Investors were once again reminded this week that fundamentals - i.e. forward estimates of units, revenues, and profits - matter to valuations. For weeks we have heard that when it comes to $Tesla(TSLA.US), the only things that mattered to valuation are autonomous driving and humanoid robots, even though TSLA hasn’t earned a single dollar of revenue from either business yet. Nor are there even working prototypes, which investors can use to evaluate vs competitive offerings.
“Retail traders — the bro trade component of retail — they’ve never really cared much about fundamentals,” said Dave Mazza, Chief Executive Officer at Roundhill Investments who in February launched a Tesla-focused product. “These folks really believe in the narrative on stocks like Tesla and Palantir Technologies Inc. Some of these names are really dependent upon a dream premium and not what they actually do for business.”We buy stocks where the present value of future free cash flows significantly exceed the stock price. We first have to like the business, supported by secular megatrends (e.g., 24/7 info and entertainment, AI, people living longer, climate sustainability) that act as favorable tailwinds for our investments, and where the company has a superior product, technology, or other sustainable competitive advantage that allows them to grow their market share or total addressable markets. Management also must have a proven ability to execute. At the heart of successful investing is a deep understanding of a company’s fundamentals, which in the case of Tesla, means forecasting automotive industry EV adoption, TSLA’s share, pricing, margins and ultimately profit per unit — all which until this week many $Tesla(TSLA.US) investors were arguing didn’t matter anymore. Until they did.The copyright of this article belongs to the original author/organization.
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