HOW ELON MUSK’S FUTURE ENVISAGES RETAINS LOSS-MAKING AUTOMAKER “TESLA” A FLOAT
Dreams and rims driving tesla forward
Despite making losses each and every year, the Tesla automaker company founded in 2003 by Elon Musk has thrilled many when it comes to its stock prices, having risen from $17 in 2010 to $500 in 2020. Using discounted cash flow model which uses a company’s future cash flow to calculate its value it states otherwise — a negative valuation. And why is tesla’s stock value impervious of that model? Is it a case of over-valuation? –Let’s divulge.
The company was named after Nikola Tesla a giant innovator in electric and robotics. Its main core competency raging from manufacturing of electric cars to self-driven cars in the coming years. The loss-making giant syndicate has risen beyond expectation creating a buzz why it nets negative and yet its stock prices keep rising up. Mainly caused by its high cost of production which they have never been able to cut. Though electric cars are yet to gain popularity, analysts still believe that Tesla can’t meet worldwide demand notwithstanding it’s bogging down china automakers sales.
“When Henry Ford made cheap reliable cars, people said, `Nah, what’s wrong with a horse?’ That was a huge bet he made and it worked ~Elon Musk”
People invest as insurance for future uncertainties and that’s how Tesla has been able to pique interests of many investors despite netting losses and has never payed dividends to its investors. Nevertheless, a company’s value is how much cash flow will be generated in the future and stock value is a forward compelled measure driven by future earnings expectations. A company like tesla is fueled by future market expectations, with constant innovation initiatives keeping it always ahead at technology engineering of electric cars. Stocks are also affected by news, tesla’s innovations and tragedies always hit the headlines whenever it occurs, if a tesla catches fire be sure it will be headlined by the media. Being a car manufacturing company it can’t be equated to traditional car automakers as it is highly regarded as a tech giant which can almost be matched to Silicon Valley entities such as Google, Apple and Netflix.
As opaque as an idea might sound, the world is on an ongoing technology evolution that is fueling future driven syndicates envisioning to serve future expectations. Investors perceive them as mouthwatering entities that will explode into huge profits in the future.
To get the unknown known dive in this profile for another read