Model does not consider non-ergodicity
lucadellanna opened this issue · 3 comments
Tesla might post great 2023 numbers but, if it bankrupts on the way there, its (current) stock goes to $0.
The current price of CDS imply a >40% chance of bankruptcy over the next 5 years.
I do not see it priced at all in your model.
A good way to implement it would be to take the share price as computed from 2023 operations and to weigh it with a 40% possibility of having it stuck to $0.
I agree that y-o-y cash needs aren't adequately addressed. If a metric like EBITDA R&D is going to be used, more attention needs to be paid to FCF.
Current prices Tesla anything are not necessarily accurate. The question is if they will go bankrupt. The way I see it, and wouldn't be surprised if ARK does too, is that Tesla has ample opportunity to raise capital at attractive rates from a suite of investors, and this would be welcomed because it could increase growth.
What you write is accurate, but should be filed under "bull case".
The whole point of the "bear case" is to consider what could go wrong.