The last few weeks have examined Tesla’s shareholders and frustrated short sellers in the stock. So, what provides here? Why has Tesla’s stock price, not collapsed facing this adversity? I think that Tesla’s price action illustrates the power of the “big story” and the sometimes difficult-to-understand market dynamics of story stocks. In earlier posts, I have made a full case for valuation being truly a bridge between the story and figures, with every true quantity informing a story and every story being captured in lots. Thus, while your final valuation might be composed of forecasts of revenue growth, profit margins and reinvestment, it is the story that binds together these numbers that represent the soul of the valuation.
That said, the total amount between tales and quantities may differ across companies and for the same company, can transform across time. For most companies, it is the tale that comes first, with numbers pursuing, as well as for others, it’s the figures that inform the story plot. Story changes and information: it is shifts in the story that cause price and value changes. An income record that beats expectations (in either path) or an information tale of significance (good or bad) might not have any influence on either (value or price) if it does not change the tale. Conversely, a shift in perceptions about the business tale, triggered by minimal information or even no information at all, can activate major price changes.
Wider disagreements: When a company’s value is driven primarily by quantities, there is certainly less room for disagreement among investors. Thus, when valuing a company in a market with steady revenue growth and sustainable profit margins, there will be less divergence in what traders think the stock will probably be worth. On the other hand, with a story stock, investor stories can span a much wider spectrum, leading to a much bigger range in values, as illustrated with Uber in this post. So, what is Tesla’s tale?
To structure the procedure, let me construct the sizes where investors may vary on the story and exactly how these distinctions play out valuation. My thinking on Tesla has transformed as time passes. 168.76) at the time. 5 billion gigafactory to manufacture batteries. The concentrate on batteries suggested if you ask me that I acquired understated the role that technology performed in Tesla’s appeal and I incorporated it more highly into my tale.
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220) at that time. I required my third shot at valuing Tesla about two weeks ago, before its Solar City acquisition announcement, and I integrated the news since my last valuation. The announcement of the Tesla 3 clearly reinforced my story line that it was moving towards being more of a mass-market company.
The unprecedented demand for the car, with close to 400,000 people placing down debris for a vehicle that will not be delivered until 2018, signifies the hold it is wearing its customer foundation. So, what effect does acquire Solar City have on the story plot? If nothing else, it substantially muddies in the waters, an unhealthy development for a story stock, and that is even why even long-term Tesla bulls and nonplussed perhaps. The Solar City acquisition spotlighted how difficult it is to separate Tesla, the ongoing company, from Elon Musk.