Is Tesla Really Worth $ 800 Billion?
You’re here (NASDAQ: TSLA) has plenty of reasons for investors to be excited. The company is the clear leader in electric vehicles, was recently added to the S&P 500, and has tons of money to speed up its operations. But even some of the most optimistic Tesla investors think a valuation of $ 800 billion is high. In this fool live Music video, recorded Jan. 25, Fool.com contributors Matt Frankel, CFP and Jason Hall discuss Tesla’s progress, competitive advantages, and that high valuation.
Jason Hall: Alright, let’s talk about Tesla talking about dividing stocks. There is no doubt about it. Tesla has had a pretty good decade over the last year, with absolutely huge inventory, but here’s the thing about it. I think it’s pretty easy to see and miss if you’re not already a Tesla Bull and haven’t been rewarded with it. It’s pretty easy to miss. It’s the company that has easily been the auto industry’s biggest disruptor since the auto industry disrupted the horse and buggy.
It’s not just about forcing all major automakers to make fully electric vehicles a priority, vertical integration is changing the way people buy and maintain cars and think about who they have to deal with to get a car. . Tesla also hit a pretty big target last year. Getting into the S&P 500 is big business. It is the fifth largest company in the S&P 500, valued at more than $ 800 billion.
And after? Tesla has a lot of money to spend. It’s going to have to spend billions and billions of dollars to increase its manufacturing footprint, whether you mean its international expansion to build more vehicles. You talk about more battery capacity for its electric vehicles and also for its energy storage activity. You have to remember that this is a business that has its Powerwall, not only in people’s homes, but also on a commercial and utility scale. There are a lot of irons in the fire here. Tesla still has the solar rooftop business that it is trying to grow and is trying to turn into the next residential solar disruptor that it still has to spend a lot of money on. This is the difficult news.
The good news is that Tesla has about $ 15 billion in cash, has more cash than debt. It is proven to have the ability to raise capital. Elon Musk, while he has the credit for being so innovative, I don’t think he’s recognized enough for his financial acumen to be willing to issue stocks to raise a ton of money. It’s so, so smart, because the company is going to spend all of this and more to develop its infrastructure over the next couple of years.
But here’s the other thing. It has generated $ 4 billion in operating cash in the past 12 months. The business can live on its own. I think it’s really, really important. And after that ? Much of Tesla’s bullish future is vehicle automation. This is the great thing. This is the thing that the idea is. We have changed cars. We have turned the industry upside down. We have revolutionized the buy and service side of the industry with vertical integration. Now we want to disrupt vehicle ownership and participate in the future of how people even use vehicles and participate in that future cash flow because people are using a vehicle that they don’t even own and we are managing the fleet as Tesla and we get a share of that.
If all goes well, even at today’s valuation, Tesla’s future could be very, very bright, but we’ll have to see how it goes, folks, right?
Matt Frankel: Yes. Well, I think Tesla would be crazy not to fundraise for those valuations.
Room: OK. Yes.
Frankel: In my opinion, their biggest competitive advantage right now is this valuation.
Frankel: They can raise $ 5 billion, I think that’s what they just announced recently, and they’re doing it at less than a 1% dilution.
Frankel: It’s crazy. There aren’t any other automakers who could even do something close. This is a huge advantage. I’m not ready to jump into Tesla at this assessment. I am a value investor at heart. I just am, more than most people at Fool. So I tend to try to find good deals. Even Tesla Bulls, no one can really argue that this is a good deal right now. [laughs].
Room: Yes. But it’s a big business. I still think it’s a wonderful business, and I would never bet against Elon Musk.
Frankel: Sure. I am not about to open a short position there.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.