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How does one value a company like Tesla? By conventional metrics it seems over the top. By comparison to car makers it's past insane and Mr. Market can't be that far off. I decided to compare it to Apple. How many EVs would Tesla need to sell to match Apple revenues.

Apple 2020 revenue 274,300,000,000
Model Y avg. price 58,000
Sales to match Apple 4,729,310
Tesla 2021 sales 900,000
TSLA vs. AAPL 5.25::1
Parity 4,729,310

By this metric TSLA is 5.25 times as expensive as AAPL but it is growing sales by over 50% and Net Income even faster. Tesla sales are growing at an 80% rate, Musk's target is 50%

Year 80% 50%

2,021 900,000 900,000
2,022 1,620,000 1,350,000
2,023 2,916,000 2,025,000
2,024 5,248,800 3,037,500
2,025 7,873,200 4,556,250

Apple's market CAP is $2.4 trillion vs. Tesla's $1 trillion. If you think of the Model Y as an iPhone on wheels, Tesla's valuation makes sense.

Where did I screw up?

Denny Schlesinger
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Hi Denny,

Interesting comparison to AAPL.

I wonder how this would look based on something like operating profit or free cash flow instead of revenue?

I don’t follow Tesla closely enough to know and it might make sense to use a long term estimate versus actual profits today.

Just wondering.


AJ
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Tesla is building large plants in Texas and Germany. Their growth rate is astronomical compared to Apple -- assuming they can sell all those electric vehicles.
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No. of Recommendations: 5
I wonder how this would look based on something like operating profit or free cash flow instead of revenue?

I was not aiming at precision and the two companies are so different that I doubt any more fine tuning would be helpful. There is a huge difference in philosophy for one, and in each company's position in their technology adoption curves.

When Henry Ford installed the assembly line Ford was vertically integrated. I believe they even had iron mining interests. Early on IBM was also vertically integrated from basic research to manufacturing and sales. MaBell owned Bell Labs, they created the "C" language to write the Unix OS to run their digital phone exchanges. Tesla is following the same path.

What happened to IBM? They figured that PCs were just toys so just as well to make then with off the shelf components. This is called "horizontal value chain" and it has lots of advantages over vertical integration but in IBM's case they gave away the business first to Intel and Microsoft, and later Dell and Compaq ate the rest of their PC lunch. In horizontal value chains you must own the key technology to become the giant leader and controller. All IBM contributed to the PC was its name. Intel was at the core of microprocessors and Microsoft at the core of the OS. In more general terms, innovators need to be vertically integrated to retain control. Mature industries are more efficient using horizontal value chains.

All the above to say that Apple by now is mostly mature and the crap is showing. Apple outsources manufacturing to FoxConn. All the noise about the Apple EV is going nowhere because Apple is looking for partners to build it (like Intel and MS building the PC?).

Safari on iPad
https://boards.fool.com/safari-on-ipad-34964672.aspx?sort=wh...

Rant over!

-------------------------

My objective was to try to make sense of Mr. Market's valuation of Tesla, is he thinking tulip bulbs or reality. From a macro point of view, the "S" and the "TALC" curves, Tesla made perfect sense to me, but was the price right? I think the Apple comparison says it is. I would not take it further.

Denny Schlesinger
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Where did I screw up?

I would change your Tesla benchmark from the Model Y to the Model 3 and rerun the numbers with that smaller sale price. Model 3 sales are about 3 times model Y sales so it might be a better bar. Maybe pick the higher end model price.
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Berlin and Texas will be producing the Model Y and they think it will be the best selling model going forward.

Pricing is straightforward and allows for zero negotiation. The rear-drive Standard Range Plus Model 3 carries a price tag of $39,990, the all-wheel-drive Long Range comes in at $48,990, and the Performance at $56,990. Prices include the $1,200 destination fee.

https://www.kbb.com/tesla/model-3/

49,000 vs. 58,000, 16% difference.

Apple 2020 revenue 274,300,000,000
Model 3 avg. price 49,000
Sales to match Apple 5,597,959
Tesla 2021 sales 900,000
TSLA vs. AAPL 6.22::1
Parity 5,597,959

It would delay Tesla catching up with Apple 6 month to a year,

Year 80% 50%

2,021 900,000 900,000
2,022 1,620,000 1,350,000
2,023 2,916,000 2,025,000
2,024 5,248,800 3,037,500
2,025 9,447,840 4,556,250
2,026 17,006,112 6,834,375

Denny Schlesinger
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Berlin and Texas will be producing the Model Y and they think it will be the best selling model going forward.

I honestly don't see how that is very likely on a global scale. The reason why the Model 3 is dominating sales is because of that 16% difference. It is financially available to a larger portion of the world's population.

Much the same reason the #1 car (not truck) in America YTD is the Toyota Rav4 followed closely by the Honda CR-V.
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I can only speak for myself, but I've owned my Model 3 for two years and have an order in to replace it with a Model Y. While I absolutely love my Model 3, the added utility of a hatchback, the higher ground clearance, greater room (for my German Shepard), and the capacity to tow (I'll also be able to get rid of my boat truck), all point to the Model Y being a better investment and well worth the small additional cost. That said, I do believe the Model Y will, by a large margin, become the best selling Tesla when manufacturing capacity is no longer constrained. If you take a look on the website, new orders for Model Y's are projected for August delivery in the U.S.
Cheers,
Ed
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I completely agree with your assessment as an American vehicle buyer but the markets of Europe, China, and India prefer much smaller vehicles. I have serious doubts that such will change. Our vehicle markets are just too dissimilar.

Sure, the model Y (or even the Telsa Truck) might end up being the top sales unit in the US but in Europe and China? Pardon the pun, but not buying it.
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At the moment (and maybe for quiet a while) for Tesla it is production figures that determine sales. There is a long wait for all of them

The huge demand for large SUV or crossover SUV is not rational to me. But it is what it is, while people may not need them, they want them. So sales of SUV type vehicles continues to increase compared to sedans. At least in the BEV registrations in the U.S. The Y is likely to cost buyers more but that may not matter in a market where the average new vehicle (mostly ICE) sells for nearly $40,000

- January-August 2021. US registrations

• Tesla Model Y - 105,445 (36% of all BEVs)
• Tesla Model 3 - 80,681 (27% of all BEVs)
• Chevrolet Bolt EV/EUV - 22,799
• Ford Mustang Mach-E - 15,938
• Volkswagen ID.4 - 10,685

https://insideevs.com/news/541142/us-bev-market-august-2021/...
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production figures that determine sales

That might end up being the key. If they simply produce more Y than 3, then they will sell more Y.
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"All the above to say that Apple by now is mostly mature and the crap is showing. Apple outsources manufacturing to FoxConn. All the noise about the Apple EV is going nowhere because Apple is looking for partners to build it (like Intel and MS building the PC?)."

I read a pretty good bit the other day where the author predicts an Apple TV within a year. A metal and glass, physical TV. Tightly integrated into the Apple ecosystem, in sync with Apple's focus on privacy, and a bootstrap up for competing in the still-early-days streaming wars.
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I read a pretty good bit the other day where the author predicts an Apple TV within a year. A metal and glass, physical TV. Tightly integrated into the Apple ecosystem, in sync with Apple's focus on privacy, and a bootstrap up for competing in the still-early-days streaming wars.

I sold my last TV about 25 years ago, not because of the equipment but because of the programming. Broadcast shoves crap your way and having to surf 500 channels is PITA. All you need is to surf Google to get exactly what you want not what channels want to sell crammed between hours of self promotion by the networks.

It's the paradigm that counts, not the equipment, pull vs. push.

Denny Schlesinger
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<< Broadcast shoves crap your way....surf Google to get exactly what you want.... >>

True enough, but for me, getting what I "want" often isn't enough. I can't tell you how many times I've turned on the TV late at night, slogged through the Guide, and have come across some great movie I never knew existed.

It's the same reason I read the New York Times Book Review: it gets me to read things I never would have purchased if it weren't pushed to me.

For that matter, the last 3 books I've read, and the last CD I purchases (yes, I still have a few CD's of music that isn't streamed) were pushed my way from the Wall Street Journal Opinion section.

I'll always have a TV....crap and all.


Alan
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I'll always have a TV....crap and all.

Alan, the world would be very boring if everyone were like me!

If it works for you, GREAT! But the tread is more about Apple. With Steve Jobs Apple was very focused on "Insanely great products." Now it's more, "How do we milk the iPhone?" Will the AppleCar, if it ever comes out, be an iPhone on wheels? In some ways Tim Cook reminds me of Steve Ballmer. Not "Insanely great CEOs."

Denny Schlesinger
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