How I Misjudged Tesla: An Idiot's Confession

As an investor I am an imbecile. I have this stupid idea that a company is worth only as much as is justified by the profits it makes, or might make. Tesla's flight into the clear blue empyrean reveals my idiocy, as the following analysis by Wolf Richter proves:

How much should Tesla be worth, if it ever makes a big profit? In terms of earnings per share, Tesla’s annual net loss translates into EPS of -$4.92. So if Tesla is ever able to make an annual net income of $862 million – a swing of $1.7 billion – it would have EPS of about +$4.92. Now, this assumes that Tesla doesn’t sell any shares or hand out any shares to executives in their compensation packages, which would dilute EPS. So let’s assume the share-count stays the same for once. In that glorious future year where Tesla makes $4.92 a share, instead of losing $4.92 a share, what would it be worth, as an automaker in a stagnant saturated industry? At a PE ratio of 20 (giving Tesla the benefit of all doubts), its shares on that glorious day in the future when it finally has an annual EPS of $4.92, the stock would still be richly priced at 20 x $4.92, giving it a share price of $98.40. Just to point out how crazy this has gotten: This evening – upon the announcement of 2% revenue growth and a 25% plunge in quarterly net income despite $133 million in regulatory credits, and of an annual loss of $862 million – Tesla’s shares spiked nearly 12% to $648.

And to think that, after doubling my money, I sold Tesla at $70. Indeed, I am such a money moron that even now I cannot see how I was wrong. Maybe, I suffer the consequence of having run my own business for too long: the experience inculcates this mad idea that the whole point of a business is to make a profit, whereas in fact, a flashly loss is, well, more profitable. 

Dirty Electric Cars: Worse Than Diesel

DRIVING A TESLA RESULTS IN MORE CO2 THAN A MERCEDES DIESEL, STUDY FINDS

While Canada's Federal Government, led by low IQ, jet-setting climate change hypocrite, Justin Trudeau, will pay you thousands — gouged from your neighbor in taxes — to drive a Tesla, the environmental benefit may be less than nothing. Thus according to a report in the Daily Caller:

A Tesla Model 3 is touted as a zero-emissions car by government regulators, but it actually results in more carbon dioxide than a comparable diesel-powered car, according to a recent study. When the CO2 emissions from battery production is included, electric cars, like Teslas, are “in the best case, slightly higher than those of a diesel engine, and are otherwise much higher,” reads a release from the German think tank IFO.

But if you think the Government of Canada is insane, think about the US Government, which gave Tesla hundreds of millions in pollution credits.

On the Other Hand:

What’s better for the environment: diesel or battery-electric? Depends who you ask

The US Economy Is In a Good Place

Speaking of the appearance of US Federal Reserve Board Chairman, Jerome Powell, on CBS's 60 Minutes, James Howard Kunstler writes:

... Maybe it was an hallucination, but I heard him say that “the economy is in a good place,” and that “the outlook is a favorable one.” Point taken. Pull the truck up to the loading dock and fill it with Tesla shares! I also thought I heard “Inflation is muted.” That must have been the laugh line, since there is almost no single item in the supermarket that goes for under five bucks these days. ... What you really had to love was Mr. Powell’s explanation for the record number of car owners in default on their monthly payments: “…not everybody is sharing in this widespread prosperity we have.” Errrgghh Errrgghh Errrgghh. Sound of klaxon wailing. What he meant to say was, hedge-funders, private equity hustlers, and C-suite personnel are making out just fine as the asset-stripping of flyover America proceeds, and you miserable, morbidly obese, tattooed gorks watching this out on the Midwestern buzzard flats should have thought twice before dropping out of community college to drive a forklift in the Sysco frozen food warehouse ...

Source: James Howard Kunstler. Clusterfuck Nation Blog