[deleted]
Why Tesla Is Worth More Than GM
11–20 of 55 posts
Re: Why Tesla Is Worth More Than GM
#12> What’s more, where GM’s production led to eight jobs in its supply chain for every one person it employed directly, the ripple effects of the Big Five’s businesses, with the exception of Apple, are much smaller. Would Amazon's ripple effect be pretty big too? All the products it sells have manufacturers (who have employees). Or is it better described by disintermediation, where a product that is sold via Amazon now…
I think you've mostly answered your own question.
To some extent, Amazon presumably creates new sales (and hence new jobs in production) but this is almost certainly offset by the jobs it destroys (middlemen of various kinds).
AWS might have greater ripple effects (enabling new tech companies) but they themselves aren't large employers.
Re: Why Tesla Is Worth More Than GM
#13A minor point, but "...because of things like online shopping, which has put hundreds of thousands of retail workers out of a job." Makes me wonder... the method of product selection and delivery have changed from in store browsing and carry out, to online browsing and delivery. Instead of sales personnel and cashiers, it involves warehousing (to a larger degree) and delivery vehicles. Employment in sales/cashiers th…
I suspect it's really difficult to an exhaustive analysis required to see the full implications. It's easy to say 'this shop has seen foot count fall and when we interview people this is why they say they come less' (though with all of the problems such surveys entail), but it's less easy to see the magnitudes involved in the full pipeline - e.g. delivery workers who now deliver to customers instead of shops. It ends…
You could do a relatively dumb back-of-the-envelope by looking at employees/revenue for Amazon and other retailers. This would give you a basic estimate for how many jobs get optimised out by first order effects, counting only employees directly employed.
2nd order effects are harder.
Re: Why Tesla Is Worth More Than GM
#14It is just not true that Tesla is worth more than GM in the common understanding of that. The real answer to "Why Tesla is Worth More Than GM" is one sentence: GM has more debt than Tesla. People understand (and the article gives reasons why) "worth more than" to be that the GM brands + factories + assets + future prospects are worth less than Tesla brands + Tesla factories + Tesla assets + Tesla future prospects. Bu…
Your premise is entirely wrong.
GM has positive $37 billion in net tangible assets. That has climbed from $27b, to $33.9b, to $37b over the last three fiscal years. Their net balance sheet is not only improving, it's dramatically in the positive.
To go with that, they have $24 billion in cash and are currently capable of earning around $12 billion in net income on an annualized basis (meaning they can easily afford the debt they have just on an income basis).
GM's balance sheet is in dramatically better shape compared to market capitalization vs Tesla. To make matters worse for Tesla, they're still bleeding immense red ink vs sales, having to regularly either raise debt or dilute shareholders to keep operating (GM doesn't have that problem, and doesn't need to eat its balance sheet to operate). That by itself tells you everything you need to know about Tesla vs GM when it comes to balance sheet vs market cap.
Tesla is worth more than GM for one reason: the potential to one day be more profitable than GM, namely that enough shareholders are buying into that premise.
Re: Why Tesla Is Worth More Than GM
#15> How did we end up with a digital economy dominated by a few big players? The simplest explanation focuses on what are called network effects
The simplest explanation is that antitrust enforcement started to lag in the '80s and became seriously deficient after 2000. Electricity, oil, telephony also had network effects.
Re: Why Tesla Is Worth More Than GM
#16It is just not true that Tesla is worth more than GM in the common understanding of that. The real answer to "Why Tesla is Worth More Than GM" is one sentence: GM has more debt than Tesla. People understand (and the article gives reasons why) "worth more than" to be that the GM brands + factories + assets + future prospects are worth less than Tesla brands + Tesla factories + Tesla assets + Tesla future prospects. Bu…
Your premise is entirely wrong. GM has positive $37 billion in net tangible assets. That has climbed from $27b, to $33.9b, to $37b over the last three fiscal years. Their net balance sheet is not only improving, it's dramatically in the positive. To go with that, they have $24 billion in cash and are currently capable of earning around $12 billion in net income on an annualized basis (meaning they can easily afford t…
You may know much more about this than me.
Is Enterprise Value too simple a calculation to compare the companies? (you seem to be looking at the entire balance sheet, not just cash/debt)
Certainly GM could issue stock tomorrow to increase their market cap to be more than Tesla's?
Market cap just seems a bit arbitrary of a metric (as it doesn't take into account cap structure) when you're comparing the value of the digital economy and digital monopolies, etc (as the article does).
Re: Why Tesla Is Worth More Than GM
#17Tesla is worth more than GM largely due to speculation that Tesla will be able to ramp up revenues, margins and cash flows unbelievably quickly and expand far beyond a car company. Whether or not they have any chance of doing this is unknown, but the market is a huge fan of Elon Musk given his history of delivering innovation.
Historically, betting on immense multiples of revenue and earnings on negative cash flow companies has not worked out on average, but Tesla may not be average.
Regardless, I wouldnt invest in either company. Autos have historically been a terrible investment due to large capital requirements, low margins, a cyclical operating cycle, ugly pension requirements, and fairly expensive labor... We shall see what the future brings.
Re: Why Tesla Is Worth More Than GM
#18Nothing to see here. The only thing the author actually says about Tesla is that they collect a lot of data from their cars. The only thing he indicates that may be useful for is self driving. Most of the text is just rambling about how awesome tech companies are and he obviously he doesn't consider GM or anyone in the auto industry to be a tech company either.
Really almost a content-free piece with respect to the headline.
Re: Why Tesla Is Worth More Than GM
#19Earlier quoted context omitted.
Your premise is entirely wrong. GM has positive $37 billion in net tangible assets. That has climbed from $27b, to $33.9b, to $37b over the last three fiscal years. Their net balance sheet is not only improving, it's dramatically in the positive. To go with that, they have $24 billion in cash and are currently capable of earning around $12 billion in net income on an annualized basis (meaning they can easily afford t…
You may know much more about this than me. Is Enterprise Value too simple a calculation to compare the companies? (you seem to be looking at the entire balance sheet, not just cash/debt) Certainly GM could issue stock tomorrow to increase their market cap to be more than Tesla's? Market cap just seems a bit arbitrary of a metric (as it doesn't take into account cap structure) when you're comparing the value of the di…
> Certainly GM could issue stock tomorrow to increase their market cap to be more than Tesla's?
That's not how it works. GM issuing shares tomorrow to raise cash, would not inherently boost the market cap. In fact, more likely given the context, shareholders would punish GM and push their valuation down. Shareholders would be spooked by such a move, they'd regard it as a bad sign for GM's operating picture. TSLA & GM are not being treated the same, or valued on the same basis. It's almost identical to the Walmart vs Amazon scenario in that sense.
Cash is essentially never valued at a $1 to $1 basis in terms of representation in the market cap. It's discounted, as for numerous reasons it's not (and shouldn't be) worth 1 to 1 in practical terms.
Debt is also frequently treated very differently from one company to another depending on the context. Comcast for example, has negative $59 billion in net tangible assets, and a mere $4 billion in cash (and most of their 'assets' are goodwill & intangibles); they have a terrible balance sheet. Yet their market cap is $181 billion, to go with $8 billion in net income. Shareholders, for various reasons, are giving Comcast a very sizable multiple and mostly ignoring the balance sheet (ie they don't regard it as a serious threat). GM has a vastly superior balance sheet, six times the cash, routinely ~50% higher quarterly net income, and yet is worth 1/3 what Comcast is.
Re: Why Tesla Is Worth More Than GM
#20Earlier quoted context omitted.
Your premise is entirely wrong. GM has positive $37 billion in net tangible assets. That has climbed from $27b, to $33.9b, to $37b over the last three fiscal years. Their net balance sheet is not only improving, it's dramatically in the positive. To go with that, they have $24 billion in cash and are currently capable of earning around $12 billion in net income on an annualized basis (meaning they can easily afford t…
You may know much more about this than me. Is Enterprise Value too simple a calculation to compare the companies? (you seem to be looking at the entire balance sheet, not just cash/debt) Certainly GM could issue stock tomorrow to increase their market cap to be more than Tesla's? Market cap just seems a bit arbitrary of a metric (as it doesn't take into account cap structure) when you're comparing the value of the di…
@adventured
But certainly if the GM entity had $10B more cash tomorrow, it might not be worth $10B more, but certainly it would be worth $5-$10B more (or at the very least >0 more)?
And of course, they could use that $10B to pay off $10B of their existing debt as well.
All I'm trying to say is that you probably shouldn't compare market caps of companies with vastly different capitalization structures to try and deduce a bigger picture idea of the economy. You should look at enterprise value.
http://www.investopedia.com/terms/m/marketcapitalization.asp