Tesla has no right to be the most valuable automaker in the world
Tesla's stock price is running under the impression that in 10 years it will be the only remaining automaker as sales and global EV market share slide
We're always told that value is impossible to define; for example, why do we so covet those green rolls of cotton in our pockets? Because, in theory, those bills, while having no inherent value, have the potential to provide you with just about anything you'd want.
But while this can be said about a $20 bill, the same cannot be said of Tesla. Over the past year, Tesla's (TSLA) stock price has skyrocketed by just over 1000%, and while this is certainly an impressive-sounding number, few people actually understand what it means.
A company's stock price is, in essence, what investors believe the company's potential to be. So, in theory, a company like Tesla, with at best average sales and dismal profits, should under no circumstances be worth more than any other automaker on the face of the earth.
However, amid a worldwide pandemic, Tesla has managed to establish itself as the world's most valuable automaker, with a market capitalization of 92 billion at the time of writing.
Just to put that into perspective, for Tesla's current stock price to be representative of reality, ten years from now, Tesla would have to be the only remaining automaker!
And while I'm sure that every member of the 'Teslarati' would gladly have you believe that this is the case, I'd bet my right leg that the vast majority of Tesla's private shareholders haven't the slightest clue what the stock's apparent value actually means, and are just holding on for the ride.
And before every single first-gen Model S owner descends upon me with accusations of selling out to big oil, I would like to explain to them that up until very recently, I was a Tesla shareholder. And that there isn't a single shred of evidence that Tesla can or ever will be the sole-surviving automaker.