Tesla has become the most valuable car company in the world

Article Edited by | Jhon N |


Better than feared U.S. conditions, strong demand for the Chinese Model 3 and an influx of new retail investors all seem to play roles.

Elon Musk's firm sports a market cap of $208 billion and (after accounting for nearly $6 billion in net debt) an enterprise value (EV) of about $214 billion. While Toyota Motors still has a slightly higher EV, in terms of market cap, Tesla is now the most valuable automaker in the world.

With the qualifier that predicting exactly what a company like Tesla will earn a year or two down the road is tough, Tesla now trades for 86 times and 58 times its non-GAAP 2021 and 2022 consensus EPS estimates of $12.98 and $19.43, respectively. Similarly, its EV is 58 times the $3.7 billion Consensus-Free Cash Flow (FCF) estimate of 2022.

Those sky-high multiples are the end result of a furious rally from its March lows in Tesla's stock. Shares now exceed $1,100, up 213 per cent from a low of $358.46 on March 19, and up 432 per cent from a low of 52 weeks set in August 2019. These gains have come although the at-large automotive industry is having a very rough time right now, thanks to the impact of the COVID-19 pandemic on both auto production and demand.

Tesla's bottom line, relative to many other automakers, appears to have held up well over the past few months. Musk has recently suggested that Tesla could have broken even in Q2.

Tesla has seen strong demand in China, with the help of a Model 3 production ramp at its Shanghai Gigafactory.

Tesla - like so many other high-growth, high-beta Nasdaq-listed names - has benefited both from the impact of the Fed's injections of liquidity into financial markets and from an increase in retail trade. The number of Robinhood investors with a position in Tesla has risen by more than 200,000 since the beginning of the year, and is currently above 323,000, according to the Robintrack web site.

Regardless of how much one attributes the surge of Tesla to one factor or another, it's fair to say that - ahead of a Q2 delivery report that might arrive tomorrow - the company is pricing a lot of future sales and profit growth, and doing so at a time when there is still a lot of near-term macro uncertainty.