Tesla stock valuations put to rest any question that the market isn’t just one big bubble
Prior to the Dot Com market boom, and the eventual rise of central bank influence in the equity markets, if you were to ask any broker or analyst what the valuations of a company that makes no profit and has to be subsidized by the government were, they would probably answer you by saying that company traded on the OTC markets, or perhaps even on the penny stock sheets. ¬†But those days are far gone, and instead here in 2017 that same example is now America’s most valuable automobile company despite the fact that they sold 9.9 million cars less than long-standing industry stalwart General Motors.
That’s right. ¬†A company that sold only 75,295 cars in 2016, has never made a profit and continues to be subsidized by the government has a stock price of over $300 per share… and is worth $3 billion more than a car company that sold over 10 million automobiles worldwide.
It’s official – for the first time ever,¬†Elon Musk’s government-subsidized car-maker is America’s most valuable auto manufacturer.
Tesla shares surged another 1% today, amid a continued “trouble in shortville” ramp, topping $300 for the first time…
That gives the company a total value of $52.7 billion.
That’s more than GM’s $49.6 billion valuation. Tesla chief executive Elon Musk says he expects the company to sell 500,000 cars next year. GM, meanwhile, sold more than 20 times that many last year.
“If you look at the different auto companies on paper, it does seem a bit proposterous, where Tesla is at this moment, versus some of the more established auto companies,”¬†Jessica Caldwell, director of industry analysis with automotive research firm Edmunds, said in an interview with¬†CBC’s On The Money on Monday.
Tesla sold 76,285 cars last year.¬†That compares to over 10 million for GM worldwide and 6.65 million for Ford. – Zerohedge
That for better lack of the term is the layman’s definition of a bubble.
But Tesla is not the only company who’s fundamentals belie its stock price and real value. ¬†For years the online retail giant Amazon.com rarely made a profit since they tended to spend every extra dime on R&D and acquisitions. ¬†And it was only around the middle of 2015 that they began reporting positive numbers yet even then their stock price was up in the range of around $600 per share.
In 2016 Amazon earned less than $4 billion in net income, which was less than 1/10 the total net income of Apple. ¬†But take a look at the difference in their share prices.
As you can see the difference in stock prices between the two companies is extraordinary, especially since an Amazon share is 4 times the price of an Apple share, despite the fact that Apple’s net income is 10 times that of Amazon. ¬†And when you look at the P/E ratios of each company, Apple is a relatively low 17.24 price to earnings where Amazon is an astronomical 184.62.
And when you compare their P/E’s to the current average on the S&P which is a historic 29:1, you can see how each indice in the U.S. is at or near an all-time high, and where there is no doubt the entire equity market is simply one huge over-inflated bubble.
All bubbles are destined to pop, and the more manipulation or ‘fed fuel’ that is pumped into them means that the consequences will be that much greater. ¬†Eight years ago when the stock markets crashed following the 2008 financial crisis, the Dow fell from 14,000 down to 6,600, thus the only question that remains is how far the markets will fall when the current bubble finally pops, and looking at companies like Tesla and Amazon, that explosion will probably be the most spectacular we have ever seen.
Kenneth Schortgen Jr¬†is¬†a writer for The Daily Economist, Secretsofthefed.com,¬†Roguemoney.net, and Viral Liberty, and hosts¬†the popular youtube podcast on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.