The true value is one thing, but the purchase price is something else.
It was only June last year when Tesla stocks were just under $179 each.
It is normal for stocks to fluctuate.

Ezz, now I know where you are going wrong.
You are getting price mixed with value.
Value is a fairly stable parameter.
It is price that fluctuates by the minute!

The minute by minute fluctuation is the price.
The value/worth is a much more stable parameter.
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I am saying, in a efficient market...the price = value in the marketplace. Efficient market means that the most up to date information is being considered in the stock price. You may have a different value than what the stock represents because you have assumptions but the price in theory represents the value in the stock market. That is why equity research firms all have price targets because that is their bet on value but the stock doesn't always match up with their values because their assumptions don't align. That aside, i am saying, even if you don't believe the value in the market, you cannot just purchase stock at a lower price because you think its lower. You either have to wait for the price to come down (if it ever does to the level you think it should be) or you don't buy it. The converse also applies where you think its worth way more than the price on the market which means you can buy it at an incredible discount to your valuation thesis.

 

You can't just purchase anything because you think the price should be lower.
At the end of the day, sales/purchases are always done by "negotiations" between parties just like purchasing property or a car etc.
However understand that even then, the sale/purchase price is just that - a price; it is still only a price, since the true value of the product can be lower or higher than the sale/purchase price.
If the sale/purchase price is lower than the true value, then we say that it was bought cheap.
If the sale/purchase price is higher than the true value, then we say that it was acquired at an expensive price.
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There is no negotiations for stock on the market. Price and value are intertwined and there is always a buyer value and price and a seller value and price (i.e. the stock market). True value in your perspective is the buyer value. Its perspective. In terms of stock, you can't negotiate...you can only wait for the stock to come down to what you think is the true value (it may or may not be actual true value because no one can tell the future). That is how the market works and thats what i keep reiterating.

 

Like anything else, share prices are simply determined by supply and demand.

An S Class may have less supply and demand than the past, and this will drive the sale/purchase price down, but its quality and value is the same, if not better over the decades.

 

The demand is based on a valuation of a stock with underlying cash flows. Why do you not understand this. It has a valuation basis for the price. All stocks work this way.

 

The share price or sale/purchase price as defined by the supply/demand for shares, property and businesses etc is the seller/buyer's ESTIMATION of the real value/worth, and NOT the real value/worth itself.
Because the share/sale/purchase price is only an estimation of the real value, this estimation fluctuates in value by the minute!

The supply/demand for shares, property and businesses etc is also affected by external factors like the economy, trade wars and viruses etc.

However, the real value/worth is a much more stable parameter.

I hope you understand the difference between by the minute fluctuating sale/purchase price as opposed to the stable true value.

Tesla's share price is a by-the-minute estimation of Tesla's real value driven by supply & demand and other external factors like the economy & viruses etc, and NOT Tesla's real value in itself - which is a much more stable parameter.
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Why are you not getting this. There is no such thing as REAL value because no one can predict the future. There is the value that the buyer predicts and a value that the seller predicts. In simplistic terms the stock market is where there is a buyer who thinks the stock is undervalued so he wants to buy and a seller who thinks the stock is overvalued so he wants to sell. All this supply and demand only fluctuates price in extremely short terms but always equalizes to buyer value and seller value.

You obviously think the stock is overvalued. If you thought the stock was only worth $100, you would have a bid for $100 on the market. That is your perceived value. The buyer value. You would have to have a seller willing to sell to you at that price because they believe it's not even worth $100. Of course they wouldn't because most buyers are buying at $700 because that is the value to them.

I feel like we are doing finance 101 here. Please go look up efficient market hypotheses.

 

EZZ,

Why do you even bother trying to explain. If someone doesn’t get it by now they won’t get it. Trying to compare the value of a car which isn’t determined by quoted market is apples and oranges. Stock price is determine by an active market so it is fair value, simple as that. Can’t get a better indicator of fair value than that. Whether an individual thinks it is worth that is another matter. And you are right, if someone were to buy Tesla right now they would end up paying a control premium on that stock price likely over 25%. The stock price is an indicator of projections and the businesses anticipated growth, not always where they are today.

 

Haha. Sorry. I guess he will never get it.

 

True.
No one can pin point with 100% the real value.
However, some techniques for calculation are more accurate than others!
A fluctuating stock market that is influenced by external factors like viruses and fluctuates share prices by the minute - is NOT an accurate method of real value assessment - stock prices are only the market's "estimate" of the real value, even if the 100% accurate absolutely real value can never be calculated.
It was only roughly six months ago that Tesla stocks were valued at only some $178.85 - how is that for real value accuracy?

That's why I say that share prices are only an "estimate" of the real value, and they are not the real value in itself, even if the real value can never be pin pointed with 100% accuracy - though some techniques for pin pointing are certainly more accurate than others - and one of the more accurate methods certainly won't be share prices, which for Tesla dipped to just $178.85 some six months ago.
The real value of a company cannot vary by that much over just 6 odd months or so.

 

Real values change drastically ALL THE TIME for smaller companies. Go read the analyst reports...they are the influencers of the stock price with their valuations. They've completed build of their gigafactory. They've PROVEN HIGH DEMAND of their Model 3. They have cash flow due to operation in the $1B range. They are releasing their Model Y product 3-6 months early. They've literally de-risked their entire business and their WACC has dramatically lowered due to these factors. Again, read my prior posts. You continue to ignore what I write when its what finance people all understand at a basic level. This is freshman college material.

 

Yes Ezz, that's very true.
The share prices fluctuate tremendously especially for smaller companies.
For example last June, Tesla got down to just $178.85, while recently it got to $887.06! External factors are involved too.
However, remember that share prices only represent the market's "estimate" of the real value, and not the actual real value itself.

 

This thread has certainly run its course. Locked