Stock analysts exhibit a wide dispersion of beliefs in terms of what they think a share of Tesla is worth. This is because of the risk and uncertainty of Tesla’s future cash flows. Proper valuation of a company depends on an analyst’s ability to accurately estimate a firm’s future cash flows. When these future outcomes are uncertain, valuations can vary.

Strategic choices that provide a firm with flexibility and keep its strategic options open are generally considered to be of greater value under conditions of high uncertainty, like those posed in the auto industry. For this reason, I believe Toyota’s approach toward the EV market of providing hybrid models to ease consumers into the transition to an all-EV is appropriate and provides them with a competitive advantage.