Professor Damodaran. This is a very good synopsis of your reasoning behind past and present Tesla valuation. However, I feel you overemphasize “Universal Laws of Business and Economics” and under-account for expertise in industry knowledge, which is a softer and valuable skill set necessary for valuation as well. I too invested in Tesla, and have since sold all shares at a very good realized return:
182% total return
889% dollar weighted annual return
I acquired Tesla shares in November 2018 at $22.72 (equivalent post-split share price). I acquired more shares in during January 2020 at $28.21. I’ve been connected to the auto industry for +30 years (the industry expertise I’m referring to). Tesla’s ability to finally scale Model 3 production was the single most important impetus to me for investing in 2018 (at a time when its market cap was about $70 billion). In automotive, the ability (and desire) to scale production of EVs by Tesla was critical. This proved to me that the business of EVs was viable. It also drove legacy automakers to begin attacking the EV opportunity as well.
Additionally, I believed that Tesla would lead the world into autonomous technology leading to its own robotaxi business. For me, robotaxis would represent Tesla’s AWS moment - a recurring revenue business destined to drive the company’s valuation to great heights. I learned later that this AWS moment would not happen for Tesla.
Why did I sell?
1. During 2021, it started to become apparent to me that Tesla, (even a company that might one day sell 10 million EVs) should not be significant multiples more valuable than Toyota (a company selling nearly 10 million vehicles per year already). There’s just not enough better Tesla margin to justify a valuation 6X Toyota when Tesla as when the company was valued at $1.2 trillion.
2. In 2021, it also became apparent to me that Tesla’s Full-Self Drive autonomous technology would not lead to robotaxi capabilities for the company. Thus, FSD would not lead to a new ‘rundle’ revenue business for Tesla
I began selling tranches in 2021 and 2022.
I sold in January 2021 at $242.21
I sold in June 2021 at $198.78
I sold in November 2021 at $379.77
I sold in January 2022 at $291.11
I sold all remaining in May 2022 at $217.79
Admittedly, some of the timing of my selling is just being fortunate. But I also believe that some of my profit comes for a reasoned understanding of the business of automotive and what makes a company like Tesla valuable in an industry that it is trying to disrupt.
More detail about my decision to sell Tesla can be found below.
Brilliant write up as always. Thank you for this, really learned a lot!
Professor Damodaran. This is a very good synopsis of your reasoning behind past and present Tesla valuation. However, I feel you overemphasize “Universal Laws of Business and Economics” and under-account for expertise in industry knowledge, which is a softer and valuable skill set necessary for valuation as well. I too invested in Tesla, and have since sold all shares at a very good realized return:
182% total return
889% dollar weighted annual return
I acquired Tesla shares in November 2018 at $22.72 (equivalent post-split share price). I acquired more shares in during January 2020 at $28.21. I’ve been connected to the auto industry for +30 years (the industry expertise I’m referring to). Tesla’s ability to finally scale Model 3 production was the single most important impetus to me for investing in 2018 (at a time when its market cap was about $70 billion). In automotive, the ability (and desire) to scale production of EVs by Tesla was critical. This proved to me that the business of EVs was viable. It also drove legacy automakers to begin attacking the EV opportunity as well.
Additionally, I believed that Tesla would lead the world into autonomous technology leading to its own robotaxi business. For me, robotaxis would represent Tesla’s AWS moment - a recurring revenue business destined to drive the company’s valuation to great heights. I learned later that this AWS moment would not happen for Tesla.
Why did I sell?
1. During 2021, it started to become apparent to me that Tesla, (even a company that might one day sell 10 million EVs) should not be significant multiples more valuable than Toyota (a company selling nearly 10 million vehicles per year already). There’s just not enough better Tesla margin to justify a valuation 6X Toyota when Tesla as when the company was valued at $1.2 trillion.
2. In 2021, it also became apparent to me that Tesla’s Full-Self Drive autonomous technology would not lead to robotaxi capabilities for the company. Thus, FSD would not lead to a new ‘rundle’ revenue business for Tesla
I began selling tranches in 2021 and 2022.
I sold in January 2021 at $242.21
I sold in June 2021 at $198.78
I sold in November 2021 at $379.77
I sold in January 2022 at $291.11
I sold all remaining in May 2022 at $217.79
Admittedly, some of the timing of my selling is just being fortunate. But I also believe that some of my profit comes for a reasoned understanding of the business of automotive and what makes a company like Tesla valuable in an industry that it is trying to disrupt.
More detail about my decision to sell Tesla can be found below.
https://taasmaster.substack.com/p/i-no-longer-own-tesla-stock-why-i
great take, thank you!