other auto companies and is a huge reason why they're valued more like a tech company (who tend to have lower debt).
A company with a $100B market cap and $200B in debt is effectively being valued similarly to a company with a $300B market cap and no debt. But just looking at P/E will show the latter company with a P/E that's 3x higher at a given earnings amount.
And that's basically the situation with car companies. Ford has a market cap of $52B, but they have $130B in debt. GM has a market cap of $55B, but $115B in debt. Volkswagen has an $84B market cap and $204B in debt. Meanwhile Tesla has a $474B market cap and only $6B in debt.
If you go by Enterprise Value (which considers cash and debt), then Tesla's value to earnings is only about 1.5-2X their competitors. Which I don't think is insanely out of line given their much faster earnings growth, their higher margins, and the fact that debt servicing costs have gotten significantly more expensive in the last 6 months (which will hurt the future earnings of high-debt companies).
The stock is still overpriced, but unless their sales or margins completely crater, I don't see how it would be a $30-40 stock.
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You can't use mkt cap to compare debt, as mkt cap is a function of price. The higher the price, the higher the mkt cap, the better the ratio. So let's raise the price!
Also, debt matters, absolutely. But it's a question of the cost of the debt, as a function of earnings (as long as the debt is at reasonable levels). And the cost of that debt is already factored into the earnings (i.e. earnings are net of debt service).
TSLA makes about $3.25/share and is priced at $150, or 47 X earnings
VW makes over 32 Euro/share and is priced at 123 Euro, or 3.7 X earnings.
Each dollar of earnings (per share) that TSLA generates is being valued at 12 X what each dollar of earnings that VW generates is being valued at.
Saying they have less debt does not justify that.