How Much Is Tesla Worth? You Decide

Wall Street Journal out with an article that lets you plug in 5 simple variables to get a valuation for Tesla.

The 5 variables are: how many cars Tesla sells in 2030, average selling price of a Tesla car in 2030 in today’s dollars, operating margin, cost of capital, and how much Tesla’s other operations are worth.

The Wall Street Journal has 4 pre-set scenarios:

1. Bearish – $58.5 billion valuation based on 5 million cars at $30k with 8% margin, 12% cost of capital, and $0 valuation for other operations besides cars

2. Default – $381 billion valuation based on 7 million cars at $30k with 10% margin, 12% cost of capital, and $200 billion valuation for other operations.

3. Bullish – $770 billion valuation based on 10 million cars at $30k with 12% operating margin, 10% cost of capital, $400 billion for other operations

4. Superfan – $2.33 trillion valuation based on 20 million cars at $30k with 15% operating margin, 8% cost of capital, $600 billion for other operations

Their assumptions are as follows:

Our model is based on estimates of Tesla’s future cash flows. It multiplies anticipated vehicle sales in 2030 by the average anticipated price to calculate revenue, and then applies the expected operating margin to arrive at operating profit. Estimates for the years before 2030 assume a smooth path in the variables from this year’s FactSet analyst consensus.

Operating profit is taxed at an 11% rate (FactSet consensus for Tesla in 2023). Cash flows are then calculated as posttax operating profit minus capital expenditures while adding back depreciation and amortization. Capital expenditures are assumed to be a flat 7% of revenue and depreciation and amortization 20% of capital expenditures.

Estimated cash flows through 2030 are discounted back to their present value at the discount rate and aggregated. A terminal value is added to account for Tesla’s cash flows beyond 2030, assuming a steady-state growth rate of 5%. The total of all these discounted estimated cash flows gives the theoretical enterprise value of Tesla’s core automotive business now.

We have left the value of its other businesses as a separate assumption within the model to arrive at a total enterprise value. Market value would also include the company’s cash or debt position, which we have not modeled.

Personally, as a Tesla bull who owns the stock, I believe Tesla is worth north of $1 trillion based on 10 million cars at $38k and 17% operating margin, 10% cost of capital, and $200B for other operations. I also believe that assuming 5% terminal growth post 2030 is too low.

What do you think?

https://www.wsj.com/finance/stocks/how-much-is-tesla-worth-you-decide-78b25ab1