Editing Tesla, Inc.

{{Infobox company

  | {{NASDAQ|TSLA}}

  | [[S&P 500]] component

| hq_location_city = Austin<!-- Do not link, search MOS:GEOLINK for further guidance -->, Texas<!-- Do not link, search MOS:GEOLINK for further guidance -->

* [[Tesla Model 3|Model 3]]

  | {{increase}} 6.54 GWh battery energy storage systems (2022)

* [[#Connectivity|connectivity]]

| net_income = {{increase}} {{US$|12.56}}&nbsp;billion (2022)

| assets = {{increase}} {{US$|82.34}}&nbsp;billion (2022)

The company sells and leases high-performance fully electric vehicles and energy generation and storage systems, and offers services related to its products. Tesla emphasises performance, attractive styling and the safety of its users in the design and manufacture of its products and is continuing to develop full self-driving technology for improved safety. The company also strives to lower the cost of ownership for its customers through continuous efforts to reduce manufacturing costs and by offering financial and other services tailored to its products.<ref name=":4">https://www.sec.gov/Archives/edgar/data/1318605/000156459021004599/tsla-10k_20201231.htm</ref>

Assuming that Tesla increases its share of the automotive market to 10% (from 2%) and other assumptions, the expected return of an investment in the company over the next five years is negative 24%, which equates to an annual return of negative 4%. In other words, an £100,000 investment in the company is expected to return £76,000 in five years time.

Accordingly, based on the assumptions provided on the Stockhub platform,  an investment in the company is considered to be a 'suitable' one for you if, among other criteria, your required:

* Return level is negative 4% per year or less in absolute terms;

* Risk level is 112% or more above the market risk level;

* Time horizon is five years or longer;

* Bid-ask margin is 0.0297% or more; and/or

* Objective is to help accelerate the world's transition to sustainable energy.

'''Fun fact:''' Tesla, Inc. was named after inventor Nikola Tesla and was founded in 2003 by Martin Eberhard and Marc Tarpenning, not Elon Musk, who joined later as an investor and chairman.

Currently, an estimated 85% of the world's energy needs are met by burning fossil fuels<ref>https://wedocs.unep.org/bitstream/handle/20.500.11822/30797/EGR2019.pdf?sequence=1&isAllowed=y</ref>, and energy production and consumption are responsible for 76% of annual human-caused greenhouse gas emissions.<ref name=":1">https://www.climatewatchdata.org/ghg-emissions?breakBy=sector&chartType=percentage&end_year=2018&sectors=total-including-lucf&start_year=1990</ref><ref name=":2">https://www.wri.org/insights/4-charts-explain-greenhouse-gas-emissions-countries-and-sectors</ref>

[[File:Model S.jpg]]

[[File:Rhd-model-3-social.png]]

[[File:MX-Hero-Desktop.jpg]]

[[File:Model y red.jpg]]

[[File:Cybertruck-Hero-Desktop.jpg]]

[[File:Tesla-roadster.jpg]]

[[File:Tesla-semi.jpg]]

[[File:Powerwall2.jpg]]

[[File:Megapack-CleanerGrid-D.jpg]]

[[File:5c603e0d86d2c7c005d1df44a jVVOsV8.jpg]]

It's worth noting that 10 years earlier than the publication of the 2016 blog post, Elon detailed the company's first master plan<ref name=":9" />, and the company has managed to achieve all of the milestones, which were as follows:

The Chief Executive Officer of Tesla is {{#property:P169|from=Q478214}} and he has served the position since October 2008 and as a member of the Board since April 2004. Elon has also served as Chief Executive Officer, Chief Technology Officer and Chairman of Space Exploration Technologies Corporation, an advanced rocket and spacecraft manufacturing and services company (“SpaceX ”), since May 2002, and served as Chairman of the Board of SolarCity Corporation, a solar installation company, from July 2006 until its acquisition by Tesla in November 2016. Elon is also a founder of The Boring Company, an infrastructure company, and of Neuralink Corp., a company focused on developing brain-machine interfaces. Prior to SpaceX, Elon co-founded PayPal, an electronic payment system, which was acquired by eBay in October 2002, and Zip2 Corporation, a provider of Internet enterprise software and services, which was acquired by Compaq in March 1999. Elon has also served on the board of directors of Endeavor Group Holdings, Inc. since April 2021. Elon holds a B.A. in physics from the University of Pennsylvania and a B.S. in business from the Wharton School of the University of Pennsylvania.

<noglossary>‎Ira received his JD/MBA from Stanford Graduate School of Business and Stanford Law School, where he was an Associate Editor of Stanford Law Review. He holds a B.A. from the University of California, Los Angeles, graduating Phi Beta Kappa and Summa Cum Laude.</noglossary> 

{{Tesla's revenue}}

|+Financials<ref>Source: Stockhub Limited</ref><ref group="Note" name="Note04" /><ref>Source: Stockhub Limited</ref><ref name="Note04" group="Note" />

|'''Year end date'''||'''31/12/2005'''||'''31/12/2006<ref name=":12">{{cite web|url=https://www.mercurynews.com/2014/07/14/2006-san-carlos-start-up-tesla-seeks-sexier-electric-car/|title=2006: San Carlos start-up Tesla seeks sexier electric car|date=July 14, 2014}}</ref><ref name="SEC">{{cite web | url=https://www.sec.gov/edgar/browse/?CIK=1318605 | title=Tesla, Inc. TSLA on Nasdaq | publisher=[[U.S. Securities and Exchange Commission]]}}</ref>'''||'''31/12/2007'''||'''31/12/2008'''||'''31/12/2009'''

|'''31/12/2010<ref name="SEC" />'''

|'''31/12/2011<ref name="SEC" />'''

|'''31/12/2012<ref name="SEC" />'''

|'''31/12/2013<ref name="SEC" />'''

|'''31/12/2014<ref name="SEC" />'''

|'''31/12/2015<ref name="SEC" />'''

|'''31/12/2016<ref name="SEC" />'''

|'''31/12/2017<ref name="SEC" />'''

|'''31/12/2018<ref name="SEC" />'''

|'''31/12/2019<ref name="SEC" />'''

|'''31/12/2020<ref name="SEC" />'''

|'''31/12/2021<ref name="SEC" />'''

|'''31/12/2022'''

|'''31/12/2022'''

|'''31/12/2023'''

|'''31/12/2024'''

|'''31/12/2025'''

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|'''31/12/2027'''

|'''31/12/2028'''

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|'''31/12/2057'''

|'''31/12/2058'''

|'''31/12/2059'''

|'''31/12/2060'''

|'''31/12/2061'''

|'''31/12/2062'''

|'''31/12/2063'''

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|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Historic'''

|'''Forecast'''

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|31,536

|$52,217

|Gross profits ($'million)

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|$23,680

|$33,677

|$46,445

|$62,115

|$80,558

|$101,316

|$185,352

|$219,221

|$251,432

|$279,652

|$301,627

|$315,485

|$319,996

|$314,750

|$300,223

|$277,702

|$249,098

|$216,679

|$182,777

|$149,514

|$118,604

|$91,237

|$68,061

|$49,236

|$34,541

|$23,498

|$15,502

|$9,917

|$6,153

|$3,702

|$2,160

|$1,222

|$670

|$357

|$184

|$92

|$45

|$21

|$10

|$4

|$2

|-

|Operating profits ($'million)

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|$11,840

|$16,839

|$23,222

|$31,057

|$40,279

|$50,658

|$123,568

|$146,147

|$167,622

|$186,434

|$201,085

|$210,323

|$213,331

|$209,834

|$200,149

|$185,135

|$166,065

|$144,453

|$121,851

|$99,676

|$79,069

|$60,825

|$45,374

|$32,824

|$23,027

|$15,665

|$10,335

|$6,612

|$4,102

|$2,468

|$1,440

|$815

|$447

|$238

|$123

|$61

|$30

|$14

|$6

|$3

|Net profits ($'million)|| style="color: red;" |-12|| style="color: red;" |-30|| style="color: red;" |-78|| style="color: red;" |-83|| style="color: red;" |−56

| style="color: red;" |−1,962

| style="color: red;" |−976

|5,519

|12,556

|$9,354

|$13,302

|$18,346

|$24,535

|$31,820

|$40,020

|$97,619

|$115,456

|$132,421

|$147,283

|$158,857

|$166,156

|$168,531

|$165,769

|$158,118

|$146,256

|$131,192

|$114,118

|$96,263

|$78,744

|$62,465

|$48,052

|$35,846

|$25,931

|$18,191

|$12,376

|$8,164

|$5,223

|$3,240

|$1,949

|$1,137

|$643

|$353

|$188

|$97

|$48

|$24

|$11

|$5

|$2

| colspan="61" |<div style="text-align: center;">'''Balance sheet'''</div>

|Total assets<br />($'million)

|8

|44

|34

|52

|130

|386

|713

|1,114

|2,417

|5,831

|8,068

|22,664

|28,655

|29,740

|34,309

|52,148

|62,131

|82,338

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| colspan="61" |<div style="text-align: center;">'''Other'''</div>

|Employees

|NA

|70

|268

|252

|514

|899

|1,417

|2,914

|17,782

|37,543

|48,817

|48,016

|70,757

|99,290

|127,855

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=== What are the assumptions used to estimate the financial forecasts? ===

 

{| class="wikitable"

| colspan="3" | <div style="text-align: center;">'''Revenue'''</div>

|What's the estimated current size of the total addressable market?

|$2,975,000,000

|Here, the total addressable market (TAM) is defined as the global automotive market, and based on a number of assumptions<ref group="Note" name="Note01" />, it is estimated that the size of the market as of today (30th May 2022), in terms of revenue, is $2.975 trillion.

 

 

If the TAM is defined as the global energy market, then research suggests that the estimated size of the market is $6.777 trillion.<ref name=":16">https://www.ucl.ac.uk/bartlett/sustainable/sites/bartlett/files/an_exploration_of_energy_cost_ranges_limits_and_adjustment_process.pdf</ref>

|What is the estimated company lifespan?

|60 years

|Tesla employs around 110,000, making the company a large organisation (more than 10,000 employees), and research shows that the average lifespan of a large corporation is around 50 years.<ref>Stadler, Enduring Success, 3–5.</ref>

|What's the estimated annual growth rate of the total addressable market over the lifecycle of the company?

|3%

|Research shows that the growth rate of the global automotive market (i.e. the total addressable market) is similar to the growth rate of global gross domestic product<ref>http://www.robertpicard.net/files/econgrowthandadvertising.pdf</ref>, which has averaged (medium) around 3% per year in the last 20 years (2001 to 2022)<ref>https://www.macrotrends.net/countries/WLD/world/gdp-growth-rate</ref>.

|What's the estimated company peak market share?

|10%

|The Stockhub users estimate that especially given the leadership of the company, the peak market share of Tesla is around 10%, and, therefore, suggests using the share amount here. As of 31st December 2021, Tesla's current share of the market is estimated at around 1.8%.

|Which distribution function do you want to use to estimate company revenue?

|Gaussian

|Research suggests that the revenue pattern of companies is similar to the pattern produced by the Gaussian distribution function  (i.e. the revenue distribution is bell shaped)<ref>http://escml.umd.edu/Papers/ObsCPMT.pdf</ref>, so the Stockhub users suggest using that function here.

|What's the estimated standard deviation of company revenue?

| 6 years

|Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on Tesla's current revenue amount (i.e. $54 billion) and Tesla's estimated lifespan (i.e. 60 years) and Tesla's estimated current stage of its lifecycle (i.e. growth stage), the Stockhub users suggest using 6 years (i.e. 68% of all sales happen within 6 years either side of the mean year), so that's what's used here.

| colspan="3" |'''<div style="text-align: center;">Growth stages</div>'''

|How many main stages of growth is the company expected to go through?

| 4 stages

|Research suggests that a company typically goes through four distinct stages of cash flow growth.<ref>Levie J, Lichtenstein BB (2010) A terminal assessment of stages theory: Introducing a dynamic approach to entrepreneurship. Entrepreneurship: Theory & Practice 34(2): 317–350. <nowiki>https://doi.org/10.1111/j.1540-6520.2010.00377.x</nowiki></ref> Research also shows that incorporating those stages into the discounted cash flow model improves the quality of the model and, ultimately, the quality of the value estimation.<ref>Stef Hinfelaar et al.:, 2019.</ref>

 

In addition, research shows that a key way to determine the stage which a company is in is by examining the cash flow patterns of the company.<ref>Dickinson, 2010.</ref> A summary of the economic links to cash flow patterns can be found in the appendix of this report. The Stockhub users estimate that with Tesla's operating cash flows positive (+), investing cash flows negative (-) and its financing cash flows positive (+), the company is in the second stage of growth (i.e. the 'growth' stage), and, therefore, it has a total of three main stages of growth. Note, to account for one-off events, the three-year average (median) amount was used to calculate the cash flows.

 

On 7th February 2022, Tesla said it currently expects: to continue to generate net positive operating cash flow as it has done in the last four fiscal years; its capital expenditures to be between $5.00 to $7.00 billion in 2022 and each of the next two fiscal years; and its ability to be self-funding to continue as long as macroeconomic factors support current trends in its sales. Accordingly, based on forward looking statements, it appears that the company is in stage two of the business lifecycle  (i.e. the 'growth' stage), and, therefore, it has a total of three main stages of growth remaining.

|Operating expenses as a proportion of revenue (%)

|Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />, and the margin for its peers is 15%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.

|11%

|Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />, and the rate for its peers is 11%.

|7%

|Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />, and the margin for its peers is 7%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.

|10%

|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />, and the amount for its peers is 10%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.

|15%  

|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />, and the amount for its peers is 15%.

| colspan="3" |'''<div style="text-align: center;">Growth stage 3</div>'''

|62%

|Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />, and the margin for its peers is 62%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.  

|13%

|Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />, and the margin for its peers is 13%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.

|14%

|Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />, and the rate for its peers is 14%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.

|4%

|10%  

|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />, and the amount for its peers is 10%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.

|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />, and the amount for its peers is 37%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.

| 1%

|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />, and the amount for its peers is 1%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.

|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />, and the amount for its peers is 10%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.

|The Stockhub users suggest that for simplicity, the net borrowing figure is zero.

|The Stockhub users suggest that for simplicity, the interest amount figure is zero.

As with any investment, investing in Tesla carries a level of risk. Overall, based on the Tesla's adjusted beta (i.e. 2.12), the degree of risk associated with an investment in Tesla is 'high'.

 

Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'high' risk, it must have a beta value of 1.5 or more. Further information about the beta ratings can be found in the appendix section of this report.

 

The key risks can be found below. For us, currently, the biggest risk to the valuation of the company relates to the strong competition for its products and services from a growing list of established and new competitors (i.e. competition risk).

The Stockhub users estimate that the expected return of an investment in the company over the next five years is negative 24%. In other words, an £1,000 investment in the company is expected to return £760 in five years time. The assumptions used to estimate the return figure can be found in the table below.

Assuming that a suitable return level over five years is 10% per year and Tesla achieves its expected return level (of negative 24%), then an investment in the company is considered to be an 'unsuitable' one.

Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach<ref name=":5">Demirakos et al., 2010; Gleason et al., 2013</ref>, so that's the approach that he Stockhub users suggest to use here; nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the using the relative valuation approach (the valuation based on the relative approach can be found in the appendix of this report).   

Tesla has never paid cash dividends, and on 7th February 2022, it said that it currently does not anticipate paying any cash dividends in the foreseeable future. Accordingly, the Stockhub users suggest using the free cash flow valuation method (rather than the dividend discount model).  

|The only available long-term forecasts (i.e. >15 years) are the ones that are supplied by the Stockhub users (the forecasts can be found in the financials section of this report), so the Stockhub users suggest using those.

| 15%

| 90%

| Research suggests that a suitable rate for a company in this growth stage (i.e. stage 2) is 90%.

| 10%

| 10%

|$950.54 billion

|As at 5th June 2022, the current value of the Tesla company is $950.54 billion.

|Research suggests that following a market crash, the average amount of time it takes for the price of a stock market to return to its pre-crash level (i.e. the recovery period) is at least three years.<ref>https://www.newyorkfed.org/mediabrary/media/medialibrary/media/research/staff_reports/research_papers/9809.pdf</ref> Accordingly, Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.

#The discount rate (the default time-weighted average rate is 10%).