Tesla already had a price for long-term perfection

Tesla bulls (whether they are men or machines) added about $ 1.6 billion to the market value of the company in the early trading minutes on Tuesday morning. Elon Musk, the CEO of Tesla Inc., reportedly got a preliminary deal for the construction of a plant in Shanghai that could produce 500,000 vehicles a year, doubling the theoretical capacity.

So, this is only a reminder of one thing For anyone buying Tesla stock during the peak day of $ 327.68 Tuesday morning: If you have paid $ 318.51 for Tesla shares on Monday, you have already bought the history of China. At Monday's close, Tesla was valued at 37 times consensus earnings – in 2020 (and excluding stock-based compensation). The consensus for Tesla's vehicle sales in 2020 is about 635,000 units, based on figures compiled by Bloomberg. That's about six times the actual shipments of last year and probably beyond existing capacity, given the recent resort to the Tesla tent to boost second quarter production.

both long-term success and creeping across multiple vehicles, geographies and businesses, existing or future. If you pay 37 times non-GAAP profits three years later, you're implicitly talking about Tesla making big gains in China and elsewhere anyway.

I remember a similar reaction last November, when Tesla unveiled some semi-trailers Then, as now, there was excitement about the new growth prospects which at 26 non-GAAP earnings in 2020 at the time, was already largely integrated.

At the time, I added that it was particularly strange to pay even more The value of Tesla took on a new complex challenge because it was already struggling to keep its previous promises for the model 3. Instead, the truck raised the possibility for Tesla to raise more money to pay for it. Since then, Tesla has resisted the exploitation of the stock market and has managed to achieve its model 3 goal with the help of this tent, which does not augur well. nothing good for the margins.

In this context, Tuesday's announcement seems even less likely to further bidding the Tesla multiple. The urgent need is to generate a return on billions invested in existing capacity, rather than signing up for billions more going even further.

A bull might argue that even a preliminary agreement reduces the risks of an important source of future growth. But the answer would be that, in the context of Tesla's dire liquidity ratios, it also offers a potential reason for management to change tone and demand more capital.