The company's sales fell for a second year in a row, as Tesla looks to AI and robotics, including a new $2 billion investment in CEO Elon Musk's company xAI.
Poor Lonnie. May he cry himself to sleep on his MyPillow tonight.
Investors had a general idea of what was going on at Tesla and thought their profits might be down to 20% of what they were last year, so prices went down before Tesla announced their results. Then the results came out. The results were terrible, but not as terrible as the rumours made it sound. So, share prices went back up a bit.
That makes perfect sense. Stocks are like gambling, where a lot of the bets make sense. This is like the odds on a sports game being very long before an injury report is released, and the odds getting slightly better after the injury report is released and it’s not as bad as feared.
Where TSLA stock makes absolutely no sense is the P/E ratio. That’s the price investors are paying for the shares compared to the earnings per share. An old, reliable company that probably won’t grow very much but that has reliably made a steady profit year after year might have a P/E ratio of 5. Tech stocks that might grow a lot in the future might have a P/E ratio of 20 because the expectation is that they have a lot of room to grow, and that in 5 years their revenues and profits might have tripled.
Tesla’s P/E ratio is currently 283.38, and its market cap is $1.386 trillion. So, Tesla investors somehow think that Tesla is going to grow to become hundreds of times its current size and/or massively profitable.
So, the day-to-day movements of Tesla’s stock price make sense in the abstract. Investors assuming bad news sell shares, when the news isn’t as bad as feared, investors buy shares. Where they make no sense at all is that the investors are somehow deluding themselves into thinking this tiny car company is about to do something to juice its share price to the moon, like inventing nuclear fusion, or perfecting a time machine.
Investors had a general idea of what was going on at Tesla and thought their profits might be down to 20% of what they were last year, so prices went down before Tesla announced their results. Then the results came out. The results were terrible, but not as terrible as the rumours made it sound. So, share prices went back up a bit.
That makes perfect sense. Stocks are like gambling, where a lot of the bets make sense. This is like the odds on a sports game being very long before an injury report is released, and the odds getting slightly better after the injury report is released and it’s not as bad as feared.
Where TSLA stock makes absolutely no sense is the P/E ratio. That’s the price investors are paying for the shares compared to the earnings per share. An old, reliable company that probably won’t grow very much but that has reliably made a steady profit year after year might have a P/E ratio of 5. Tech stocks that might grow a lot in the future might have a P/E ratio of 20 because the expectation is that they have a lot of room to grow, and that in 5 years their revenues and profits might have tripled.
For a typical car company that’s well run, a P/E ratio of about 5-10 is normal. Volkswagen is at about 8, Toyota is at about 10, Ford is at about 12.
Tesla’s P/E ratio is currently 283.38, and its market cap is $1.386 trillion. So, Tesla investors somehow think that Tesla is going to grow to become hundreds of times its current size and/or massively profitable.
So, the day-to-day movements of Tesla’s stock price make sense in the abstract. Investors assuming bad news sell shares, when the news isn’t as bad as feared, investors buy shares. Where they make no sense at all is that the investors are somehow deluding themselves into thinking this tiny car company is about to do something to juice its share price to the moon, like inventing nuclear fusion, or perfecting a time machine.