Tesla Motors (TSLA) – With a market capitalization of $31 billion, Tesla Motors is valued by Wall Street at roughly $620,000 for every car the company delivered in 2015. Tesla’s lofty valuation has made shares of the company one of the most popular plays among short sellers.
Goldman Sachs disagrees with the valuation, stating:
On the back of this analysis, our base case volumes and EPS estimates rise by an average of 11% and 17% from 2018-2025 (and our downside case by 5% and 10%, respectively). We also raise the probability of our upside case –where Tesla goes from being merely successful to being disruptive, to 35% from 25%. This drives the bulk of our 6-month price target revision to $245 from $202, enough to justify the current price but with limited upside from here. Our PT is based on probability weighted automotive scenarios (plus stationary storage optionality) all embedding a 20% cost of capital.
We are skeptical of TSLA’s <$190/kWh pack cost estimate given our discussion with other experts (Cairn & MIT). Moreover, factory variable costs only include parts, material, and assembly labor per car. All other operating costs such as depreciation, engineering & R&D, overhead, SG&A, etc. are not included. Therefore, even though TSLA’s assumptions would imply Model 3 MSRP could exceed FVCs by ~$4.5k, this still leaves little room for operating profit after covering all other costs. Typically, OEMs require a 45-55% markup from FVC just to breakeven. This would imply, even at $190/kWh, an ASP of ~$45k-48k simply for TSLA to breakeven on the Model 3.
Deutsche Bank states
We’ve assumed that Tesla should have no problem achieving 500k units, a low double digit EBIT margin, and $22 EPS in the 2020 timeframe ($440 stock at 20x, which we discount to $280 at 15%/yr). Interestingly, a number of developments suggest that these forecasts might be understated. Without question, overwhelming demand for Model 3 (400k so far; likely hundreds of thousands more by the time M3 launches) has led the company to “re-think” expansion plans.
Credit Suisse recently stopped coverage of the company noting:
The Investment Policy Committee has removed Tesla Motors from the U.S. Focus List owing to the departure of the primary analyst. The stock has also been removed from the Global Focus List.
See the following visualizations to highlight relevant figures regarding Tesla’s public valuation.
TSLA – charts
Tesla Motors Inc. (TSLA) Vehicle Deliveries
Tesla Model S/X Deliveries vs. Model 3 Reservations
Tesla Motors Inc. (TSLA) vs. S&P 500 Percent Change Over Time – 1 Year
Tesla Motors Inc. (TSLA) Annual Revenue Projections