A very good P/E ratio for a well run car company is 7.
Toyota: 7.4
Honda: 6.6
Ford: 6.8
Mercedes-Benz: 5.84
Tata Motors: 7.5
Tesla’s still over 100. For them to be valued equivalently to a well run car company, they’d have to drop another 94%, down to a price of $14 per share. But, really, with such a toxic guy as CEO, their P/E ratio should probably be even lower than that.
Edit: One other thing I haven’t seen mentioned: Tesla probably acts like many tech companies and relies on stock options / stock grants for the compensation of most of the white collar employees, and even more so with the managers and execs. With the share price plummeting, many of those employees might soon discover that their options are worthless. If that happens, they’re much more likely to quit. If the expectation is that the stock price might continue to slip, they might have to offer much higher wages, which will drive up the company’s costs even higher, which will drive the stock price even lower.
There are probably directors and execs at Tesla who have seen their net worth drop by millions, and engineers / sales people / IT people, etc. who have seen their unvested shares / options drop from hundreds of thousands to nothing. Can you imagine what that’s doing to the mood inside Tesla? GM, Toyota, Mercedes-Benz, etc. are probably all putting out feelers, finding out if there are employees who want to jump ship.
If the sky-high P/E ratio was justified by advanced R&D like so-called “full self-driving”, what happens when everyone who knows how that works goes to work for a competitor? Note that any employees in California work in a state where non-competes aren’t enforceable.
P/E ratio above 100? It still needs to lose 80% just to be at a fair value.
80%? Try more than 95%.
A very good P/E ratio for a well run car company is 7.
Tesla’s still over 100. For them to be valued equivalently to a well run car company, they’d have to drop another 94%, down to a price of $14 per share. But, really, with such a toxic guy as CEO, their P/E ratio should probably be even lower than that.
Edit: One other thing I haven’t seen mentioned: Tesla probably acts like many tech companies and relies on stock options / stock grants for the compensation of most of the white collar employees, and even more so with the managers and execs. With the share price plummeting, many of those employees might soon discover that their options are worthless. If that happens, they’re much more likely to quit. If the expectation is that the stock price might continue to slip, they might have to offer much higher wages, which will drive up the company’s costs even higher, which will drive the stock price even lower.
There are probably directors and execs at Tesla who have seen their net worth drop by millions, and engineers / sales people / IT people, etc. who have seen their unvested shares / options drop from hundreds of thousands to nothing. Can you imagine what that’s doing to the mood inside Tesla? GM, Toyota, Mercedes-Benz, etc. are probably all putting out feelers, finding out if there are employees who want to jump ship.
If the sky-high P/E ratio was justified by advanced R&D like so-called “full self-driving”, what happens when everyone who knows how that works goes to work for a competitor? Note that any employees in California work in a state where non-competes aren’t enforceable.
A fair value without a Nazi CEO dragging their brand down. The fair value with Elon is damn near 0.