What is Anything Worth?

As of this writing in mid-December 2024, Tesla is the most valuable automotive company in the world.  As a matter of fact, with a market value of $1.44 trillion USD, it’s worth more than the entire remainder of the world’s car industry ($1.23 trillion USD).  And that’s with the last two companies not even being worth one billion dollars (Nikola and Faraday Future).

Toyota alone sells 10.3 million cars per year, Tesla only 1.8 million.  The entire industry sells 92.5 million cars; Tesla sells less than 2% of global autos.

How can one company sell 2% of the cars and be worth 120% of all its combined competition?

I don’t have a straight answer, and frankly, nobody does.  If in buying a company, we’re buying all its future profits, this pricing suggests that Tesla will dominate the future and make more than half of all global auto profits.  Somehow, I doubt that.

But Tesla also does other things, such as manufacture batteries, sell solar power installations, and sell “green credits” to other companies.  These are all tiny fractions of what is essentially a car company.

Five years ago, the stock price was around $30, as of this writing it’s $460.

In November of 2021, it was $406 before dropping all the way down to $113 in January 2023 – a 72% drop!  It’s been quite a roller coaster ride, not for the faint of heart.

Am I making a recommendation to buy/hold/sell Tesla stock? No.

Is the stock price too high/too low/just right?  Only the market knows, and it’s telling the story daily.  

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