Financial analyst and YouTuber Kevin Paffrath (“Meet Kevin”) joins Market Domination to discuss Tesla’s valuation as CEO Elon Musk touted the company’s AI initiatives at Thursday’s shareholder meeting.
Paffrath believes there is a large difference between what Tesla is going to deliver versus what Elon Musk promises. He states that compared to Toyota (TM), Tesla has been on a downward trend:
“The difference between the two companies is growth. I value Tesla at a PEG ratio [Price/Earnings-to-Growth] of 1.67, assuming we can get about 30% growth once we bottom out from here. Toyota’s growing, in some years, it’s projected to grow negatively, but more reasonably, it’s growing somewhere between 5-6%, which is barely above the rate of inflation. So that’s one of the reasons you see the valuation disparity.”
He adds, “I think you can go short, and people get mad at me for saying this, but it’s just a hedge. It’s a macro hedge. You go short bitcoin, you could use a fund like BITI (BITI). I’m not affiliated with them. It’s a negative one. The reason for that is when risk assets sell off, Tesla goes down… you don’t want to short the whole market for a hedge because that’s not going to work. You specifically want an offsetting risk hedge.”
For more expert insight and the latest market action, click here to watch this full episode of Market Domination.
This post was written by Melanie Riehl
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Video Transcript
When you’re looking at how this company is valued though, I mean, just to compare it to Toyota just to give one example here.
Uh you look at the market cap of Tesla versus a Toyota.
Um You know, there is a big gap here, Tesla, uh a bigger market cap.
It’s the gap has been bigger in the past.
Uh The revenue Toyota though is not quite three times but close to three times the margins to your point at Tesla uh on an automotive basis are higher.
But, you know, if you’re just looking, we, we always call it an EV maker, but if you’re just valuing it and even if you’re just valuing it as an EV maker, it doesn’t seem to account for how the market is valuing it, it has to deliver on all this stuff and it, it doesn’t seem to me, I mean, can it be in 2026 or 27 or 29 or whenever the stuff that he’s promising is actually gonna happen?
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Well, I, I like to look at sort of what do I think Tesla is going to deliver versus what Elon promises because I think there’s a large split between those.
Don’t get me wrong.
I appreciate the optimism of the CEO I would expect that.
And you’re right, Toyota would have been a much better stock frankly to own for the last three years than Tesla.
Tesla has just been on a straight downtrend.
And it’s very unfortunate the difference between the two companies is growth.
I value.
Tesla had a peg ratio of 1.67 assuming we can get about 30% growth.
Once we bottom out from here, Toyota is growing in some years, it’s projected to grow negatively but more reasonably, it’s growing somewhere between 5 to 6% which is barely above the rate of inflation.
So that’s one of the reasons you see the valuation disparity.
But it’s also one of the reasons you’ve seen a lot more downside with Tesla because we did have to go through a few negative growth periods.
24 is going to be the big one.
Now that said, here’s how I think someone could hedge themselves, obviously not personalized advice, but I think you can go short and people get mad at me for saying this, but it’s just a hedge.
It’s a macro hedge.
You go short Bitcoin, you could use a fund like bit I I’m not affiliated with them as a negative one.
The reason for that is when risk assets sell off Tesla goes down.
Look at what’s happening today, the French sovereign debt crisis, you’ve got risk assets, selling off when risk as that sell off.
Bitcoin goes down as well.
But look at NVIDIA, it’s up.
So you don’t want to short the whole market for a hedge because that’s not going to work.
You specifically want an offsetting risk hedge.
And I think Bitcoin is the perfect way to hedge your Tesla position.