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Why Tesla Is Worth More Than GM

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Re: Why Tesla Is Worth More Than GM

#41

Post by thenewwazoo »

kolinko wrote: post #36
adventured wrote: post #14

Earlier 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…

Thanks for this outline. What is a go-to place for finding data for such analysis? I would like to learn this :)

Probably GM's 10k statement.

Re: Why Tesla Is Worth More Than GM

#42

Post by robotresearcher »

Garfgon wrote: post #39
elmar wrote: post #31

Earlier quoted context omitted.

> 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. Elon musk created a narrative that is building a completely different way of manufacturing and commercializing cars that differs greatly from historical car manufactures. If you accept that, current economic models that are used to value other car manufacture…

That's the same thing they said about web companies in the mid 90s.

That's right. Tesla aims to be the Google of that story.

Re: Why Tesla Is Worth More Than GM

#43

Post by rainbowmverse »

Garfgon wrote: post #39
elmar wrote: post #31

Earlier quoted context omitted.

> 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. Elon musk created a narrative that is building a completely different way of manufacturing and commercializing cars that differs greatly from historical car manufactures. If you accept that, current economic models that are used to value other car manufacture…

That's the same thing they said about web companies in the mid 90s.

The web companies that survived turned a lot of industries on their heads, and are still doing it. What did advertising look like before Google and Facebook?

Of course, that doesn't tell you anything long-long-term. Every ad and product used to have AOL keywords somewhere. Tesla may obliterate the auto industry, but what forms from the ruins may not have a place for them.

Re: Why Tesla Is Worth More Than GM

#44

Post by Animats »

tuna-piano wrote: post #9

It 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…

Now that makes sense. The article is mostly generic new-economy blathering.

We'll know in a few months if Tesla will be a success. For their Model 3, Tesla has to transition from being a high-margin low-volume manufacturer to a low-margin high-volume manufacturer. That's very tough. Few companies succeed at that.

Already, the price of the Model 3 has crept up. The base vehicle is supposed to sell for $35K, but in practice most models will be around $45K with upgrades. Maybe higher. Overpriced upgrades are where the profit comes from in automotive. That may be how Tesla escapes fighting it out on cost with Chevy and Toyota.

Re: Why Tesla Is Worth More Than GM

#45

Post by cs702 »

This reminds me of the many reasonable-sounding articles in the late 1990's that rationalized the sky-high valuations of dot-coms. For example:

https://www.theatlantic.com/magazine/archive/1999/09/dow-36-...

https://hbr.org/1999/11/the-new-economy-is-stronger-than-you...

A few months after these articles were published, the stock market crashed... and it took the better part of two decades to recover.

Re: Why Tesla Is Worth More Than GM

#46

Post by kgwgk »

nbouscal wrote: post #38
tuna-piano wrote: post #23

Earlier quoted context omitted.

Certainly if there were two identical companies, and one had $10B more in cash, the one with $10B more in cash would be worth more than the other company? I understand it's not 1-1. I'm thinking completely theoretically, so if the world doesn't work like finance theory, fine. But I just can't see any way in which leverage, debt, cash, etc don't substantially alter the market cap of a company.

adventured is having a really hard time with your phrase "two identical companies". The answer to your question is yes, if you had two identical companies and then gave one of them $10B in cash, that company would be worth $10B more.

Actually adventured is right on non-operating cash being usually discounted. In general the second company will not be valued at $10bn more than the first.

Would you rather have a $1 in cash and a $9 share in the first company, or a $10 share in the second company where $1 is the cash per share? The second case is more risky so you wouldn't pay the full extra $1 for the second share.

Of course it could also be the case that the spread is larger than $1, if the first company is too short on cash and there is a liquidity risk depressing the valuation.

Re: Why Tesla Is Worth More Than GM

#47

Post by mkx »

tuna-piano wrote: post #9

It 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…

I've found this article to be the most helpful for understanding how net debt and equity come together to comprise EV: https://www.wallstreetprep.com/blog/common-topics-of-confusi...

Re: Why Tesla Is Worth More Than GM

#48

Post by Theodores »

There are as many reasons as there are investors. Apart from financial returns, not everyone is in it for the same thing.

My reason for giving Tesla a higher valuation is different to the next guy. However, Tesla is a better starting point for capitalising on a low carbon future. Even the GM pension obligations factor into my hunch. Ultimately it is all about belief, in my case a belief in a zero carbon future.

Re: Why Tesla Is Worth More Than GM

#49

Post by greenyoda »

skywhopper wrote: post #25

1) Because investors with too much money in their pockets believe the self-driving hype. 2) Because GM (and Ford and Chrysler) has a lot more unknowns and risks given its increasingly outdated dealer-based sales channel, along with decades of pension liabilities, and is ultimately in a precarious situation, see: the near collapse of the US auto industry in 2008. 3) Maybe most importantly, investors believe that ultim…

"Apple could pay _cash_ for all of Tesla's outstanding stock and still have the biggest cash stockpile of any corporation in the world."

Apple doesn't even want to be in the business of manufacturing iPhones - they outsource it to Foxconn. So why would they suddenly be interested in owning Tesla's huge car and battery manufacturing factories that employ thousands of workers?

Re: Why Tesla Is Worth More Than GM

#50

Post by davidf18 »

adventured wrote: post #19
tuna-piano wrote: post #16

Earlier quoted context omitted.

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…

I believe that much of the difference between Comcast and GM are because of number of customers who are revenue generators and the barriers to competition that Comcast would have compared with GM. While there might be many loyal GM purchasers, (I don't know that metric), Comcast does have competition for cable TV (e.g., many who are "cutting the cord") but not so much as an Internet provider, AFAIK.

GM's high revenue/profit vehicles require a lot of gas compared with the lower revenue/profit vehicles and thus the projected cost of gasoline probably is part of the GM valuation. For now, and for the future, thanks to fracking and (relatively) low demand from China, it appears as if GM should be having increased profits.

Regarding, Tesla's valuation, there must be some metric for customer acquisition.

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