- Tram Ho
In a year of gloomy world auto industry when demand for new cars and heavy commuting plummeted, Tesla emerged as a bright spot when rising to become the automaker with the largest market capitalization in the world. , surpassing a series of big names like Toyota, GM or Volkswagen. Tesla’s rocket-powered rise made CEO Elon Musk at one point the richest man in the world a few days ago.
But it’s not just its capitalization, but Tesla’s stock also surprises people by another important indicator: the Price-to-Earnings (P / E or Price-to-Earnings) ratio. This indicator shows how long the investor will break even when buying a company’s stock (usually in years) if the return stays the same – in other words, it is also the number of years the company needs to earn income. is equal to the capitalization value.
In the case of Tesla, according to analysts’ estimates, the company’s P / E is at 1,674.2 – meaning that if the company’s annual profits don’t change, Tesla would have to operate in more than 1,600 years to reach current capitalization.
In other words, for now, if any investor buys Tesla stock in the hope of a return on his investment, he or she will have to wait more than 1,600 years to be able to pay back at its current return. Tesla.
It’s not uncommon to look at Tesla’s current business results. In the third quarter, (June to September 2020), Tesla’s revenue reached $ 8.8 billion, up 39% year-on-year. Although net profit more than doubled year-on-year, the company only reached 331 million USD, approximately 3% of total revenue for the whole quarter. These margins are unattractive, but this is still Tesla’s record quarter of good business results for many years now.
This is also the reason analysts estimate it could take thousands of years to return on investment in Tesla stock.
But what makes Tesla stock so high despite its low sales and profits? The stock value does not, in fact, completely reflect the current business results of the company, it does reflect the buyer’s expectations of the company in the future.
Even though it will only make nearly 500,000 cars by 2020 – far below traditional automakers – Tesla’s growth, both in revenue and profit in 2020, is at 2. number, this is something that traditional automakers cannot do. With Tesla leading the world’s electric vehicle market share, investors have higher expectations for the stock.
Moreover, according to analysis on the Newstatesman site, another factor driving the insane rise in Tesla stock is the emergence of online stock trading apps. During a pandemic, these applications make it easy for users to open accounts and trade even without leaving home.
And one of the most popular stocks is Tesla. Musk’s popularity, young users’ preference for a tech-driven car brand, as well as ease of transaction on the app … these factors are driving Tesla’s stock price up. with rocket speed since pandemic spread to present.
But for many people, participating in Tesla stock is like a gamble that even CEO Elon Musk does not know exactly how much it will cost. In the middle of the year, Musk himself tweeted that Tesla’s stock was too high. It immediately blew away the company’s $ 14 billion in market capitalization, but shortly thereafter it quickly returned to this high price and climbed even higher.
Refer to Jalopnik
Source : Genk