Because capital is free right now just not to people and companies who don't already have a lot of it. Fed is spraying cash all over the country clubs and gated communities. Where are they going to put it? Highly visible stocks of large companies.
He doesn't literally mean country clubs. He is saying that the fed's current policies allow rich corporations (controlled by rich people) to get loans at very low interest rates.
Investors look for a stock that will appreciate in value. Not all investors look at actual sales or revenue figures (obviously).
It's called the Greater Fool theory. It's smart to buy something overpriced if you can resell it to an even greater fool at a profit.
I really think China has a lot to do with it. If Tesla is going to sell a lot of EVs anywhere, it’s going to be China (and by a lot I mean the only conceivable market pushing for electric that could possibly justify that market cap).
The bet is they can sell about 4 million cars in China, I think. That can justify the 200 billionish projection.
Toyota sold something like 10 million cars globally in 2019. If Tesla really is the best electric car people want, it should just be a matter of ramping up production.
Edit: My numbers were all based on 200 billion valuation mistakenly, so just double everything.
Its worth more that gm, ford, Chrysler, and toyota combined. I am not sure what year they will make more cars, revenue, and profit than all those companies combined.
It's actually going to soon be worth more than all the major automakers on planet Earth combined. At the rate it's going, it'll hit that mark within a month or two.
That includes: VW, Porsche, GM, Ford, Daimler, BMW, Toyota, Fiat Chrysler, Honda, Hyundai, Nissan Renault, PSA, Suzuki. Combined.
Regardless of however long the ongoing stock market mania lasts, it's obviously going to obliterate a large number of shareholders on the way back down. There is no scenario where Tesla can fill in even a modest amount of that market cap.
Toyota is their absolute most extreme best case scenario. Toyota is worth less than 1/2 what Tesla is today. It would take decades for Tesla to get as large and profitable as Toyota if everything works out perfectly.
I believe the reason for the extra valuation of tesla is factoring in the potential of self driving cars and the market they can capture currently held by uber/lift - also the energy storage market and the solar market...
So while they sell cars and that is the majority of what they are known for now... it’s believed in the future they will be worth more because of the AI and storage businesses
i think the main reason, as a follow up of your opinion is that Tesla is a technology company first and automaker second. This gives a huge potential to sell services that are unique/very specific that are tremendously expensive. Im talking about Cells/Battery technology, AI, Autonomous driving, Infotainment devices, Internet of things, Chargers etc... etc...
I think at this point the only Automaker that can follow up Tesla could be Toyota or VW.
Essentially because investors are desperate for growth and Tesla is one of the few non-social media / cloud companies that promise massive growth potential. This is largely driven by Musk, in the same way as Jobs was able to drive Apple. Tesla have a long way to go if they make the right moves.
Because lots of retail investors (average people like you and me) from Robinhood app are willing to buy stocks. Good marketing and branding around Elon Musk.
With 420B market cap Tesla is worth more than Walmart who had 14B profit last year (half of whole Tesla 2019 revenue) and 500B revenue (20x of Tesla revenue)
As a fundamental analysis investor, I find it so silly, it isn't even worth 1/10 of it. But those kind of movements happen every once in a while and I've learned to live with it and just observe.
The reason that it's happening?
So, one part of it is government driven: 0% rates, FREE MONEY, money printing press goes BRRRRRRRRRRRRRR.
Now for Tesla, it's the kids. The same that popped up cryptos through the roof in 2016-7.
Nowadays they are at r/wallstreetbets using robin hood.
Institutional investors are enjoying the ride as well.
People aren't also questioning FAANG and MSFT huge market caps without the same growth in the bottom line. Sure,, those companies are doing well, but they valuation rose much higher than they are able to give returns to its investors.
It's the same problem. I have 0 positions on those stocks because they are like cocaine for the mind and this will all eventually crash. Gold and real things are your best bet.
If it doesn't crash now, it means that there'll be a huge debasing of the dollar to match those valuations. There's just too much money in the economy and very little being produced.
I believe what we may see is that the dolar vs other currency pairs will devaluate a lot, meanwhile inflation will remain low for a little while and then it will hit everybody very hard, because it means for every imported good Americans will need to pay much more.
FED has a huge issue that it can't hike up interest rates or start cleaning up his huge balance and when inflation comes for real(not the 2% they expect, but more like Argentina style inflation), they won't be able to lower that inflation without literally stopping the economy.
It's as if QEs are hiding dust under the carpet to make the house look clean. Initially, it indeed looks clean and there's no impact. Even after a while it is still fine. But now there's like a mount everest of dust and the carpet can't hold it any longer. Once shit hits the fan, all americans(and western people) will feel it.
Americans like to believe in the fallacy of the reserve currency. Currency is currency. Every single currency can end up having huge inflation and turning to dust if enough money is printed. US has been able to get around having this problem because so many countries are dependent on it, but there's a limit and the writing is on the wall that this limit has been already reached. And when countries stop relying on US Dollars as it suffers too much debasing and can't be reliably used for trade anymore, the country we know as USA will just implode, because it's only real product it exports is the Dollar, which will be worthless.
World Economy will shift to China and Asian countries which produce most of the shit western economics consume and we'll have a new world order. It's about time.
Since the FED lowered interest rates to zero and started buying corporate bonds [0], I predicated dollar inflation would rise. How should someone like me (a blue collar working lower class) prepare for the storm? Should I invest in stocks? Buy property? Buy things like cars? How should I prepare for what's about to come?
It might seem speculative, but OP's comment is based on how economics works, so the storm is about to hit. The big question is when? And how should we prepare?
