Stocktake: Trillionaire Tesla defies the doubters and the numbers

Electric car-maker Tesla became the latest stock market trillionaire last week, defying the doubters who can't get their heads around its astronomical valuation.

It's hard to make sense of the numbers. Tesla is now worth more than the combined valuation of its top five competitors. News of Hertz's $4.2 billion order of 100,000 Tesla cars resulted in the stock adding some $100 billion in market capitalisation – more than the entire market value of Ford and GM.

Although Tesla is the sixth most valuable company in the S&P 500 it only ranks 89th in terms of revenues. The company trades on a price/sales ratio of 21 – seven times as high as the S&P 500 and over three times that of the famously expensive NYSE FANG+ index.

Technically, the stock is extremely extended, trading 25 per cent above its 200-day moving average. Of course looking extremely extended is nothing new for Tesla.

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As for the fundamentals, looking at valuation multiples and market share “has been a loser’s game for years”, as Matt Weller of Forex.com noted last week.

Still, it’s noteworthy that Tesla hasn’t grown at the expense of traditional car makers, who have themselves enjoyed decent gains in market capitalisation in recent years.

Expensive stocks can get a lot more expensive but it bears repeating: it really is hard to make sense of the numbers.