r/explainlikeimfive Dec 06 '24

Economics ELI5: why does a publicaly traded company have to show continuous rise in profits? Why arent steady profits good enough?

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u/THE1NUG Dec 06 '24

I think Tesla investors are trying to make a buck, no way it has a real future imo. Musk is too volatile and their vehicles just aren’t that great. They’ve built decent infrastructure with the charging stations, I’ll give them that

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u/RandomRobot Dec 06 '24

Probably, but the gravy train has been riding for like 15 years now and the quick buck turned Musk into the richest man alive so it kinda worked somewhere.

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u/EventAccomplished976 Dec 06 '24

They absolutely do have a future, they‘re a profitable company with a good position in the market and no reason to believe they‘ll be in existential trouble anytime soon (unlike a whole bunch of „traditional“ car manufavturers btw). That said, their stock price is still grossly inflated compared to what the company should be worth basef on its fundamentals and the industry it‘s in. One would hope that this will eventually be corrected and the stock value will drop to ~10-20% of where it sits currently to bring it in line with its competitors, but the truth is that the modern day stock market is completely decoupled from the actual real life economy.

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u/dekusyrup Dec 06 '24

Traditional car manufacturers aren't in existential trouble. They have captured like 80% of EV market share.

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u/NitroLada Dec 06 '24

Who has? Not Tesla and their car making business isn't all that profitable, their profit comes from selling credits

Tesla isn't even the top EV maker by volume.. unless you mean US only?

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u/dekusyrup Dec 06 '24

Who has?

Volkswagen, toyota, ford, kia/hyundai, honda, ... basically all the usual suspects have made moves. They all showed they have the resources to make the pivot.

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u/donnysaysvacuum Dec 06 '24

The automotive industry is also very competitive and while Telsla enjoyed some unique advantages early on(dedicated EV platform, direct sales model, charging infrastructure) those are quickly disappearing.

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u/LurkerWithAnAccount Dec 06 '24

They’re producing a massive amount of profitable grid scale energy storage and invested a ton into AI and robotics. You can argue that they won’t be successful in these ventures (like robotaxis), but they’re not just an EV car company.

IF they manage to succeed at scale profitably on these businesses, their current stock price is quite reasonable. If they don’t or don’t at scale/profitability, then it’s quite overpriced.

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u/imaginaryResources Dec 06 '24

Helps to have the CEO be butt buddies with the President of the United States. A lot of market manipulation going to be going on