Student: “So Elon Musk is a trillionaire?”
Me: “Yup.”
Student: “How did he get that much money?”
Me: “Well, he doesn’t really have a trillion dollars cash. He just owns a lot of stock in companies that are valued at a trillion dollars.”
Student: “So those companies make huge profits?”
Me: “Oh gosh no. They all lose billions of dollars a year. All of them. Huge losses.”
The Economist headline: “Gen Z Mysteriously Hates Capitalism and No One Can Figure Out Why.”
Tesla annual/quarterly gross profit history and growth rate from 2010 to 2024. Gross profit can be defined as the profit a company makes after deducting the variable costs directly associated with making and selling its products or providing its services. <ul style='margin-top:10px;'> <li>Tesla gross profit for the quarter ending March 31, 2024 was <strong>$3.696B</strong>, a <strong>18.07% decline</strong> year-over-year.</li> <li>Tesla gross profit for the twelve months ending March 31, 2024 was <strong>$16.845B</strong>, a <strong>15.37% decline</strong> year-over-year.</li> <li>Tesla annual gross profit for 2023 was <strong>$17.66B</strong>, a <strong>15.31% decline</strong> from 2022.</li> <li>Tesla annual gross profit for 2022 was <strong>$20.853B</strong>, a <strong>53.26% increase</strong> from 2021.</li> <li>Tesla annual gross profit for 2021 was <strong>$13.606B</strong>, a <strong>105.22% increase</strong> from 2020.</li> </ul>
@zeenix @nswigger "Very profitable" is maybe a bit misleading if compared to stock price.
Tesla stock is valued at 403.8 with $477M last quarter net income, and $3.86B 12-month net income.
BMW stock is valued at 85 with $1.37B last quarter net income, and $7.52B 12-month net income.
I picked first random car company, but I'd wager the comparison is pretty similar no matter what.
It doesn't make sense to compare the share prices for different companies. Any company can have whatever share price it wants by issuing or buying back shares, by having stock splits or (whatever the opposite is called, I've forgotten). You need to compare the market capitalisation (share price multiplied by the number of shares). And that makes it look even more ludicrous.
Tesla's market cap is $1.506 T.
BMW's is €43 B (around $50 B).
Tesla's market valuation is around 30x that of BMW (not the 5x that the stock prices alone would imply).
A market valuation for a company is typically a combination of how well it's doing at the moment (profit) and how much people expect it to grow. BMW is probably a relatively stable company, but the price for Tesla is assuming that it will grow by a factor of about 300. Tesla sold a bit under 2M cars last year (including some slightly dodgy accounting with Musk's companies selling to each other). That's close to 2% of total car sales. So a factor of 50x growth would mean that they have 100% of the total addressable market. More than that requires the market expanding significantly or them moving into completely new markets.
This is why Tesla is referred to as a 'meme stock': the valuation has absolutely nothing to do with how much money the company is expected to be and 100% to do with the supply of greater fools.
Nathaniel Swigger
Zeeshan Ali Khan 
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