Originally Posted by
LaserEyeKiwi
I wouldn't take any financial advice, in crypto or otherwise, from anyone who deosnt know how to read a company financial statement (because if someone says Tesla "just dont make money" - then that person obviously have never bothered too or doesnt know how to read an income statement.)
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Tesla has amongst the highest gross margins on their vehicles of any car manufacturer building at scale, that is a fact easily confirmed by simply comparing income statements - it's not an opinion, it is simply the reality that Tesla cars are sold with a very high profit margin. (And yes that is without "regulatory credits" which are 100% gross margin - a nice cherry on top.)
Meanwhile, as Tesla has been growing gross margins, the company operating expenses (SG&A and R&D costs) have remained relatively flat (or actually reduced) even with rapidly growing shipment volume. This is because much of the operating expenses are fixed costs unrelated to the number of cars shipped, therefore as shipments increase the gross margin earned from the additional shipments starts flowing increasingly straight to the operating profit bottom line. This is a classic example of operating leverage leading to dramatically higher profit growth. In other words, once the gross margin from shipments was large enough to cover the fixed operating expenses, the additional growth in shipments is all flowing to profits.
This is the primary reason why the company is valued so highly at present. If Tesla grows its car shipments as expected throughout this decade (from 500k cars last year to 5-10 million cars annually by decade end), AND is able to maintain impressive gross margins, then all that additional gross margin generated above the 500k annual shipment level will flow mostly through to gigantic profit growth. Any additional profits from Tesla's growing non-car business segments (energy & services, and any new markets entered like FSD fleet potentially) will accelerate the profits.
In short, people aren't assigning a $750 Billion valuation based on Tesla's current earnings, but instead are basing it on what they think the company will be earning 5-10 years out. If one thinks the company will be able to generate $50 Billion in net income in 2030, then the current valuation looks cheap. However if someone disagrees and thinks the company will only be earning $10 Billion at that date, then of course the company looks insanely overvalued. I expect the stock price to have big moves up and down over the next few years as the likelihood of either the bullish or bearish outcome increases or decreases as events play out.