Tesla stock has been on a tear this year, and over the last 12 months, really, up over 270% in 2020 and over 540% during the last 12 months. Their flamboyant CEO, Elon Musk, makes headlines not only for building cool cars but for building rocket ships that go to the moon and back (soon). If there’s one thing Elon and Tesla are not, is boring. Maybe that’s why Tesla has become the biggest car company in the world, at least by market cap, overtaking your dad’s car company, Toyota.
By the Numbers
Tesla’s current stock price makes it the largest car company on Earth, giving it a market cap of about $290 billion. Its next closest competitor, Toyota, comes in at about $172 billion. That’s great for Tesla stock owners and bad for Toyota stock owners, right? Well, that depends. Relative to Toyota, Tesla investors are paying 335 times earnings-per-share (EPS) estimates for 2020. That’s rich. And for Toyota? You can buy a share and it’ll cost you about 18 times EPS. Value, right? We’ll get to that later. Toyota also laps Tesla in actually selling cars – they sold 8.958 million worldwide, as of 3/30/2020. Tesla sold 367,656 in 2019. That’s 24x more – which probably explains why you’ll see more Prius’s on the road than Tesla’s. Those 8.958 million Toyota’s sold delivered $275 billion in revenue to shareholder’s – Tesla shareholders got less than 10% of that, getting about $26 billion. You know what Tesla shareholders did get, though? An over 6,600% price increase since they IPO’d in 2010. You know how much Toyota’s shareholders got? ‘Bout 84%.
The chart below will show how some of those numbers look on a graph but it can’t tell you why someone is willing to pay such an expensive price for such a small return. Well, I can’t either. The reasons why the market (a reflection of us, its participants) will bear that kind of valuation are as numerous as the participants themselves.
While no one is getting excited over a Camry, sooner or later, Tesla’s earnings are going to have to cash the checks its valuation continually writes.