Stocktake: Is Tesla really worth over $1.2 trillion?

Elon Musk offloaded $5 billion (€4.35bn) in Tesla shares last week, shortly after polling his Twitter followers on the matter. Twitter aside, Musk must have wondered: is Tesla really worth $1.2 trillion? Does a one month gain of over $400 billion in market value make sense? Is now a good time to sell?

Valuation expert Aswath Damodaran remains sceptical. Prof Damodaran sold his Tesla holding in January 2020, just before a 10-fold price increase. An investment crime? Maybe, says Damodaran, but he revisited the crime scene last week, updating his Tesla valuation.

Damodaran admits to being wrong, saying Tesla has a chance of delivering higher profit margins than any other car-maker in history. His most upbeat forecast aims for revenues of about $400 billion in 2032 and operating margins of 16 per cent. If achieved this would make Tesla “far more profitable and investment efficient than any large manufacturing company in the world”.

Nevertheless, even this upbeat scenario arrives at a $571 share price – less than half of where the stock traded last week.

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If you’re buying Tesla for the long term finding a story to justify today’s values will require a “real stretch”, says Damodaran, one that would require Tesla to be a “one-of-a-kind company”.

And if you’re a trader don’t delude yourself with “tales of fundamentals”, says Damodaran. Rather, “you were on the right side of momentum”.