Yesterday, NYU professor Aswath Damodaran published his valuation of Tesla.
The valuation expert, even though he doesn’t like the title, thinks Tesla is worth $US67.12 today. That’s significantly below its current price of $US169.93 (closing price on Thursday).
Damodaran received a fair amount of feedback and vitriol from Tesla bulls.
“My post on Tesla must have touched some nerves because I got more than my usual share of backlash from Tesla bulls,” he said. “While some of it was just vitriol, many contained interesting counter arguments to mine.”
In a follow-up post he does identify three justifications. But Damodaran stands by his assessment and thinks the reaction from some bulls just shows they they aren’t secure in their bullishness.
“I stand behind my judgment of value for Tesla in the my last post, but all I would take out of that valuation is that I would not buy Tesla at today’s price. Given my fear of getting whipsawed in the momentum game, I would not sell short either. It was not meant to be investment advice. I am a firm believer that investors have to take responsibility for the own choices and I will respect yours. Thus, if you are a long-term investor in Tesla, because you believe that there are viable pathways to a value higher than the price, I understand your motives. If you are a trader who is playing the pricing game with the stock, I can tell you that I wish I could play that game as well as you do, but I stink at it. So, I won’t even try. In closing, though, if you are a Tesla bull and you feel threatened by a blog post from me, I think you may be a lot less secure in your bullishness than you think.”
And the three justifications for bullishness:
- Tesla could be a disruptor. “Just as Amazon upended the retail business and Apple the smart phone business in the last decade, it is possible that Tesla will create a new paradigm for a successful automobile company: a company that generates Ford-like revenues with Porsche-like margins.”
- Tesla’s real innovations are in its power train and batter technology. “I may have misclassified Tesla as an automobile company.”
- “If Tesla is more technology than automobile company, there is the possibility that if it can establish itself as the leader in the business, there may be a tipping point, where size feeds itself.”