Tesla, Inc. (TSLA) Valuation Report

Market Cap
$643B

Enterprise Value
$619B

Price
$201.97 1.11%

Adjusted Yield
-0.3%

TTM Growth Margin Ratio Yield
Revenue $97B 18.8% 6.4x
Gross $18B -15.3% 18.2% 35.1x
EBITDA $14B -24.0% 14.0% 45.7x
EBIT $8.9B -34.9% 9.2% 69.6x 1.4%
Profit $15B 19.1% 15.5% 42.9x 2.3%
FCFF -$2.6B -172.0% -2.7% -238.8x -0.4%
FCFE $14B 825.1% 17.3% 46.7x 2.1%
Cost of Equity = 14.6% | Cost of Capital = 14.5%Currency: USD | Updated:
Sector: Consumer Cyclical | Industry: Auto Manufacturers | Read more...

Tesla, Inc.
designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally.
It operates in two segments, Automotive, and Energy Generation and Storage.
The Automotive segment offers electric vehicles, as well as sells automotive regulatory credits; and non-warranty after-sales vehicle, used vehicles, retail merchandise, and vehicle insurance services.
This segment also provides sedans and sport utility vehicles through direct and used vehicle sales, a network of Tesla Superchargers, and in-app upgrades; purchase financing and leasing services; services for electric vehicles through its company-owned service locations and Tesla mobile service technicians; and vehicle limited warranties and extended service plans.
The Energy Generation and Storage segment engages in the design, manufacture, installation, sale, and leasing of solar energy generation and energy storage products, and related services to residential, commercial, and industrial customers and utilities through its website, stores, and galleries, as well as through a network of channel partners; and provision of service and repairs to its energy product customers, including under warranty, as well as various financing options to its solar customers.
The company was formerly known as Tesla Motors, Inc.
and changed its name to Tesla, Inc.
in February 2017.
Tesla, Inc.
was incorporated in 2003 and is headquartered in Austin, Texas..

Full-time employees: 140,473 | HQ: Austin
Website: https://www.tesla.com

Valuation

Input

➜ Revenue Growth

➜ EBIT Margins

➜ Reinvstment Efficiency

➜ Cost of Capital

➜ Tax

TSLA Valuation Output

Terminal value

$248B

+ PV Terminal Value

$75B

+ PV FCFF

$8B

= Sum of PV

$83B

+ Cash

$29B

- Debt

$5.1B

= Intrinsic Value

$107B

Value Per Share

$31

Overvalued by 85% vs its $202 Price

1-Year Price Target

$35 (-82%)

10-Year Fundamental Projections for Tesla, Inc. (TSLA)
YearGrowthSalesEBIT %EBITTaxNOPATReinvestmentROICFCFFWACCPV FCFF
TTM 15.0% $97B 9.2% $8.9B 43% $5.1B $3.2B 13% -$2.6B 14.5% --
2025 15.0% $111B 9.2% $10B 43% $5.8B $6B 13% -$212M 14.5% -$185M
2026 15.0% $128B 9.2% $12B 43% $6.7B $7B 13% -$244M 14.5% -$186M
2027 15.0% $147B 9.2% $14B 43% $7.7B $8B 13% -$281M 14.5% -$187M
2028 15.0% $169B 9.2% $16B 43% $8.9B $9.2B 13% -$323M 14.5% -$188M
2029 15.0% $195B 9.2% $18B 43% $10B $11B 13% -$371M 14.5% -$189M
2030 12.9% $220B 9.2% $20B 40% $12B $13B 13% -$1B 13.3% -$468M
2031 10.7% $243B 9.2% $22B 37% $14B $12B 13% $1.7B 12.1% $685M
2032 8.6% $264B 9.2% $24B 34% $16B $11B 14% $5.1B 10.9% $1.8B
2033 6.4% $281B 9.2% $26B 31% $18B $8.9B 14% $8.9B 9.7% $2.9B
2034 4.3% $293B 9.2% $27B 28% $19B $6.3B 15% $13B 8.5% $4B
♾️ 4.3% $306B 9.2% $28B 25% $21B $11B 8.5% $10B 8.5% --
How is TSLA's expected return calculated?

The expected return is a percent (%) estimate of how much a stock's value will change per year. It is used to calculate TSLA's 1-year price target by multiplying the stock's present value with (1 + expected return). The expected return is calculated using a stock's risk (cost of capital), excess returns, and dividend yield.

Expected Return = (1 + Cost of Capital) * (Cost of Capital * (1 + ROIC - Cost of Capital - Dividend Yield))
15.2% = 114.5% * (14.5% * 91.5%)

We exclude dividend payments because they aren't reflected in a stock's price. Note that excess returns are highly dependant on our estimate of invested capital and its return. Neglecting to capitalize expense items such as operating leases, R&D, brand name marketing expenses, may inflate the excess return estimate.

Growth

In the 12 months ending Q4'23 Tesla, Inc. (TSLA) grew revenues by 18.8%, from $81B to $97B - indicating a deceleration of revenue growth. TSLA has a 5-year and 3-year revenue compound annual growth rate (CAGR) of 31.5% and 21.6% respectively.

Revenue Growth Estimates

Sustainable
8.4%
Fundamental
7.8%
Priced-in
14.9%

Bottom Line Growth Estimates

Fundamental Earnings Growth
0.1%
Fundamental EBIT Growth
7.8%
Priced-in FCFF Growth
15.0%

Looking at forward estimates, we can see that the market is pricing-in a 14.9% long-term revenue growth rate, while the financials indicate a future revenue growth rate between 8.4% and 7.8%.

Using the average of these 3 estimates we get a 10.4% long-term revenue growth for TSLA.

What is TSLA's sustainable revenue growth?

Similar to fixed vs variable costs, the sustainable growth rate shows how much we can expect the company to grow based on their reinvestment into the business, excluding variable demand and pricing. This rate may be helpful as a long-term baseline for the company.

(TSLA) has invested $40B in total capital, consisting of $64B in book value of equity, plus $5.1B in total debt, less $29B in cash & equivalents.
By adding on the average reinvestment of $6.7B in the last 4 quarters on a TTM basis to the $40B capital base, and applying the current sales to capital ratio of 244.6%, we can expect the company to grow its revenue to $113B, implying growth of 16.8%. However, we assume at least one gap year for CapEx to transform into growth, so we divide the rate by 2 and get a 8.4% sustainable revenue growth.
Use your own judgement based on the type of business since it takes time for reinvestment to yield growth.

What are TSLA's fundamental revenue & EBIT growth rates?

The fundamental growth rates analyze how much (TSLA) is reinvesting into the business, adjusted for the quality of those reinvestments to come up with an estimate for a long-term future growth. Both fundamental and sustainable gorwt rate estimates attempt to use fundamentals in estimating growth.

Tesla, Inc. (TSLA) has reinvested an average of $6.7B on a rolling TTM basis, reflecting a reinvestment rate of 129.8%, calculated as:
Reinvestment / (EBIT - Tax) a.k.a. NOPAT.
By multiplying the reinvestment rate with the return on invested capital (ROIC) we get a long-term estimate for a growth in EBIT:
129.8% * 6.0% = 7.8% (Reinvestment rate * ROIC)

In order to convert this to a fundamental revenue growth rate, we analyze the relationship between EBIT growth and Revenue growth, and come up with a scaling factor of 99.5%. We then multiply the fundamental EBIT growth estimate by the revenue scaling factor and get an equivalent for a fundamental revenue growth rate of 7.8%.

What FCFF & revenue growth rates is the market pricing-in for TSLA?

In order to justify the current $643B market capitalization given a 14.5% cost of capital, TSLA needs to keep growing its un-levered free cash flows by 15.0% across many ( >10 ) years.

TSLA's market implied FCFF growth rate of 15.0% =
1 + (Enterprise Value * Cost of Capital - FCFF) / (Enterprise Value + FCFF) =
1 + ($619B * 14.5% - -$2.6B) / ($619B + -$2.6B)

By analyzing the relationship between EBIT growth and revenue growth, we get a scaling factor of 99.5% that we apply to our implied FCFF growth in order to get the market implied revenue growth rate of 14.9%

Margins

Gross
18.2%
-28.7% YoY
EBIT
9.2%
-45.2% YoY
Profit
15.5%
0.3% YoY
FCFF
-2.7%
-160.6% YoY
Why is TSLA scaling revenues by -11.7% relative to COGS?

TSLA grew revenue by 18.8% in the last 12 months, and their COGS changed by 30.5% in the same period. This means that the company is scaling revenues -11.7% worse than costs.

A company that has a scaling rate above 1:1 indicates efficient growth that may translate into added value in the bottom line. Conversely, if the rate is lower, e.g. 1:0.9, it shows that while the company managed to grow, their costs increased more than revenues.

Free Cash Flows

Reinvestment
-$3.2B
FCFF
-$2.6B
FCFE
$14B
Net CapEx
-$1.4B
Simple FCFF
$4.4B
Change in WC
-$1.8B

Note: cash flows in the table and chart are presented as inflows and outflows, meaning that positive numbers indicate how much a company has taken in, and negatives show how much cash has flown out.

What is included in TSLA's $6.1B capital expenditures?

In the last 12 months TSLA invested $8.9B in plant property & equipment (PPE) CapEx. By adding the -$2.8B in acquisition expenses, we get a total CapEx of $6.1B.

How much is TSLA reinvesting into the business?

In the last 12 months ending Q4'23, TSLA made capital expenditures of $6.1B. By netting out the depreciation of $4.7B, we get a NetCapEx of $1.4B, indicating that the company invested in future growth.

Finally, we add on the change in Working Capital of $1.8B, and get a Total Reinvestment of $3.2B.

By investing more than it depreciates, TSLA is increasing its future growth assets.

How are TSLA's -$2.6B free cash flows to the firm (FCFF) calculated? TSLA's -$2,593,000,000.00 Free Cash Flows to the Firm (FCFF) =
$8,891,000,000.00 EBIT
- $3,765,000,000.00 Tax
- $8,899,000,000.00 Plant Property Equipment
- -$2,844,000,000.00 Acquisitions
+ $4,667,000,000.00 Depreciation
+ -$1,781,000,000.00 Change in Working Capital
- $1,812,000,000.00 Stock Based Compensation

Free Cash Flows to the Firm are important because they indicate how much a company has left over for all (debt & equity) investors.
It is a measure of the true bottom line for investors, as opposed to earnings and the simplified version of free cash flows (Cash from operating activities - PPE).

In the last 12 months TSLA had -$2.6B in free cash flows. This means that the company still needs to grow the business or cut costs.

How are TSLA's $14B free cash flows to equity investors (FCFE) calculated? TSLA's $13,784,000,000.00 Free Cash Flows to the Equity (FCFE) =
$14,997,000,000.00 Net Income
- $8,899,000,000.00 Plant Property Equipment
- -$2,844,000,000.00 Acquisitions
+ $4,667,000,000.00 Depreciation
+ -$1,781,000,000.00 Change in Working Capital
+ $5,055,000,000.00 Total Debt today
- $3,099,000,000.00 Total Debt one year ago

Free Cash Flows to the Equity investors show how much the company has left over for shareholders.
It is an insightful metric when paired with FCFF for analyzing companies that have a lot of debt, as it can reveal the effect of interest rates on the value of equity.

When compared to FCFF, they should be roughly in-line, else we need to think about what causes the difference. In the last 12 months TSLA had $14B in free cash flows to equity, indicating that the business can return capital in the form of dividends and buybacks.

Returns

ROE
23.6%
ROIC
6.0%
Sales to Cap
244.6%
How much excess returns (value) is TSLA creating on average (0%), and how to calculate it?

ROE Excess Returns 9.0% = Return on Equity - Cost of Equity
ROC Excess Returns -8.5% = Return on Capital - Cost of Capital

Average Excess Returns = (ROE - Cost of Equity + ROIC - Cost of Capital) / 2

For every 1% of growth in its net and operating income, the value of TSLA's stock changes by an average of 0.00%.

Excess returns are important because they help us estimate a company's target price.

If you are analyzing a company with a lot of R&D expenses, consider capitalizing them as an asset to get a better ROE & ROC estimate - You can use our automated spreadsheet.

Capital Structure

Equity
$64B
Debt
$5.1B
Cash
$29B
Interest Coverage
57.0x
Debt to EBITDA
0.37x
Debt to Capital
0.8%

Dividends & Buybacks

Adj. Yield
-0.3%
Dividends + Buybacks - SBC
FCFE Payout
--
% FCFE paid as Div + Net Buybacks
R-R Upside
--
FCFE yld. / Cost of Equity - 1

Tesla, Inc. has transferred a total value of -$1.8B to investors in the last 12 months. The required cash return (excluding expected growth) for TSLA is $66B, or a 10.3% yield in the same period.

With an adjusted payout of -13.1%, TSLA seems to be spending a potentially unsustainable amount of cash and may require financing if the financials don't improve.

SEC Filings

Examine the details and validate data:

Historical SEC Filings

Headlines