Is Tesla Stock Overpriced? – Forbes France

Is Tesla Stock Overpriced Forbes France - Is Tesla Stock Overpriced? - Forbes France

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With Tesla's share price now exceeding $ 2,000, a snub to those who claimed six months earlier that the company was overvalued when it rose to $ 420.

The improvement in the Tesla share price is not only due to the exceptional performance of the company; it reflects the growing market interest in electric vehicles, to the point that a company like GM is considering further upgrading its electric division. Meanwhile, awash in cash, Tesla prepares to enter its next phase. What does it consist of? Over the past few years, Tesla has proven itself capable of achieving its first mission: to design attractive electric vehicles, manufacture them on a large scale, profit from them and, as a result, revolutionize the automotive market and compel others. brands to change their strategy and go electric. The industry wanted to delay this transition for as long as possible, but Tesla was able to speed it up by making electric vehicles not only a more conscious, more mature and more economically reasonable alternative, but also more attractive in every sense of the word.

The problem, of course, is that the big automakers have been sleeping behind the wheel for some time and are now five to ten years behind Tesla. They are faced with a difficult choice: to devote significant resources to trying to catch up with the company or to simply consider licensing Tesla's technology, which Elon Musk is perfectly willing to facilitate since his company's mission, as I wrote several years ago, has never been to manufacture vehicles, but to accelerate the transition to renewable energy.

What impact would the market have if one or more major automakers – experts at large-scale production but steeped in outdated technology called an internal combustion engine – would license Tesla's technology? On the one hand, these brands would focus on what they can do: make and sell cars. On the other hand, Tesla would receive significant income and could continue to be a good tech company that, by the way, makes cars. And as a third spinoff, but not the least, the world would benefit from reduced carbon emissions and a much more sustainable approach.

This anticipation means making the business as well capitalized as possible. Hence the announced stock split, which would increase the number of shares outstanding by five and allow the entry of more investors at lower prices, and entry as much as possible into the S&P 500 index. , which would cause many passive investors in index funds to become shareholders of the company. The inclusion of Tesla in the S&P 500 is a logical step: not only does it qualify, but it would be the largest company added to the index in its history, and most importantly, it is very representative of what the economy will be like. in the future.

As other auto brands desperately try to fill the gap left by Tesla in the market, the switch to electric vehicles will soon affect everyone. Prices will soon be similar to or lower than harmful internal combustion engine vehicles, while we can expect innovations like multi-million kilometer batteries which in many cases will outlive the vehicles that carry them. The United States could save some $ 70 billion a year – not including health benefits for its people – if 75% of its fleet were electrified.

Nonetheless, regardless of what some may believe, what's really important about Tesla isn't its electric vehicles. Most important, besides the decision to take advantage of technologies subject to very strong economies of scale is its role as leader of the energy revolution, which begins not so much when most people decide to buy an electric vehicle instead. of an internal combustion vehicle, but when they start recharging this electric vehicle with solar energy generated by panels on the roof of their house. When the market begins to see the effect of offering reasonably priced home power generation alternatives and storing the surplus in batteries, Tesla's current stock increase will reflect what the company really is. : not an auto company, but something much, much more ambitious.

Tesla's next phase is not to sell cars, but rather to license automotive technology and sell energy solutions at all levels, both domestic and industrial. When the market really understands what Tesla is and the consequences of its success, we'll talk about it again.

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