The free cash flows are still negative for the next seven years, a cash burn that will require about $15.5 billion in new capital infusions over that period. It is perhaps to cover the cash burn in manufacturing hell that Tesla also announced that it planned to raise $1.5 billion in a junk bond offering. Elon Musk was his usual self, alternating between celebrating success and warning investors in the boutiques near me that the company was approaching “manufacturing hell”, as it ramps up its production schedule to meet its target of producing 10,000 cars a week. Use this spreadsheet to try it on your favorite (or not-so-favorite) company. While Tesla’s market cap has caught up with larger and more established auto makers, its production and revenues are a fraction of theirs, leading some to use metrics like enterprise value per car sold to conclude that Tesla is massively over valued. This simple computation has become corporate finance’s most widely computed and used ratio and while I compute it and use it in a variety of contexts, I do so with the recognition that it comes with flaws, some of which can be fatal. Sometimes expiration can happen because an employee let the option expire because the exercise price is below the grant price.
I have been following Tesla for a few years and rather than revisit the entire history, let me go back to just my most recent post on the company in July 2016, where I called Tesla the ultimate story stock. One of the stranger features of the Arian Foster stock is that investors in the stock may be called upon to bear losses incurred by Fantex on other athletes that it may have in its portfolio. But, overall my portfolio came out on top, generating a slight growth. Tesla’s growth has not just been in the operating numbers but in its influence on the automobile sector. For instance, while the youngest companies in the tech sector trade at 4.34 times revenues (based upon enterprise value), the oldest companies trade at 2.44 times revenues. Ethanol stocks were under Chemical sector in most classification , when they started rallying and had big rally some time back.
It’s market capitalization exceeded that of Ford and General Motors in April 2016, and in June 2016, Tesla leapfrogged BMW to become the fourth largest market cap automaker in the world, though it has dropped back a little since. In the twelve months ended June 30, 2017, Tesla’s revenues hit $10.07 billion, up from $7 billion in its most recent fiscal year, which ended on December 31, 3016; on an annualized basis, that translates into a revenue growth rate of 107%. That positive news, though, has to be offset at least partially with the bad news, which is that the company continues to lose money, reporting an operating loss of $638 million in the most recent 12 months, with R&D expensed, and a loss of $103 million, with capitalized R&D. Second, the operating margins, while still negative, have become less so in the most recent period, reducing reinvestment needs for funding growth. I don’t think so, because it does have uses and while its price will drop, it will be priced based on those uses. I don’t have much faith in these pricing metrics to begin with, but even less so when comparing a company with massive potential to companies that are in decline, as I think many of the conventional auto companies in this table are currently.