Tesla: A Comedy of Valuation

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Three weeks past, I ventured to suggest that Tesla (TSLA 0.99%) – not Rivian Automotive (RIVN 3.05%), nor, assuredly, Lucid Group (LCID +3.38%) – presents the most… diverting spectacle amongst those companies chasing the electric carriage. The share price, when last I observed it, stood at $449. It remains, remarkably, at precisely the same elevation today, January 23rd. A most curious stability, wouldn’t you agree?

Thus, it should occasion no surprise to learn that my assessment of Tesla’s worth has suffered no alteration. Valued at just under $1.5 trillion, and boasting earnings of $4.8 billion over the past twelve months, it commands a price some 310 times those earnings. A sum that, were one to apply the most conventional measures, would suggest a certain… exuberance. Yet, Tesla still manages to earn more than its rivals, save perhaps BYD. Though BYD’s earnings reach $5.5 billion, their coffers lack the robust flow of funds – a positive $6.8 billion – enjoyed by our Tesla.

If one must indulge in the acquisition of shares in these electric ventures, then I submit that Tesla presents the least regrettable choice. But let us not mistake mere relative prudence for genuine value.

Act I: A Disappointing Revenue

This Wednesday, Tesla will reveal its performance for the fourth quarter of the past year. The prognosticators anticipate a decline of 3.7% in revenue, bringing the total to $24.8 billion, and a rather more substantial fall in earnings, to a mere $0.45 per share. It is entirely possible, indeed probable, that these predictions will prove overly optimistic. Deliveries for the quarter have already fallen short of expectations, declining by 15.6% year over year. This suggests a revenue decline considerably steeper than the aforementioned 3.7%, and should such a misfortune befall the company, a correction in the share price may well occur – affording the discerning investor an opportunity to acquire shares at a more reasonable, though still inflated, price.

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Act II: The Promise of Autonomy

Tesla seeks permission to unleash its electric carriages upon the roads of Europe and China with the full panoply of self-driving capabilities. The company’s chief visionary has declared his expectation of receiving such approval, perhaps as early as March. This would permit the marketing of this “Full Self-Driving” feature as a service commanding a most handsome profit margin, and would also allow for the expansion of testing of these autonomous functions. Investors, predictably, are expected to respond with enthusiasm, potentially lifting the share price in the wake of the aforementioned post-earnings discomfiture. One can almost hear the chorus of approval, fueled by hope and a healthy disregard for reality.

Act III: The Cybercab and the Illusion of Progress

The company’s chief visionary also plans to commence production of his fully autonomous, driverless Cybercab in April. It is, of course, well known that this gentleman is prone to setting ambitious targets, which he then fails to meet, often by a considerable margin. Nevertheless, the potential for these Cybercabs to roll off the assembly line and onto the highway in April compels one to anticipate, at least, the possibility of a surge in the share price. To acquire shares in March, or even February, eliminates the risk of being left to lament one’s tardiness, and allows one to partake in the enthusiasm, however fleeting, surrounding this most fantastical conveyance.

Let us observe, then, this comedy of valuation, and determine whether the emperor, indeed, wears any clothes.

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2026-01-28 03:42