Condensed TSLA valuation model - Cute_Cranberry (he/he) Conclusion This TSLA valuation model considers the discounted cash flow value of the years 2023 through 2040 and a terminal value. The cash flows and terminal value discounts are set at 1.15 while the exit yield is set at 7% with cash flows approximating 80% of the GAAP net income taxed 20% in the entire duration. Using the assumptions the model makes the value of the stock currently should be $435. Alternatively a bear case is considered which disregards some of the moats and results in a $183/share present value. Method The method of this valuation model is clarifying the assumptions that this model makes, which may or may not turn out to be correct. These are the moats, operating margins, duration that the asset value is calculated based on and ways to generate revenue. Additionally the discounts for cash flows and exit value are established. At last there is base valuation that is much more bearish but is in my opinion the understanding of the broader market and might be more applicable to the market sentiment. Since so much of the information is already widespread I will not try to explain, clarify or try to convince anyone of the validity of this model so if you want to argue go suck a dick. Underlying assumptions Because the market is extremely divided in terms of understanding what the company even is or what its moats are and going to be it’s important to establish the assumptions for this model. As Tesla is currently mostly a car company that is widely believed that the bet should be made on and that is categorically wrong. In my opinion, if you don’t hold the expectation that Tesla is able to widely monetize and accelerate AI and/or software in the future, go find a different opportunity or an index fund. Mobility With that out of the way let’s approximate the opportunity size for these markets. The model assumes Tesla will do 16M units in 2030 with a fleet size of 60M and a world wide demand for miles driven to be approximately 20T which is derived from current mobility and a slightly increased demand due to cost decline. The terminal demand for mobility in 2035 is assumed to be 25T miles with 60% with an autonomous service mostly from developing markets and high density urban areas. Exceptions will be wealthier people that treat cars as a luxury and families with children and/or very specific needs. As any autonomous vehicle is likely capable of 35.000 miles per year compensating for off hours and sub optimal routing this is a fleet of, you guessed it, roughly 420M autonomous vehicles needing replacement every 10 years. The remainder will be driven by owned vehicles at ~10k miles/year for a fleet size of 1B at 90M/year replacement rate which actually yields a similar fleet size of today but with higher utilization. Tesla is targeted to achieve a 25% market share in both of these markets resulting in 22.5M/year direct sales at $45k ASP and 12% operating margin for the first $100B of post tax income. This is complemented by roughly an $5c profit per mile on the remaining 25% of 420M autonomous vehicles that makes them $185B. Energy Energy storage will be an essential piece to the puzzle and any and all capacity in the next 20 years will be needed. There has been a recent surge in revenue but it is still comparatively small and overlooked. The model assumes a 2035 $/kWh of $300, a production of 2.0TWh/year and 17% operating margin resulting in ~$80B of post tax income. Exclusions For obvious reasons I will not go into stuff that completely changes the fabric of society like the mass application of bots or rampant AI development. At that point the whole point of money is moot and everyone is either rich as fuck or dead lying in scorched earth and glowing atmosphere to be discovered as a case study by aliens. Financial metrics In my model I expect cash flows to approach 80% of the GAAP net income and to be taxed 20%. I discount them at 15% assuming an 8% equities discount and a 7%/year risk premium for not achieving the desired results. The exit yield is set at 7% in 2040 for a 14.3x price to earnings ratio. Discounted cash flows Accounting for the three major streams of income the DCF is as follows. Year Revenue ($B) Operating margin Net income ($B) EPS ($) Cash flow ($B) Discounted value ($B) SP at 25x earnings MC 25x earnings 2023 112 15% 13 4.25 11 11 106 336 2024 162 20% 26 8.19 21 18 205 648 2025 221 22% 39 12.29 31 24 307 972 2026 312 24% 60 18.92 48 32 473 1498 2027 480 28% 108 33.96 86 49 849 2688 2028 750 31% 186 58.75 149 74 1469 4650 2029 990 33% 261 82.55 209 90 2064 6534 2030 1,250 32% 320 101.07 256 96 2527 8000 2031 1,340 32% 343 108.35 274 90 2709 8576 2032 1,430 31% 355 112.02 284 81 2800 8866 2033 1,560 30% 374 118.26 300 74 2956 9360 2034 1,654 28% 370 117.00 296 64 2925 9260 2035 1,753 26% 365 115.16 292 55 2879 9115 2036 1,858 25% 372 117.37 297 48 2934 9290 2037 1,969 24% 378 119.44 303 43 2986 9453 2038 2,088 23% 384 121.33 307 38 3033 9603 2039 2,213 23% 407 128.61 326 35 3215 10179 2040 exit 2,346 23% 432 136.32 4,933 458 3408 10790 If the market at some point assigns a 25x multiple to the earnings in 2030 the expected market cap is $8T with a share price of $2527 with the expectation the company uses these cash flows to drill new markets and grow profits incrementally. Using the sum of these discounted cash flows applying a terminal value of 14.2x on the exit earnings the current day stock price would be $435 representing a $1.38T market cap. Gay bear case This case considers really just Tesla growing EV sales and incrementally adding energy and that’s fucking it. The terminal exit value is still similar but the post 2030 PE ratios won’t likely surpass 15 as a commodity company and in line with current day car companies. Year Revenu e ($B) Operating margin Net income ($B) EPS ($) Cash flow ($B) Discounted value ($B) SP at 25x earnings ($) MC 15x earnings ($B) 2023 112 14% 13 3.96 10 10 99 188 2024 150 15% 18 5.69 14 13 142 270 2025 200 16% 26 8.09 20 15 202 384 2026 300 16% 38 12.13 31 20 303 576 2027 400 16% 51 16.17 41 23 404 768 2028 550 16% 70 22.24 56 28 556 1056 2029 650 16% 83 26.28 67 29 657 1248 2030 800 16% 102 32.34 82 31 809 1536 2031 856 16% 110 34.61 88 29 865 1644 2032 916 16% 117 37.03 94 27 926 1759 2033 980 16% 125 39.62 100 25 991 1882 2034 1,049 16% 134 42.40 107 23 1060 2013 2035 1,122 16% 144 45.36 115 21 1134 2154 2036 1,201 16% 154 48.54 123 20 1213 2305 2037 1,285 16% 164 51.94 132 19 1298 2466 2038 1,375 16% 176 55.57 141 17 1389 2639 2039 1,471 16% 188 59.46 151 16 1487 2824 2040 exit 1,574 16% 201 63.62 2,302 214 1591 3022 Using the sum of these discounted cash flows applying a terminal value of 14.2x on the exit earnings the current day stock price would be $183 representing a $580B market cap.