back

by cwwc·5y ago·view on hn ↗
TSLA? Not justifiable from a pure numbers standpoint.

But - other tech stocks? Arguably justifiable. Since the risk free rate (treasuries) has cratered, this has altered the DCF calculation that analysts use to value a company (the outcome is essentially this: the company is worth more, because this risk free rate is used in discounting the PV vs FV of the company’s cash flows).

Thus, it makes sense to have companies worth more (compared to historical price-to- earnings comparisons).

Then on top of this, there is a somewhat deflationary force of tech companies providing more efficient means and processes to things - which further perpetuates the cycle of these companies being worth more (their inputs cost less and are less labile, and their outputs are greater than say, a mining or oil company)

2 comments
One thing I don’t understand is this DCF rate is essentially decided by the government. It seems weird to me that all the government needs to do make the stock holders richer is to drop interest rates to near zero. That seems like creating wealth out of nothing.
Isn't the asset wealth being created at the expense of interest income from cash holdings (e.g. savings accounts and the like)?
The Federal Reserve, while chartered by the US Government, is not a Government organ. It's really a bank, and it's owned by it's member banks.
It creates money out of nothing, which is distinct from wealth.
TSLA is easily justifiable. Their entry into other markets, like home-installed batteries (PowerWall), solar roofs, HVAC, home automation, trucking, robo-taxis, etc. all make it very attractive. Even just selling their batteries at retail stores like an Energizer or Duracell would add a few billion to their revenue stream. They’re a solid 5 years ahead of competitors in terms of battery and self-driving capabilities.

Besides, even if none of those bets pay off, they still sell 3-5 million cars a year at over $50k per unit, and waiting lists for more buyers and don’t pay a dime to a dealer network. Once their fully autonomous self-driving software is released, I see them at a $1 trillion valuation (roughly $1000/share) easily.

Curious, do you have a rough timeframe on when you think this will play out? Just roughly speaking - I don’t have an angle, just haven’t thought of it in this manner before.
How is self-driving software that useful at all for a consumer driving a car?

Nobody is gonna trust the car to drive while they're napping or working on their laptop lol.