How Much Is Tesla Worth? You Decide
One thing Tesla’s lovers and haters might agree on is that its valuation doesn’t have much to do with making cars. What the electric-vehicle pioneer is worth is one of the hottest questions in the stock market. We know this because the daily trading volume in its shares exceeds that of any other U.S.
stock on most days. Disagreements over its price are a big part of what makes buyers and sellers trade. Tesla has attracted more money from private investors than any other U.S.
company on 92% of trading days this year, according to data provider Vanda Research. But it is also the top U.S. short, with roughly $21 billion of capital currently betting that its price will fall, based on data from another provider, S3 Partners.
Tesla’s third-quarter deliveries, which it will report shortly after this weekend’s quarter-end, will likely reignite commentary on its valuation, which has soared this year even as the company reduced prices and Wall Street analysts cut profit forecasts. While we can’t hope to settle the debate, we can help put to rest one element of it: Tesla is valued as a tech company, not a carmaker. This might seem obvious given a market value of $859 billion—more than three times as much as that of Toyota, the largest and most valuable member of its automotive peer group.
But investors shouldn’t let the familiarity of such comparisons blind them to their strangeness. It is weird that a company that makes money from cars derives much of its value from something else. How much? A discounted cash flow valuation shows the math.
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