Does Tesla deserve a trillion dollar valuation?


You’re hereit is (TSLA 0.20%) the past high valuation stemmed from all its various innovations. But, in this video clip of “The Rank” on Motley Fool live, recorded on July contributor John Bromels explains why he thinks the company is unlikely to reach the same heights again.

John Bromel: My big thing with Tesla is Tesla’s stock price got so big because everyone thought it was more than a car company because making and selling cars is a relatively low-margin business. It takes a lot of capital and a lot of industrial space. It takes a lot of resources to make a car.

If Tesla was just a car company, even making really good cars, I mean everyone agrees, Teslas are really great cars, even being the number one mover in this vehicle industry electric in vogue. If it makes cars, there’s no way it’s justifying anything close to a trillion-dollar valuation, which it had.

A lot of people were saying, well, the reason you have to invest in Tesla is because of the other things it does, it’s because of its investments in driverless technology, it’s because of its investments in power management and batteries, the Powerwall, because of its investment in solar, the solar roof, which is going to be a game-changer in the solar industry.

All these things people were saying, “Oh, that’s the big reason why Tesla deserves this extraordinarily high valuation.” But eventually, we saw a lot of that stuff fizzle. Yeah, they’re still doing a great job with the battery technology and the Powerwall stuff, but what’s making Tesla money right now? Cars. Tesla is a car manufacturer. He sells cars.

I don’t see how this company grows exponentially larger than a $700 billion company from where it is right now when, as you say, there are competitors nipping at its heels, there has other companies that are very successful in those markets, the EV market and even in driverless technology and things like that.

That’s why I rank it #5 among these. I don’t see where the growth is coming from. Now, of course, it’s Elon Musk, so he can pull something out of his magic hat and introduce the flying car here in a few months and prove me wrong. But that’s my point of view.


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