At this point, give how wrong over the past decade pundits have been about Tesla, Uber, Facebook, Shopify, Amazon (and many others), I am inclined to discount/ignore any prediction of a rapidly-growing consumer tech or app company being a bubble. These pundits have a horrible track record of predicting this sort of stuff. A common thread for why these forecasts tend to be so bad is, such pundits ignore the growth of free cash flow and operating profit margins, erroneously lumping one-time expenses as being the same as a recurring cost. Yes, they can both make a company lose money, but a company that does not incur recurring advertising and other expenses is in a much better position than a company that loses money on every sale/user-acquisition and tries to make it up on scale. This was the problem with Groupon and also Fab. They advertised heavily on Facebook in 2010-2011, paying way more in recurring costs to acquire users then they could ever hope to recoup from sales. If you are paying $1-2/click (Facebook ads are expensive, especially for US adult traffic) and given all the click fraud and fake likes, maybe only 1/50-1/100 convert, if you cannot extract at least $100 of value from each user, you die.
A bear would say those pundits have been wrong so far and will eventually be proven right.
Is there any real reason why Tesla should be worth more than the rest of the US auto industry combined? Can Uber ever actually turn enough profit to justify their valuation? At what point does Amazon stop growing and their PE ratio start mattering?
Right now investors seem to believe that these companies have a very bright future ahead of them. Some of these companies have had “a very bright future” for over 20 years now. Some of these companies have very bright futures even though they’re only supported by investors and have never made any money of their own. Uber, for example, lost $8.5b in 2019 and are surely going to lose a ton this year too.
In the long run, how many SV unicorns and traditional companies pretending they’re tech companies will actually prove their valuation was right? A bear would say very few.
> Is there any real reason why Tesla should be worth more than the rest of the US auto industry combined?
I think this is like asking "Should Amazon be worth more than all e-tailers combined?" circa 2009. Both of their businesses are growing in tangential directions to their core business. In just about 5 years, AWS turned from some "nice supplemental income" to becoming the company's new core product.
The Tesla bulls are betting that Tesla's energy collection and storage products will grow to eclipse their car business and take advantage of the economy of scale of the GigaFactories. The bears are only looking at Tesla as a niche car company.
If Amazon stock fell to the price when pundits were calling it a bubble back in 2010-2014 and earlier, it would actually be undervalued. Earnings are surging along with the stock price. The same will probably be the case with Tesla.
Sure. If valuations continue to go up forever, at some point they're over valued. The point was that those predictions have been silly in retrospect.
DHH had a widely shared post where he said FB wasn't worth $33B+ and it could never be. He was clearly wrong (off by an order of magnitude). Eventually there will be some overvalued companies (WeWork before the valuation plummeted might be a good example). But given how many bear predictions have turned out to be really wrong, it's good to be skeptical of similar arguments going forward (they won't always been wrong, but some have been spectacularly wrong).
Fab at least grew so fast and did an absolutely terrible job at it. Invested in warehousing and competing with Amazon in terms of options and delivery.
Money was treated as endless, each employee was given a membership to Equinox for example, ~200/month per employee, let alone all the other mindless expenses.
Young employees were given free reign to buy whatever they thought would sell, which lead to massive stockpiles of crap they had to sell away.
I bet Fab would have been successful if it was managed in any type of coherent way.
look at all the articles since 2010 or so about Amazon and Tesla being bubbles. Or before that, articles in 2007-2010 about Facebook being Myspace. Or about Uber dying due to debt (this was in 2014-2016). These are the companies pundits write the most about ,and have been wrong. Yeah, many unicorns do fail or get acquired for sub-billion, but pundits seldom if ever write about them, except when they fail. The media wrote way more articles about Uber being a bubble than Fab, even though Fab died and Uber is doing well and worth >$40 billion .
The obvious difference is that none of those examples had the US government as an adversary. In such cases it's hard to evaluate any product or service based on its merits but rather based on which side of the political games they fall on. It is in the US's general best interest for Uber or Tesla to succeed, no so for TikTok, quite the opposite actually.
There's an often-shared image of the excitement of a technology looking like a V shape, with a valley of disappointment following a big media hype. I wonder if that's why the Bill Gates quote rings so true: "Most people overestimate what they can do in one year and underestimate what they can do in ten years"
Tesla will carry on for the next few years,until all the major manufacturers will get to the point,where making electric becomes a new norm. At that point Tesla may become no more than Dachia or Kia.
The narrative from Tesla bears continues to shift into the future as it outperforms their predictions. Wasn’t the company supposed to have been sidelined many times by now?
And when that doesn't happen, you'll come up with your next theory. The goal posts will keep moving until one day you'll run out of things to say and the company is a behemoth capturing a percentage of all car sales (not just electric).
That's been the dynamic with Tesla since the company was started.
Personally I couldn't care less whether they succeed or not. I'm not blind either and I'm fully aware how big a flame they put under the industry's ass and how everyone started working on similar projects. All that aside, I still think that they will be facing huge competition from other manufacturers once they are fully on board with electric models. Who knows, maybe Tesla will drive fast enough and will be no.1 manufacturer in 10 years time,I don't have crystal ball for that. It is, however, dangerous to ride on positive news only, disregarding any other opinion if it doesn't match yours.
I don't disagree with anything you said there! In fact I agree with your measured take. I only wanted to push back against this part from your original comment:
> At that point Tesla may become no more than Dachia or Kia.
The future is already here, and it requires these old car companies (Ford, GM, etc) to not only become electric car companies, but also become computer hardware and software companies. Many many manufacturers will fold in the coming years or be absorbed by larger conglomerates because they simply won't be able to compete on these vectors.
The advantages/efficiencies these old car companies have spent decades building are being rendered irrelevant. And that's the real problem for them. The risk isn't that they can't compete, the risk is that whatever they put out is irrelevant. Think iPhone v. Blackberry.
It's not just about making a new type of car. It's about building a new kind of company entirely.
The worst case scenario is Tesla gets acquired for a godly sum of money - not that it goes under or becomes the next Kia. Tesla's battery production capacity very well makes the company one of national strategic interest.
Please don't don't put facebook in the same category as Tesla, uber, shopify, etc. They generate an enormous amount of free cash flow. Without AWS even Amazon isn't generating much free cash flow.
