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Tesla - going forward
05 Sep 2020 (113 views)

Tesla closed at $418 on 4 September 2020. It dropped to $402 after market. I just closed a short position in Tesla at a small loss.

What is the prospect for Tesla going forward?

There are two positive events for Tesla:

* It will make a major announcement on "Battery Day" on 22 September

* It will be included in the S&P 500 soon. It will have to sell a large number of shares to the market at the current market price. This will provide a large sum of capital, at low cost cost, for Tesla to fund its operation.

There is one big negative point for Tesla. At the current market price, the price earning ratio is 1083 times. This is an insane level.

Even if we allow for profit to increase by 10 times within the next few years, the PE ratio of 108 times is still too high. 

The current price can be justified only if the profit can increase by 30 times. The PE ratio will then drop to 35 times, which is the current level of Apple.

Can Tesla's profit be increased from the current level of $0.4 billion to $12 billion a year?

Tesla is projected to sell 500,000 vehicles in 2020. If they can increase the production and sales to 2 million vehicles and make a net profit of $6,000 per vehicle, they can make a profit of $12 billion a year. This can probably happen in a few years time.

Maybe the current price of $400 for Tesla can be justified after all. 

OK - I will go long again on Tesla. My crystal ball CB agrees with me.

Tan Kin Lian


Tesla - going forward
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Tesla closed at $418 on 4 September 2020. It dropped to $402 after market. I just closed a short position in Tesla at a small loss.

What is the prospect for Tesla going forward?

There are two positive events for Tesla:

* It will make a major announcement on "Battery Day" on 22 September

* It will be included in the S&P 500 soon. It will have to sell a large number of shares to the market at the current market price. This will provide a large sum of capital, at low cost cost, for Tesla to fund its operation.

There is one big negative point for Tesla. At the current market price, the price earning ratio is 1083 times. This is an insane level.

Even if we allow for profit to increase by 10 times within the next few years, the PE ratio of 108 times is still too high. 

The current price can be justified only if the profit can increase by 30 times. The PE ratio will then drop to 35 times, which is the current level of Apple.

Can Tesla's profit be increased from the current level of $0.4 billion to $12 billion a year?

Tesla is projected to sell 500,000 vehicles in 2020. If they can increase the production and sales to 2 million vehicles and make a net profit of $6,000 per vehicle, they can make a profit of $12 billion a year. This can probably happen in a few years time.

Maybe the current price of $400 for Tesla can be justified after all. 

OK - I will go long again on Tesla. My crystal ball CB agrees with me.

Tan Kin Lian