Tesla's (TSLA +0.44%) past high valuation stemmed from all its diverse innovations. But, in this video clip from "The Rank" on Motley Fool Live, recorded on July 13, Fool.com contributor John Bromels outlines why he thinks the company likely won't reach the same lofty heights again.
John Bromels: My big thing with Tesla is Tesla's share price got so big because everyone thought it's more than a car company, because manufacturing and selling cars, this is a comparatively low-margin business. It takes a lot of capital and a lot of industry space. It takes a lot of resources to manufacture a car.
If Tesla were just a car company, even making really great cars, I mean, everybody agrees, Teslas are really fantastic cars, even being the first mover in this hot electric vehicle industry. If it's making cars, there is no way it justifies anything close to a trillion-dollar valuation, which is what it had.
A lot of people were saying, well, the reason you got to invest in Tesla is because of the other stuff it's doing, is because of its investments in driverless technology, it's because of its investments in power management and batteries, the Powerwall, because of its investment in solar, the Solar Roof, which is going to be a game changer in the solar industry.
All of those things that people were saying, "Oh, that's the big reason Tesla deserves this extraordinarily high valuation." But ultimately, we've seen a lot of that stuff fizzle. Yes, they're still doing a great job with battery technology and Powerwall stuff, but what's making the money for Tesla right now? Cars. Tesla is a car manufacturer. It sells cars.
I can't see how this company gets exponentially larger than a $700 billion company from where it is right now while, as you say, there's competitors nipping at its heels, there are other companies seeing a lot of success in these markets, the EV market and even in driverless technology and things like that.
That is why I rank it No. 5 out of these. I don't see where the growth comes from. Now, of course, he's Elon Musk, so he may pull something out of his magic hat and introduce the flying car here in a couple of months and prove me wrong. But that's my take.
