Tesla is an oddity in the business landscape. The company’s stock is so stratospheric that Elon Musk has surpassed Jeff Bezos as the world’s richest person. Now, we have another mind-blowing metric. At Tesla’s current price-to-earnings ratio, it would take the company almost 1,600 years to make what the stock market says it’s worth.
The New Statesman put up a startling comparison. In 2020, Tesla delivered 499,550 vehicles. Yet, its market capitalisation shot up to $US750 ($971) billion dollars. Comparatively, General Motors delivered 2.5 million vehicles in the same year, yet its market value is only $US62 ($80) billion. Tesla’s price-to-earnings ratio — a comparison of share price to earnings per share — is roughly 128X to the industry average of 15X, according to Zacks Investment Research. Based on that ratio, it would take Tesla 1,600 years to make the kind of money the stock market says it’s worth.
Why is the stock market value of this Tesla getting so outrageously high?
One factor suggested by the New Statesman suggested pandemic lockdowns mixed with trading apps. Trading apps like Robinhood make it easy for anyone to throw money at a stock. During the pandemic, these apps saw their user base escalate. And one of the stocks these users are investing in? Tesla. The company’s stock splits, and the way these apps already allow trading on the fractional level, also encourage people to spend money on the company. The pandemic fuels Tesla’s rise.
Musk’s tweets can also result in big changes in Tesla’s stock price. In a single tweet he erased $US14 ($18) billion dollars in Tesla’s market value.
Tesla stock price is too high imo
— Elon Musk (@elonmusk) May 1, 2020
Many of those who got in on Tesla’s stock earlier are now wealthy. Who knows how high it’ll rise.
That’s the thing about Tesla. It’s like going to a casino. Nobody — not even Musk — knows how far Tesla will go. Perhaps the stock will reach impossible heights. Or perhaps the stock will one day crash so hard there will be textbooks talking about Tesla’s crash.