[dmoy]

From that link:

> In 2010, its stock price was $20 and by 2017 had risen to $380 a share, yet Tesla reported a loss of $4.3 billion. How is this possible? The only way to explain this bizarre scenario is to recognize that the market is not efficient

I will pass on buying/reading that book based on this excerpt alone.

I am far away from a tesla fan (I actively encourage my friends/family to not buy teslas, or invest in tesla, etc), but saying "the only way to explain this" is pretty unbelievable.

[ZephyrBlu]

How would you explain it then?

I don't believe Tesla would be valued so highly or fluctuate so violently if the market was actually efficient.

[exged]

The market is efficient in the sense that it aggregates all knowledge between market participants. Nevertheless, no one actually has a crystal ball to predict events far in the future. Tesla's valuation and volatility can both be explained by some market participants expecting huge growth over a long period of time, with a correspondingly huge uncertainty over the actual outcome.

Just to put some simple numbers on things, a commonly held expectation is that Tesla will grow revenue at ~50% a year until 2030 while maintaining high margins. At that point Tesla's revenue would be approximately 1T with perhaps 100B in net income. A fair valuation would then be around 3T, assuming there is still some future growth left.

This largely explains today's 500B valuation - if there is a 30% chance of this scenario playing out (and Tesla goes bankrupt in the other 70%) then this is a reasonable bet compared to buying other stocks.

As for the volatility, imagine if the average market participant changes their mind and believes that Tesla is only likely to achieve a 40% growth rate over the next decade. This would drop 2030 revenue and profits by more than 40% compared to the previous scenario, and today's stock price would fall significantly as well.

[dmoy]

> How would you explain it then?

I am not expert enough to know, but just off hand declaring that something is "the only way" with literally no justification or reasoning puts a really bad taste in my mouhth