I came across this article from Gartner L2 on Saturday morning, but since I was off yesterday I had to sit on it for a looong three days. For some background Gartner is a research specialty company and L2 Inc is an intelligence firm which benchmarks the digital competence of consumer brands. L2 was founded by esteemed NYU Business School Marketing Professor Scott Galloway – if you haven’t seen this guy’s stuff on YouTube put him on your watch list.
The gist of this research piece is the disparity of investor perspectives between companies in mature industries, like say auto manufacturing, compared to younger tech firms. Mr. Galloway starts with a summary of several tech leaders and the results from their respective Q1 Earnings calls. Then he compares these high flier firms to traditional companies by dividing their market cap by annual sales to create a common denominator metric. You can see an example of what I’m talking about in the image below.
It’s so interesting to see how this investor paradigm falls apart with Tesla, who is being priced by Wall Street just like Amazon and Apple, despite being 10x more than its auto piers like Ford and Mercedes. Galloway’s assertion is that the market is mistakenly pricing Tesla like a tech firm when it’s really a manufacturer. If you believe that theory than Telsa’s investors will be in for a reality check in the near future.
Besides just the Tesla paradox this article is filled with interesting anecdotes and resulting predictions. Make yourself smarter by reading this one!