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.