Editing Tesla, Inc.
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[[File:Tesla logo.jpg|150px]] | |||
Helping to accelerate the world's transition to sustainable energy. | |||
{| class="wikitable" | |||
|+ Key information | |||
|- | |||
| Risk/return|| High | |||
|- | |||
| Price per share|| $663.90<ref name=":1">https://uk.finance.yahoo.com/quote/TSLA/profile?p=TSLA</ref> | |||
|- | |||
| Asset class|| Equities<ref name=":2">https://sec.report/CIK/0001318605#:~:text=Tesla%2C%20Inc.%20is%20incorporated%20in,motor%20vehicles%20%26%20passenger%20car%20bodies.</ref> | |||
|- | |||
| Industry|| Consumer Cyclical<ref name=":1" /> | |||
|- | |||
| Country of incorporation|| United States<ref name=":2" /> | |||
|- | |||
| Minimum investment amount|| $10<ref name=":10">https://www.business2community.com/stocks/buy-tesla-stock</ref> | |||
|- | |||
| Maximum investment amount|| $687.81 billion<ref name=":1" /> | |||
|- | |||
| Current valuation|| $687.81 billion<ref name=":1" /> | |||
|- | |||
| Investor type|| All | |||
|- | |||
| Bid/ask spread (%)|| 0.0015063%<ref name=":1" /> | |||
|- | |||
| Commission amount|| Zero<ref name=":10" /> | |||
|- | |||
| Market|| Public<ref name=":1" /> | |||
|} | |||
==Summary== | |||
* Tesla is on a mission to accelerate the world's transition to sustainable energy.<ref name=":3">https://www.tesla.com/about</ref> | |||
* | *The company designs, develops, manufactures, sells and leases high-performance fully electric vehicles and energy generation and storage systems, and offers services related to its products. It 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. It 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> | ||
* Based on a number of assumptions, the expected return of an investment in the company over the next five years is 72%. In other words, an £1,000 investment in the company is expected to return £1,720 in five years time. | |||
* The degree of risk associated with an investment in Tesla is 'high'. | |||
* | |||
==Operations== | ==Operations== | ||
=== How did the idea of the company come about? === | === How did the idea of the company come about? === | ||
The idea of the company came about when the now founding team of the company realised that the current way that humankind is meeting its energy needs is unsustainable and bad for the | The idea of the company came about when the now founding team of the company realised that the current way that humankind is meeting its energy needs is unsustainable and bad for the environment.<ref name=":9">https://www.tesla.com/en_GB/blog/secret-tesla-motors-master-plan-just-between-you-and-me</ref> | ||
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 | 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>https://www.climatewatchdata.org/ghg-emissions?breakBy=sector&chartType=percentage&end_year=2018§ors=total-including-lucf&start_year=1990</ref><ref>https://www.wri.org/insights/4-charts-explain-greenhouse-gas-emissions-countries-and-sectors</ref> | ||
Researching into a better way to meet the energy needs, the team concluded that the best way to do so is to move to a solar electric economy, from a mine-and-burn hydrocarbon economy.<ref name=":9" /> | Researching into a better way to meet the energy needs, the team concluded that the best way to do so is to move to a solar electric economy, from a mine-and-burn hydrocarbon economy.<ref name=":9" /> | ||
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Model S is the fastest accelerating and longest ranging car that Tesla provides, with a zero-to-60 miles per hour acceleration of 3.1 seconds and a maximum distance range on a single battery charge of 405 miles, respectively.<ref>https://www.tesla.com/</ref> The price of the car in the US is $99,990.<ref name=":8" /> | Model S is the fastest accelerating and longest ranging car that Tesla provides, with a zero-to-60 miles per hour acceleration of 3.1 seconds and a maximum distance range on a single battery charge of 405 miles, respectively.<ref>https://www.tesla.com/</ref> The price of the car in the US is $99,990.<ref name=":8" /> | ||
[[File:Model S.jpg]] | [[File:Model S.jpg|600px]] | ||
{| class="wikitable" | |||
|+Competition comparison | |||
!Category | |||
!Model S<ref name=":8">https://www.tesla.com/models</ref> | |||
!Model 3<ref>https://www.tesla.com/model3</ref> | |||
!Model X<ref>https://www.tesla.com/modelx</ref> | |||
!Model Y<ref>https://www.tesla.com/modely</ref> | |||
|- | |||
|Is the vehicle fully electric? | |||
| style="background: orange; color: white;" |Yes | |||
| style="background: orange; color: white;" |Yes | |||
{| class="wikitable" | |||
|+ | |||
!Category | |||
! | |||
! | |||
! | |||
! | |||
| | |||
| style="background: orange; color: white;" |Yes | | style="background: orange; color: white;" |Yes | ||
| style="background: orange; color: white;" |Yes | | style="background: orange; color: white;" |Yes | ||
|- | |- | ||
|What's the top acceleration of the vehicle? | |What's the top acceleration of the vehicle? | ||
| style="background: | | style="background: green; color: white;" |3.1 seconds | ||
|style="background: | | style="background: red; color: white;" |5.8 seconds | ||
| style="background: orange; color: white;" |3.8 seconds | | style="background: orange; color: white;" |3.8 seconds | ||
| style="background: orange; color: white;" |4.8 seconds | | style="background: orange; color: white;" |4.8 seconds | ||
|- | |- | ||
|What's the maximum distance range of the vehicle on a single battery charge? | |What's the maximum distance range of the vehicle on a single battery charge? | ||
| style="background: green; color: white;" |405 miles | | style="background: green; color: white;" |405 miles | ||
|style="background: | | style="background: red; color: white;" |272 miles | ||
| style="background: orange; color: white;" |348 miles | | style="background: orange; color: white;" |348 miles | ||
| style="background: orange; color: white;" |330 miles | | style="background: orange; color: white;" |330 miles | ||
|- | |- | ||
|What's the top speed of the vehicle? | |What's the top speed of the vehicle? | ||
| style="background: green; color: white;" |155 miles per hour | |||
|style="background: green | |||
| style="background: orange; color: white;" |140 miles per hour | | style="background: orange; color: white;" |140 miles per hour | ||
|style="background: | | style="background: green; color: white;" |155 miles per hour | ||
| style="background: red; color: white;" |135 miles per hour | | style="background: red; color: white;" |135 miles per hour | ||
|- | |- | ||
|Which design type is the vehicle? | |Which design type is the vehicle? | ||
| style="background: orange; color: white;" |Sedan (i.e. car) | | style="background: orange; color: white;" |Sedan (i.e. car) | ||
|style="background: orange; color: white;" |Sedan (i.e. car) | | style="background: orange; color: white;" |Sedan (i.e. car) | ||
| style="background: orange; color: white;" |SUV (i.e. car) | | style="background: orange; color: white;" |SUV (i.e. car) | ||
| style="background: orange; color: white;" |SUV (i.e. car) | | style="background: orange; color: white;" |SUV (i.e. car) | ||
|- | |- | ||
|What is the safety rating of the vehicle? | |What is the safety rating of the vehicle? | ||
| style="background: orange; color: white;" |5 out of 5 stars | | style="background: orange; color: white;" |5 out of 5 stars | ||
| style="background: orange; color: white;" |5 out of 5 stars | | style="background: orange; color: white;" |5 out of 5 stars | ||
| style="background: orange; color: white;" |5 out of 5 stars | | style="background: orange; color: white;" |5 out of 5 stars | ||
| style="background: orange; color: white;" |5 out of 5 stars | | style="background: orange; color: white;" |5 out of 5 stars | ||
|- | |- | ||
|How many seats does the vehicle have? | |How many seats does the vehicle have? | ||
| style="background: red; color: white;" |5 seats | | style="background: red; color: white;" |5 seats | ||
|style="background: red; color: white;" |5 seats | | style="background: red; color: white;" |5 seats | ||
| style="background: orange; color: white;" |7 seats | | style="background: orange; color: white;" |7 seats | ||
| style="background: orange; color: white;" |7 seats | | style="background: orange; color: white;" |7 seats | ||
|- | |- | ||
|What's the cargo capacity of the vehicle? | |What's the cargo capacity of the vehicle? | ||
| style="background: | | style="background: orange; color: white;" |28 cubic feet | ||
| style="background: red; color: white;" |23 cubic feet | | style="background: red; color: white;" |23 cubic feet | ||
|style="background: | | style="background: green; color: white;" |88 cubic feet | ||
|style="background: | | style="background: orange; color: white;" |76 cubic feet | ||
|- | |- | ||
|Which drive wheel does the vehicle have? | |Which drive wheel does the vehicle have? | ||
| style="background: orange; color: white;" |All-wheel drive | | style="background: orange; color: white;" |All-wheel drive | ||
| style="background: red; color: white;" |Rear-wheel drive | | style="background: red; color: white;" |Rear-wheel drive | ||
| style="background: orange; color: white;" |All-wheel drive | | style="background: orange; color: white;" |All-wheel drive | ||
|style="background: orange; color: white;" |All-wheel drive | | style="background: orange; color: white;" |All-wheel drive | ||
|- | |- | ||
|What's the price of the vehicle? | |What's the price of the vehicle? | ||
| style="background: orange; color: white;" |$99,990 | | style="background: orange; color: white;" |$99,990 | ||
| style="background: green; color: white;" |$46,990 | | style="background: green; color: white;" |$46,990 | ||
|style="background: | | style="background: red; color: white;" |$114,990 | ||
| style="background: orange; color: white;" |$62,990 | | style="background: orange; color: white;" |$62,990 | ||
|- | |- | ||
|What's the vehicle's price per cargo capacity? | |What's the vehicle's price per cargo capacity? | ||
| style="background: | | style="background: red; color: white;" |$3,571 per cubic feet | ||
|style="background: | | style="background: orange; color: white;" |$2,043 per cubic feet | ||
| style="background: orange; color: white;" |$1,307 per cubic feet | | style="background: orange; color: white;" |$1,307 per cubic feet | ||
| style="background: green; color: white;" |$829 per cubic feet | | style="background: green; color: white;" |$829 per cubic feet | ||
|- | |- | ||
|What's the vehicle's price per | |What's the vehicle's price per passenger? | ||
| style="background: | | style="background: red; color: white;" |$19,998 per passenger | ||
| style="background: orange; color: white;" |$9,398 per passenger | |||
| style="background: orange; color: white;" |$16,427 per passenger | |||
| style="background: green; color: white;" |$8,999 per passenger | |||
| style="background: orange; color: white;" |$9,398 per | |||
|style="background: orange; color: white;" |$ | |||
| style="background: green; color: white;" |$8,999 per | |||
|} | |} | ||
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!Category | !Category | ||
!Winner | !Winner | ||
|- | |- | ||
|Which Tesla car has the fastest acceleration? | |Which Tesla car has the fastest acceleration? | ||
|Model S | |Model S | ||
|- | |- | ||
|Which Tesla car has the longest range? | |Which Tesla car has the longest range? | ||
|Model S | |Model S | ||
|- | |- | ||
|Which Tesla car has the largest cargo capacity? | |Which Tesla car has the largest cargo capacity? | ||
|Model X | |Model X | ||
|- | |- | ||
|Which Tesla car is the lowest priced? | |Which Tesla car is the lowest priced? | ||
|Model 3 | |Model 3 | ||
|- | |- | ||
|Which Tesla car has the lowest price per cargo capacity? | |Which Tesla car has the lowest price per cargo capacity? | ||
|Model Y | |Model Y | ||
|- | |- | ||
|Which Tesla car has the lowest price per | |Which Tesla car has the lowest price per passenger? | ||
|Model Y | |Model Y | ||
|} | |} | ||
'''Model 3''' | |||
Model 3 is the lowest priced car that Tesla provides, selling in the US at $46,990. | |||
[[File:Rhd-model-3-social.png|600px]] | |||
'''Model X''' | |||
Model X is the largest cargo capacity car that Tesla provides, with a cargo capacity of 88 cubic feet. The price of the car in the US is $114,990. | |||
[[File:MX-Hero-Desktop.jpg|600px]] | |||
'''Model Y''' | |||
Model Y is the lowest price per cargo capacity and lowest price per passenger car that Tesla provides, at $829 per cubic feet and $8,999 per passenger, respectively. The price of the car in the US is $62,990. | |||
[[File:Model y red.jpg|600px]] | |||
====== Automotive leasing ====== | ====== Automotive leasing ====== | ||
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Cybertruck is a truck, a motor vehicle designed to transport cargo, carry specialised payloads, or perform other utilitarian work. What will be unique about the offering is that it will be the safest vehicle that Tesla provides. The price of the offering is expected to be $39,900.<ref>https://www.autoexpress.co.uk/tesla/cybertruck/96447/tesla-cybertruck-delayed-until-least-2023#:~:text=Tesla%20Cybertruck%3A%20performance%20and%20range&text=Entry%2Dlevel%2C%20Single%20Motor%2C,a%20top%20speed%20of%20110mph.</ref> | Cybertruck is a truck, a motor vehicle designed to transport cargo, carry specialised payloads, or perform other utilitarian work. What will be unique about the offering is that it will be the safest vehicle that Tesla provides. The price of the offering is expected to be $39,900.<ref>https://www.autoexpress.co.uk/tesla/cybertruck/96447/tesla-cybertruck-delayed-until-least-2023#:~:text=Tesla%20Cybertruck%3A%20performance%20and%20range&text=Entry%2Dlevel%2C%20Single%20Motor%2C,a%20top%20speed%20of%20110mph.</ref> | ||
[[File:Cybertruck-Hero-Desktop.jpg]] | [[File:Cybertruck-Hero-Desktop.jpg|600px]] | ||
'''Tesla Roadster''' | '''Tesla Roadster''' | ||
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The Tesla Roadster is a car. What will be unique about the offering is that it will be the fastest accelerating and longest ranging car that Tesla provides. The price of the offering is around $200,000.<ref>https://carbuzz.com/cars/tesla/roadster</ref> | The Tesla Roadster is a car. What will be unique about the offering is that it will be the fastest accelerating and longest ranging car that Tesla provides. The price of the offering is around $200,000.<ref>https://carbuzz.com/cars/tesla/roadster</ref> | ||
[[File:Tesla-roadster.jpg]] | [[File:Tesla-roadster.jpg|600px]] | ||
'''Tesla Semi''' | '''Tesla Semi''' | ||
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Tesla Semi is a semi-trailer truck, a motor vehicle that is designed to transport large cargo, via one or more of its attached trailers. What will be unique about the offering is that it will be the largest cargo capacity vehicle that Tesla provides. The price of the offering is around $150,000. | Tesla Semi is a semi-trailer truck, a motor vehicle that is designed to transport large cargo, via one or more of its attached trailers. What will be unique about the offering is that it will be the largest cargo capacity vehicle that Tesla provides. The price of the offering is around $150,000. | ||
[[File:Tesla-semi.jpg]] | [[File:Tesla-semi.jpg|600px]] | ||
======Ride-hailing service====== | ======Ride-hailing service====== | ||
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'''Powerwall''' | '''Powerwall''' | ||
Powerwall is a energy storage system (i.e. a type of battery).<ref name=":4" /> What’s unique about the offering is that it's the lowest priced energy storage system that Tesla provides | Powerwall is a energy storage system (i.e. a type of battery).<ref name=":4" /> What’s unique about the offering is that it's the lowest priced energy storage system that Tesla provides. A single Powerwall sells for $10,500. | ||
[[File: | [[File:Powerwall2.jpg|600px]] | ||
{| class="wikitable" | {| class="wikitable" | ||
|+ | |+Competition comparison | ||
|- | |- | ||
! !!Powerwall!!'''Megapack''' | |||
|- | |- | ||
| | |Is the source of energy solar?||style="background: green; color: white;" |Yes||style="background: green; color: white;" |Yes | ||
| | |||
| | |||
|- | |- | ||
| | |Is it designed for houses (i.e. smaller electricity demand)?||style="background: green; color: white;" |Yes||style="background: red; color: white;" |No | ||
| | |||
| | |||
|- | |- | ||
| | |Is it designed for commercial buildings (i.e. greater electricity demand)?||style="background: red; color: white;" |No|| style="background: green; color: white;" |Yes | ||
|$ | |} | ||
| | |||
'''Megapack''' | |||
Megapack is an energy storage system.<ref name=":4" /> What’s unique about the offering is that it's the largest energy storage system that Tesla provides. A single Megapack sells for $1,000,000. | |||
[[File:Megapack-CleanerGrid-D.jpg|600px]] | |||
'''Solar Roof''' | |||
Solar Roof is a roof tile.<ref name=":4" /> What makes the tile unique is that it's the most aesthetically-beautiful, energy generation roof tile. In other words, it's the most beautiful roof tile that generates electricity. There is no information on the price of the offering within the public domain. | |||
[[File:5c603e0d86d2c7c005d1df44a jVVOsV8.jpg|600px]] | |||
{| class="wikitable" | |||
|+Competition comparison | |||
|- | |||
! !!Solar Roof!!Traditional roof tile | |||
!Other solar-energy generation roof tile | |||
|- | |||
|Does it generate electricity?|| style="background: green; color: white;" |Yes|| style="background: red; color: white;" |No | |||
| style="background: green; color: white;" |Yes | |||
|- | |||
|Is it aesthetically beautiful?|| style="background: green; color: white;" |Yes|| style="background: green; color: white;" |Yes | |||
| style="background: red; color: white;" |No | |||
|} | |} | ||
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Tesla offers certain loan and power purchase agreement (PPA) options to residential or commercial customers who pair energy storage systems with solar energy systems.<ref name=":4" /> The company offers certain financing options to its solar customers, which enable the customer to purchase and own a solar energy system, Solar Roof or integrated solar and Powerwall system.<ref name=":4" /> Its solar PPAs, offered to commercial customers, charges a fee per kilowatt-hour based on the amount of electricity produced by its solar energy systems.<ref name=":4" /> | Tesla offers certain loan and power purchase agreement (PPA) options to residential or commercial customers who pair energy storage systems with solar energy systems.<ref name=":4" /> The company offers certain financing options to its solar customers, which enable the customer to purchase and own a solar energy system, Solar Roof or integrated solar and Powerwall system.<ref name=":4" /> Its solar PPAs, offered to commercial customers, charges a fee per kilowatt-hour based on the amount of electricity produced by its solar energy systems.<ref name=":4" /> | ||
Note: a PPA is a contract between two parties, one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer). The agreement defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination. | |||
===From which place(s) are the offerings able to be purchased?=== | ===From which place(s) are the offerings able to be purchased?=== | ||
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===From which place(s) are the offerings promoted?=== | ===From which place(s) are the offerings promoted?=== | ||
The main way that Tesla promotes the | The main way that Tesla promotes the offering is through media coverage and word of mouth. | ||
=== What's the current strategy of the company? === | === What's the current strategy of the company? === | ||
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# Develop a self-driving capability that is 10x safer than manual, via massive fleet learning; and | # Develop a self-driving capability that is 10x safer than manual, via massive fleet learning; and | ||
# Enable your car to make money for you when you aren't using it. | # Enable your car to make money for you when you aren't using it. | ||
It's worth noting that 10 years earlier | It's worth noting that 10 years earlier, 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: | ||
#Build a sports car | #Build a sports car; | ||
#Use that money to build an affordable car | #Use that money to build an affordable car; | ||
#Use that money to build an even more affordable car | #Use that money to build an even more affordable car; and | ||
#Provide zero emission electric power generation options | #Provide zero emission electric power generation options. | ||
== Market== | == Market== | ||
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Here, the total addressable market (TAM) is defined as the global automotive market, and based on a number of assumptions, it is estimated that the size of the market as of today (30th May 2022), in terms of revenue, is $3.0 trillion. | Here, the total addressable market (TAM) is defined as the global automotive market, and based on a number of assumptions, it is estimated that the size of the market as of today (30th May 2022), in terms of revenue, is $3.0 trillion. | ||
===Serviceable Available Market=== | ===Serviceable Available Market=== | ||
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[[File:Elon Musk Royal Society (crop2).jpg|200px]] | [[File:Elon Musk Royal Society (crop2).jpg|200px]] | ||
Elon Musk is the Chief Executive Officer of Tesla and 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. | |||
====Chief Financial Officer==== | ====Chief Financial Officer==== | ||
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Ira has served as the Chairman of the Silicon Valley Technology Innovation & Entrepreneurship Forum (SVIEF) for many years. He is also an active leader at Stanford University, where he has served on the Board of Visitors of Stanford Law School and is currently an advisory board member of the Stanford Global Climate and Energy Project (GCEP) and the Stanford Precourt Institute for Energy (PIE) Advisory Council. Ira has also been a guest lecturer, including helping to teach a course on Venture Capital. In addition, Ira served for many years on the Advisory Board of the Forum for Women Entrepreneurs (FWE). | Ira has served as the Chairman of the Silicon Valley Technology Innovation & Entrepreneurship Forum (SVIEF) for many years. He is also an active leader at Stanford University, where he has served on the Board of Visitors of Stanford Law School and is currently an advisory board member of the Stanford Global Climate and Energy Project (GCEP) and the Stanford Precourt Institute for Energy (PIE) Advisory Council. Ira has also been a guest lecturer, including helping to teach a course on Venture Capital. In addition, Ira served for many years on the Advisory Board of the Forum for Women Entrepreneurs (FWE). | ||
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. | |||
'''Larry Ellison''' | '''Larry Ellison''' | ||
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==Financials== | ==Financials== | ||
=== Historic === | === Historic === | ||
For the fiscal (and calendar) year 2021, Tesla reported a net income of $5.52 billion.<ref name="Tesla4Q2021final" /> The annual revenue was $53.8 billion, an increase of 71% over the previous fiscal year.<ref name="Tesla4Q2021final" /> | |||
Tesla ended 2020 with over $19 billion of cash on hand after having raised approximately $12 billion in stock sales.<ref name=bb20210208 /> At the end of 2019 it had $6.3 billion cash on hand.<ref name=ars20210128 /> | |||
==== | Of the revenue number in 2021, $314 million came from selling regulatory credits to other automakers to meet government pollution standards. That number has been a smaller percentage of revenue for multiple quarters.<ref name=Tesla4Q2021final /> In Q1 2022, Tesla sold $679 million of regulatory carbon credits.<ref>{{Cite news |date= |title=Tesla Carbon Credit Sales Jump by 116% |work=CarbonCredits.com |url=https://carboncredits.com/tesla-regulatory-carbon-credit-sales-jumps-116/}}</ref> | ||
{| | |||
| | In February 2021, a 10-K filing revealed that Tesla had invested some $1.5 billion in the cryptocurrency Bitcoin, and the company indicated it would soon accept Bitcoin as a form of payment.<ref name="bb20210208">{{cite news |title=Tesla Bets on Bitcoin in Blue-Chip Boost to Cryptocurrency |url=https://www.bloomberg.com/news/articles/2021-02-08/tesla-bets-1-5-billion-on-bitcoin-in-new-policy-crypto-surges |work=[[Bloomberg News|Bloomberg]] |date=February 8, 2021 |access-date=February 8, 2021 }}</ref> Tesla made more profit from the 2021 investment than the profit from selling cars in 2020, due to the Bitcoin price increase after the investment was announced.<ref>{{Cite news|last=Correspondent|first=James Dean, Chief Business|title=Tesla made more profit from bitcoin in a month than from selling cars last year|newspaper=[[The Times]]|language=en|url=https://www.thetimes.co.uk/article/tesla-made-more-profit-from-bitcoin-in-a-month-than-from-selling-cars-last-year-5sfl6qd0h|access-date=February 19, 2021|issn=0140-0460}}</ref><ref>{{cite web|title=Tesla May Have Already Made More In Profits From Bitcoin Than Electric Vehicles|url=https://finance.yahoo.com/news/tesla-may-already-made-more-224537165.html|access-date=February 19, 2021|website=finance.yahoo.com|language=en-US}}</ref> | ||
The quarter ending June 2021 was the first time Tesla made a profit independent of Bitcoin and regulatory credits.<ref>{{cite web|last=O'Kane|first=Sean|date=July 26, 2021|title=Tesla finally made a profit without the help of emission credits|url=https://www.theverge.com/2021/7/26/22594778/tesla-q2-2021-earnings-revenue-profit-credits-emissions-bitcoin|access-date=October 22, 2021|website=The Verge|language=en}}</ref> | |||
{| class="wikitable" style="text-align:right;" | |||
|- | |||
!Year | |||
!Revenue<br />($'million) | |||
!Net income<br />($'million) | |||
!Total assets<br />($'million) | |||
!Employees | |||
|- | |||
|align=left|2005 | |||
| 0 | |||
| -12 | |||
| 8 | |||
| | |||
|- | |||
|align=left|2006<ref>{{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 /> | |||
| 0 | |||
| -30 | |||
| 44 | |||
| 70 | |||
|- | |||
|align=left|2007 | |||
|0.073 | |||
| -78 | |||
| 34 | |||
| 268 | |||
|- | |- | ||
|align=left|2008 | |||
| 15 | |||
| -83 | |||
| 52 | |||
| 252 | |||
|- | |- | ||
| | |align=left|2009 | ||
| 112 | |||
| −56 | |||
| 130 | |||
| 514 | |||
| | |||
| | |||
| | |||
| | |||
|- | |- | ||
| | |align=left|2010<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> | ||
| 117 | |||
| −154 | |||
| 386 | |||
| 899 | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
|- | |- | ||
| | |align=left|2011<ref name=SEC /> | ||
| 204 | |||
| −254 | |||
| 713 | |||
|1,417 | |||
|- | |- | ||
| | |align=left|2012<ref name=SEC /> | ||
|413 | |413 | ||
| −396 | |||
|1,114 | |||
|2,914 | |||
|- | |||
|align=left|2013<ref name=SEC /> | |||
|2,013 | |2,013 | ||
| −74 | |||
|2,417 | |||
|5,859 | |||
|- | |||
|align=left|2014<ref name=SEC /> | |||
|3,198 | |3,198 | ||
| −294 | |||
|5,831 | |||
|10,161 | |||
|- | |||
|align=left|2015<ref name=SEC /> | |||
|4,046 | |4,046 | ||
| −889 | |||
|8,068 | |||
|13,058 | |||
|- | |||
|align=left|2016<ref name=SEC /> | |||
|7,000 | |7,000 | ||
| −675 | |||
|22,664 | |||
|17,782 | |||
|- | |||
|align=left|2017<ref name=SEC /> | |||
|11,759 | |11,759 | ||
| −1,962 | |||
|28,655 | |||
|37,543 | |||
|- | |||
|align=left|2018<ref name=SEC /> | |||
|21,461 | |21,461 | ||
| −976 | |||
|29,740 | |||
|48,817 | |||
|- | |||
|align=left|2019<ref name=SEC /> | |||
|24,578 | |24,578 | ||
| −862 | |||
|34,309 | |||
|48,016 | |||
|- | |||
|align=left|2020<ref name=SEC /> | |||
|31,536 | |31,536 | ||
|721 | |||
|52,148 | |||
|70,757 | |||
|- | |||
|align=left|2021<ref name=SEC /> | |||
|53,823 | |53,823 | ||
| | |5,519 | ||
|$78,935 | |62,131 | ||
|$112,257 | |99,290 | ||
|$154,816 | |} | ||
|$207,049 | |||
|$268,527 | === Forward === | ||
|$337,721 | |||
|$411,894 | ====What are the financial forecasts?==== | ||
=====Income statement===== | |||
{| class="wikitable" | |||
|+Income statement<ref>Source: Stockhub Limited</ref><ref group="Note" name="Note04" /> | |||
|- | |||
!Year | |||
!'''1''' !!'''2'''!!'''3'''!!'''4'''!!'''5''' | |||
!'''6''' | |||
!'''7''' | |||
!'''8''' | |||
!'''9''' | |||
!'''10''' | |||
!'''11''' | |||
!'''12''' | |||
!'''13''' | |||
!'''14''' | |||
!'''15''' | |||
!'''16''' | |||
!'''17''' | |||
!'''18''' | |||
!'''19''' | |||
!'''20''' | |||
!'''21''' | |||
!'''22''' | |||
!'''23''' | |||
!'''24''' | |||
!'''25''' | |||
!'''26''' | |||
!'''27''' | |||
!'''28''' | |||
!'''29''' | |||
!'''30''' | |||
!'''31''' | |||
!'''32''' | |||
!'''33''' | |||
!'''34''' | |||
!'''35''' | |||
!'''36''' | |||
!'''37''' | |||
!'''38''' | |||
!'''39''' | |||
!'''40''' | |||
!'''41''' | |||
!'''42''' | |||
|- | |||
|Year end date||31/12/2022||31/12/2023||31/12/2024||31/12/2025 ||31/12/2026 | |||
|31/12/2027 | |||
|31/12/2028 | |||
|31/12/2029 | |||
|31/12/2030 | |||
|31/12/2031 | |||
|31/12/2032 | |||
|31/12/2033 | |||
|31/12/2034 | |||
|31/12/2035 | |||
|31/12/2036 | |||
|31/12/2037 | |||
|31/12/2038 | |||
|31/12/2039 | |||
|31/12/2040 | |||
|31/12/2041 | |||
|31/12/2042 | |||
|31/12/2043 | |||
|31/12/2044 | |||
|31/12/2045 | |||
|31/12/2046 | |||
|31/12/2047 | |||
|31/12/2048 | |||
|31/12/2049 | |||
|31/12/2050 | |||
|31/12/2051 | |||
|31/12/2052 | |||
|31/12/2053 | |||
|31/12/2054 | |||
|31/12/2055 | |||
|31/12/2056 | |||
|31/12/2057 | |||
|31/12/2058 | |||
|31/12/2059 | |||
|31/12/2060 | |||
|31/12/2061 | |||
|31/12/2062 | |||
|31/12/2063 | |||
|- | |||
|Revenues ($'million)|| $78,935||$112,257||$154,816||$207,049||$268,527 | |||
|$337,721 | |||
|$411,894 | |||
|$487,157 | |$487,157 | ||
|$558,739 | |$558,739 | ||
Line 838: | Line 699: | ||
|$2 | |$2 | ||
|- | |- | ||
|Gross profits ($'million) | |Gross profits ($'million)||$23,680||$33,677||$46,445||$62,115||$80,558 | ||
| | |$101,316 | ||
|$185,352 | |||
|$23,680 | |||
|$33,677 | |||
|$46,445 | |||
|$62,115 | |||
|$80,558 | |||
|$101,316 | |||
|$185,352 | |||
|$219,221 | |$219,221 | ||
|$251,432 | |$251,432 | ||
Line 900: | Line 738: | ||
|$1 | |$1 | ||
|- | |- | ||
|Operating profits ($'million) | |Operating profits ($'million)||$11,840||$16,839||$23,222||$31,057||$40,279 | ||
| | |$50,658 | ||
|$123,568 | |||
|$146,147 | |||
|$167,622 | |||
|$186,434 | |||
|$201,085 | |||
|$11,840 | |||
|$16,839 | |||
|$23,222 | |||
|$31,057 | |||
|$40,279 | |||
|$50,658 | |||
|$123,568 | |||
|$146,147 | |||
|$167,622 | |||
|$186,434 | |||
|$201,085 | |||
|$210,323 | |$210,323 | ||
|$213,331 | |$213,331 | ||
Line 962: | Line 777: | ||
|$1 | |$1 | ||
|- | |- | ||
|Net profits ($'million)| | |Net profits ($'million)||$9,354||$13,302||$18,346||$24,535|| $31,820 | ||
|$9,354 | |||
|$13,302 | |||
|$18,346 | |||
|$24,535 | |||
|$31,820 | |||
|$40,020 | |$40,020 | ||
|$97,619 | |$97,619 | ||
Line 1,018: | Line 815: | ||
|$1 | |$1 | ||
|$0 | |$0 | ||
|} | |||
===== Balance sheet===== | |||
=====Cash flow statement===== | |||
====What are the assumptions used to estimate the financial forecasts?==== | |||
{| class="wikitable" | |||
|+Key inputs | |||
!Description | |||
!Value | |||
!Commentary | |||
|- | |||
| 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 billion. | |||
|- | |||
|What's the estimated terminal annual growth rate of the total addressable market? | |||
|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% | |||
|Stockhub estimates that 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 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 Stockhub suggests using that function here. | |||
|- | |||
|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 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 company suggests 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. Stockhub estimates 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. | |||
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. | |||
|- | |- | ||
| | |What proportion of the company lifecycle is represented by growth stage 1? | ||
|- | |30% | ||
| | |Research suggests 30%.<ref name=":6">http://escml.umd.edu/Papers/ObsCPMT.pdf</ref> | ||
|- | |||
|What proportion of the company lifecycle is represented by growth stage 2? | |||
|10% | |||
|Research suggests 10%.<ref name=":6" /> | |||
| | |||
| | |||
|- | |- | ||
| | | What proportion of the company lifecycle is represented by growth stage 3? | ||
| | |20% | ||
| | | Research suggests 20%.<ref name=":6" /> | ||
| | |- | ||
| | |What proportion of the company lifecycle is represented by growth stage 4? | ||
| | |40% | ||
| | |Research suggests 40%.<ref name=":6" /> | ||
| | |- | ||
|2 | | colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>''' | ||
| | |- | ||
| | |Cost of goods sold as a proportion of revenue (%) | ||
| | |70% | ||
| | |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">http://people.stern.nyu.edu/adamodar/pdfiles/papers/younggrowth.pdf</ref>, and the margin for its peers is 70%. | ||
| | |- | ||
| | |Operating expenses as a proportion of revenue (%) | ||
| | |15% | ||
| | |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%. | ||
| | |- | ||
| | |Tax rate (%) | ||
| | |21% | ||
| | |Research suggests that it's best to use the marginal tax rate of the country in which the company mainly operates. Tesla mainly operates in the United States, and the marginal tax rate there is 21%. | ||
| | |- | ||
| | |Depreciation and amortisation as a proportion of revenue (%) | ||
| | |5% | ||
| | |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 5%. | ||
| | |- | ||
| | |Fixed capital as a proportion of revenue (%) | ||
| | |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%. | ||
| | |- | ||
| | |Working capital as a proportion of revenue (%) | ||
| | |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%. | ||
| | |- | ||
| | |Net borrowing ($000) | ||
| | |Zero | ||
| | |Stockhub suggests that for simplicity, the net borrowing figure is zero. | ||
| | |- | ||
| | |Interest amount ($000) | ||
| | |Zero | ||
| | |Stockhub suggests that for simplicity, the interest amount figure is zero. | ||
| | |- | ||
| | | colspan="3" |'''<div style="text-align: center;">Growth stage 3</div>''' | ||
| | |- | ||
| | |Cost of goods sold as a proportion of revenue (%) | ||
| | |55% | ||
| | |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 55%. | ||
| | |- | ||
| | |Operating expenses as a proportion of revenue (%) | ||
| | |15% | ||
| | |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 15%. | ||
| | |||
|- | |- | ||
| | |Tax rate (%) | ||
|21% | |||
|Research suggests that it's best to use the marginal tax rate of the country in which the company mainly operates. Tesla mainly operates in the United States, and the marginal tax rate there is 21%. | |||
|- | |- | ||
| | |Depreciation and amortisation as a proportion of revenue (%) | ||
|5% | |||
|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 3)<ref name=":7" />, and the amount for its peers is 5%. | |||
|- | |- | ||
| | |Fixed capital as a proportion of revenue (%) | ||
| | |3% | ||
| | |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 3)<ref name=":7" />, and the amount for its peers is 3%. | ||
|- | |- | ||
| | |Working capital as a proportion of revenue (%) | ||
| | |10% | ||
|Research | |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%. | ||
|- | |- | ||
| | |Net borrowing ($000) | ||
| | |Zero | ||
| | |Stockhub suggests that for simplicity, the net borrowing figure is zero. | ||
|- | |- | ||
| | |Interest amount ($000) | ||
| | |Zero | ||
| | |Stockhub suggests that for simplicity, the interest amount figure is zero. | ||
|- | |- | ||
| | | colspan="3" |'''<div style="text-align: center;">Growth stage 4</div>''' | ||
| | |||
|- | |- | ||
|Cost of goods sold as a proportion of revenue (%) | |||
|55% | |||
|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 4)<ref name=":7" />, and the margin for its peers is 55%. | |||
|Cost of goods sold 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 | |||
|- | |- | ||
|Operating expenses as a proportion of revenue (%) | |Operating expenses as a proportion of revenue (%) | ||
|15% | |15% | ||
|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 | |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 4)<ref name=":7" />, and the margin for its peers is 15%. | ||
|- | |- | ||
|Tax rate (%) | |Tax rate (%) | ||
| | |21% | ||
|Research suggests that it's best to use | |Research suggests that it's best to use the marginal tax rate of the country in which the company mainly operates. Tesla mainly operates in the United States, and the marginal tax rate there is 21%. | ||
|- | |- | ||
|Depreciation and amortisation as a proportion of revenue (%) | |Depreciation and amortisation as a proportion of revenue (%) | ||
| | |5% | ||
|Research suggests that it's best to use a similar | |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 5%. | ||
|- | |- | ||
|Fixed capital as a proportion of revenue (%) | |Fixed capital as a proportion of revenue (%) | ||
| | | 3% | ||
|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 | |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 3%. | ||
|- | |- | ||
|Working capital as a proportion of revenue (%) | |Working capital as a proportion of revenue (%) | ||
| | | 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 | |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%. | ||
|- | |- | ||
|Net borrowing ($000) | |Net borrowing ($000) | ||
Line 1,244: | Line 984: | ||
|Zero | |Zero | ||
|Stockhub suggests that for simplicity, the interest amount figure is zero. | |Stockhub suggests that for simplicity, the interest amount figure is zero. | ||
| | |} | ||
==Risks== | |||
As with any investment, investing in Tesla carries a level of risk. Overall, based on the key risks highlighted below, the degree of risk associated with an investment in Tesla is high. | |||
===Risks related to the ability to grow the business=== | |||
*Tesla may be impacted by macroeconomic conditions resulting from the global COVID-19 pandemic. | |||
*Tesla may experience delays in launching and ramping the production of its products and features, or Tesla may be unable to control its manufacturing costs. | |||
*Tesla may be unable to grow its global product sales, delivery and installation capabilities and its servicing and vehicle charging networks, or Tesla may be unable to accurately project and effectively manage its growth. | |||
*Tesla's future growth and success is dependent upon consumers’ demand for electric vehicles and specifically its vehicles in an automotive industry that is generally competitive, cyclical and volatile. | |||
*Tesla's suppliers may fail to deliver components according to schedules, prices, quality and volumes that are acceptable to us, or Tesla may be unable to manage these components effectively. | |||
*Tesla may be unable to meet its projected construction timelines, costs and production ramps at new factories, or Tesla may experience difficulties in generating and maintaining demand for products manufactured there. | |||
* Tesla will need to maintain and significantly grow its access to battery cells, including through the development and manufacture of its own cells, and control its related costs. | |||
*Tesla faces strong competition for its products and services from a growing list of established and new competitors. | |||
===Risks related to the company's operations=== | |||
*Tesla may experience issues with lithium-ion cells or other components manufactured at Gigafactory Nevada and Gigafactory Shanghai, which may harm the production and profitability of its vehicle and energy storage products. | |||
*Tesla faces risks associated with maintaining and expanding its international operations, including unfavourable and uncertain regulatory, political, economic, tax and labour conditions. | |||
*Tesla's business may suffer if its products or features contain defects, fail to perform as expected or take longer than expected to become fully functional. | |||
*Tesla may be required to defend or insure against product liability claims. | |||
*Tesla will need to maintain public credibility and confidence in its long-term business prospects in order to succeed. | |||
*Tesla may be unable to effectively grow, or manage the compliance, residual value, financing and credit risks related to, its various financing programs. | |||
*Tesla must manage ongoing obligations under its agreement with the Research Foundation for the State University of New York relating to its Gigafactory New York. | |||
*If Tesla is unable to attract, hire and retain key employees and qualified personnel, its ability to compete may be harmed. | |||
*Tesla is highly dependent on the services of Elon Musk, its Chief Executive Officer. | |||
*Tesla's information technology systems or data, or those of its service providers or customers or users could be subject to cyber-attacks or other security incidents, which could result in data breaches, intellectual property theft, claims, litigation, regulatory investigations, significant liability, reputational damage and other adverse consequences. | |||
*Any unauthorized control or manipulation of Tesla's products’ systems could result in loss of confidence in it and its products. | |||
*Tesla's business may be adversely affected by any disruptions caused by union activities. | |||
*Tesla may choose to or be compelled to undertake product recalls or take other similar actions. | |||
*Tesla's current and future warranty reserves may be insufficient to cover future warranty claims. | |||
*Tesla's insurance coverage strategy may not be adequate to protect it from all business risks. | |||
*Tesla's debt agreements contain covenant restrictions that may limit its ability to operate its business. | |||
*Additional funds may not be available to Tesla when it needs or want them. | |||
*Tesla may be negatively impacted by any early obsolescence of its manufacturing equipment. | |||
*Tesla holds and may acquire digital assets that may be subject to volatile market prices, impairment and unique risks of loss. | |||
*There is no guarantee that Tesla will have sufficient cash flow from its business to pay its indebtedness or that it will not incur additional indebtedness. | |||
*Tesla is exposed to fluctuations in currency exchange rates. | |||
*Tesla may need to defend itself against intellectual property infringement claims, which may be time-consuming and expensive. | |||
*Increased scrutiny and changing expectations from stakeholders with respect to the company's ESG practices may result in additional costs or risks. | |||
* Tesla's operations could be adversely affected by events outside of its control, such as natural disasters, wars or health epidemics. | |||
===Risks related to government laws and regulations=== | |||
* Demand for Tesla's products and services may be impacted by the status of government and economic incentives supporting the development and adoption of such products. | |||
*Tesla is subject to evolving laws and regulations that could impose substantial costs, legal prohibitions or unfavourable changes upon its operations or products. | |||
*Any failure by Tesla to comply with a variety of United States and international privacy and consumer protection laws may harm the company. | |||
*Tesla could be subject to liability, penalties and other restrictive sanctions and adverse consequences arising out of certain governmental investigations and proceedings. | |||
*Tesla may face regulatory challenges to or limitations on its ability to sell vehicles directly. | |||
===Risks related to the ownership of the company's common stock=== | |||
*The trading price of Tesla's common stock is likely to continue to be volatile. | |||
* Tesla's financial results may vary significantly from period to period due to fluctuations in its operating costs and other factors. | |||
*Tesla may fail to meet its publicly announced guidance or other expectations about its business, which could cause its stock price to decline. | |||
*Transactions relating to Tesla's convertible senior notes may dilute the ownership interest of existing stockholders, or may otherwise depress the price of its common stock. | |||
*If Elon Musk were forced to sell shares of Tesla's common stock that he has pledged to secure certain personal loan obligations, such sales could cause its stock price to decline. | |||
* Anti-takeover provisions contained in Tesla's governing documents, applicable laws and its convertible senior notes could impair a takeover attempt. | |||
==Valuation== | |||
===What's the expected return of an investment in the company?=== | |||
Stockhub estimates that the expected return of an investment in the company over the next five years is 72%. In other words, an £1,000 investment in the company is expected to return £1,720 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 72%), then an investment in the company is considered to be a 'suitable' one. | |||
===What are the assumptions used to estimate the return?=== | |||
{| class="wikitable" | |||
|+ Key inputs | |||
!Description | |||
!Value | |||
!Commentary | |||
|- | |||
| Which valuation model do you want to use? | |||
|Discounted cash flow | |||
| There are two main approaches to estimate the value of an investment: | |||
# By calculating the present value of the investment's expected future cash flows (i.e. discounted cash flow valuation); and | |||
#By comparing the investment to other similar investments (i.e. relative valuation). | |||
= | 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 Stockhub suggests 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, Stockhub suggests using the free cash flow valuation method (rather than the dividend discount model). | |||
|- | |||
|Which financial forecasts to use? | |||
| Stockhub | |||
|The only available long-term forecasts (i.e. >15 years) are the ones that are supplied by the Stockhub company (the forecasts can be found in the financials section of this report), so Stockhub suggests using those. | |||
|- | |||
| colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>''' | |||
|- | |||
|Discount rate (%) | |||
| 8% | |||
|There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital. | |||
|- | |||
|Probability of success (%) | |||
| 100% | |||
| Research suggests that a suitable rate for a company in this growth stage (i.e. stage 2) is 100%. | |||
== | |- | ||
| colspan="3" |'''<div style="text-align: center;">Growth stage 3</div>''' | |||
|- | |||
|Discount rate (%) | |||
| 8% | |||
|There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital. | |||
|- | |||
|Probability of success (%) | |||
|100% | |||
|Research suggests that a suitable rate for a company in this growth stage (i.e. stage 3) is 100%. | |||
== | |- | ||
| colspan="3" |'''<div style="text-align: center;">Growth stage 4</div>''' | |||
|- | |||
|Discount rate (%) | |||
| 8% | |||
|There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital. | |||
|- | |||
|Probability of success (%) | |||
| 100% | |||
|Research suggests that a suitable rate for a company in this growth stage (i.e. stage 4) is 100%. | |||
|- | |||
| colspan="3" |'''<div style="text-align: center;">Other key inputs</div>''' | |||
|- | |||
|What's the current value of the company? | |||
|$688 billion | |||
|As at 30th May 2022, the Stockhub company estimates the current value of its company at $688 billion. | |||
|- | |||
|Which time period do you want to use to estimate the expected return? | |||
| Between now and five years time | |||
|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. | |||
|} | |||
== | ===Sensitive analysis=== | ||
The main inputs that result in the greatest change in the expected return of the Tesla investment are, in order of importance (from highest to lowest): | |||
The | #The size of the total addressable market (the default size is $3.0 trillion); | ||
#Tesla peak market share (the default share is 10%); and | |||
#The discount rate (the default time-weighted average rate is 8%). | |||
The impact of a 50% change in those main inputs to the expected return of the Tesla investment is shown in the table below. | |||
= | {| class="wikitable sortable" | ||
|+Tesla investment expected return sensitive analysis | |||
!Main input | |||
!50% worse | |||
!Unchanged | |||
!50% better | |||
|- | |||
|The size of the total addressable market | |||
|(14%) | |||
|72% | |||
|158% | |||
|- | |||
|Tesla peak market share | |||
|(14%) | |||
| 72% | |||
| 158% | |||
|- | |||
|The discount rate | |||
|30% | |||
| | |72% | ||
| 136% | |||
| | |||
|} | |||
==Appendix== | |||
=== Financial statements === | |||
{| class="wikitable" | |||
|+Balance sheet | |||
!Year end date | |||
!31/12/2021 | |||
!31/12/2020 | |||
!31/12/2019 | |||
!31/12/2018 | |||
|- | |- | ||
| | |'''Current Assets''' | ||
| | | | ||
| | | | ||
| | | | ||
| | | | ||
|- | |- | ||
| | |Cash and Cash Equivalents ($million) | ||
| | |$17,576 | ||
| | |$19,384 | ||
| | |$6,268 | ||
| | |$3,879 | ||
|- | |- | ||
| | |Short-Term Investments ($million) | ||
|$131 | |||
| -- | |||
| -- | |||
| -- | |||
|- | |- | ||
| | |Net Receivables ($million) | ||
| | |$1,913 | ||
| | |$1,886 | ||
|$1,324 | |||
|$949 | |||
|- | |- | ||
| | |Inventory ($million) | ||
| | |$5,757 | ||
| | |$4,101 | ||
|$3,552 | |||
|$3,113 | |||
|- | |- | ||
| | |Other Current Assets ($million) | ||
|$1,723 | |||
|$1,346 | |||
|$959 | |||
|$366 | |||
|- | |- | ||
| | |Total Current Assets ($million) | ||
| | |$27,100 | ||
| | |$26,717 | ||
|$12,103 | |||
|$8,307 | |||
|- | |- | ||
| | |'''Long-Term Assets''' | ||
| | | | ||
| | | | ||
| | |||
| | |||
|- | |- | ||
| | |Long-Term Investments ($million) | ||
| -- | |||
| -- | |||
| -- | |||
|$422 | |||
|- | |- | ||
| | |Fixed Assets ($million) | ||
|$ | |$25,411 | ||
| | |$17,396 | ||
| | |$14,061 | ||
|$13,420 | |||
| | |||
|- | |- | ||
| | |Goodwill ($million) | ||
| | |$200 | ||
| | |$207 | ||
| | |$198 | ||
|$68 | |||
|- | |- | ||
| | |Intangible Assets ($million) | ||
| | |$257 | ||
| | |$313 | ||
| | |$339 | ||
|$282 | |||
|- | |- | ||
| | |Other Assets ($million) | ||
|$9,163 | |||
|$7,515 | |||
|$7,608 | |||
| | |$7,241 | ||
| | |||
| | |||
|- | |- | ||
| | |Deferred Asset Charges ($million) | ||
| | | -- | ||
| | | -- | ||
| -- | |||
| -- | |||
|- | |- | ||
| | |Total Assets ($million) | ||
| | |$62,131 | ||
| | |$52,148 | ||
|$34,309 | |||
|$29,740 | |||
|- | |- | ||
| | |'''Current Liabilities''' | ||
| | | | ||
| | | | ||
| | |||
| | |||
|- | |- | ||
| | |Accounts Payable ($million) | ||
| | |$15,744 | ||
| | |$9,906 | ||
|$6,993 | |||
|$5,499 | |||
|- | |- | ||
| | |Short-Term Debt / Current Portion of Long-Term Debt ($million) | ||
| | |$1,589 | ||
| | |$2,132 | ||
|$1,785 | |||
|$2,568 | |||
|- | |- | ||
| | |Other Current Liabilities ($million) | ||
| | |$2,372 | ||
| | |$2,210 | ||
|$1,889 | |||
|$1,926 | |||
|- | |- | ||
| | |Total Current Liabilities ($million) | ||
| | |$19,705 | ||
| | |$14,248 | ||
|$10,667 | |||
|$9,993 | |||
|- | |- | ||
| | |Long-Term Debt ($million) | ||
| | |$5,245 | ||
| | |$9,556 | ||
|$11,634 | |||
|$9,404 | |||
|- | |- | ||
| | |Other Liabilities ($million) | ||
| | |$3,546 | ||
| | |$3,330 | ||
|$2,691 | |||
|$3,039 | |||
|- | |- | ||
| | |Deferred Liability Charges ($million) | ||
|$2,052 | |||
|$1,284 | |||
|$1,207 | |||
|$991 | |||
|- | |- | ||
| | |Misc. Stocks ($million) | ||
|$826 | |||
|$850 | |||
| | |$849 | ||
|$834 | |||
|- | |- | ||
| | |Minority Interest ($million) | ||
| | |$568 | ||
| | |$655 | ||
|$643 | |||
|$556 | |||
|- | |- | ||
| | |Total Liabilities ($million) | ||
| | |$31,374 | ||
| | |$29,268 | ||
|$27,048 | |||
|$24,261 | |||
|- | |- | ||
| | |'''Stock Holders Equity''' | ||
| | | | ||
| | | | ||
| | |||
| | |||
|- | |- | ||
| | |Common Stocks ($million) | ||
| | |$1 | ||
| | |$1 | ||
|$1 | |||
| -- | |||
|- | |- | ||
| | |Capital Surplus ($million) | ||
| style=" | |$331 | ||
| style=" | | style="color: red;" |-$5,399 | ||
| style="color: red;" |-$6,083 | |||
| style="color: red;" |-$5,318 | |||
|- | |- | ||
| | |Retained Earnings | ||
| | | -- | ||
| | | -- | ||
| -- | |||
| -- | |||
|- | |- | ||
| | |Treasury Stock ($million) | ||
| | |$29,803 | ||
| | |$27,260 | ||
|$12,736 | |||
|$10,249 | |||
|- | |- | ||
| | |Other Equity ($million) | ||
| style=" | |$54 | ||
| style=" | |$363 | ||
| style="color: red;" |-$36 | |||
| style="color: red;" |-$8 | |||
|- | |- | ||
| | |Total Equity ($million) | ||
| | |$30,189 | ||
| | |$22,225 | ||
|$6,618 | |||
|$4,923 | |||
|- | |- | ||
| | |Total Liabilities & Equity ($million) | ||
|$62,131 | |||
|$52,148 | |||
|$34,309 | |||
|$29,740 | |||
|} | |} | ||
{| class="wikitable" | {| class="wikitable" | ||
|+ | |+Cash flow | ||
! | !Year end date | ||
! | !31/12/2021 | ||
! | !31/12/2020 | ||
!31/12/2019 | |||
!31/12/2018 | |||
|- | |- | ||
| | |Net Income ($million) | ||
| style=" | |$5,519 | ||
| style=" | |$721 | ||
| style="color: red;" |-$862 | |||
| style="color: red;" |-$976 | |||
|- | |- | ||
| | |'''Cash Flows-Operating Activities''' | ||
| | | | ||
| | | | ||
| | |||
| | |||
|- | |- | ||
| | |Depreciation ($million) | ||
| | |$2,911 | ||
| | |$2,322 | ||
|$2,154 | |||
|$2,060 | |||
|- | |- | ||
| | |Net Income Adjustments ($million) | ||
| | |$2,424 | ||
| | | $2,575 | ||
| $1,375 | |||
| $1,043 | |||
|- | |- | ||
| | |'''Changes in Operating Activities''' | ||
| | | | ||
| | | | ||
| | |||
| | |||
|- | |- | ||
| | |Accounts Receivable ($million) | ||
| style=" | | style="color: red;" |-$130 | ||
| style=" | | style="color: red;" |-$652 | ||
| style="color: red;" |-$367 | |||
| style="color: red;" |-$497 | |||
|- | |- | ||
| | |Changes in Inventories ($million) | ||
| style=" | | style="color: red;" |-$1,709 | ||
| style=" | | style="color: red;" |-$422 | ||
| style="color: red;" |-$429 | |||
| style="color: red;" |-$1,023 | |||
|- | |- | ||
| | |Other Operating Activities ($million) | ||
| style=" | | style="color: red;" |-$3,676 | ||
| style=" | | style="color: red;" |-$1,667 | ||
| style="color: red;" |-$937 | |||
| style="color: red;" |-$504 | |||
|- | |- | ||
| | |Liabilities ($million) | ||
| | |$6,033 | ||
| | |$2,925 | ||
|$1,384 | |||
|$2,082 | |||
|- | |- | ||
| | |Net Cash Flow-Operating ($million) | ||
| | | $11,497 | ||
| | | $5,943 | ||
| $2,405 | |||
|$2,098 | |||
|- | |- | ||
| | |'''Cash Flows-Investing Activities''' | ||
| | | | ||
| | | | ||
| | |||
| | |||
|- | |- | ||
| | |Capital Expenditures ($million) | ||
| style=" | | style="color: red;" |-$6,514 | ||
| style=" | | style="color: red;" |-$3,232 | ||
| | | style="color: red;" |-$1,432 | ||
| style="color: red;" |-$2,319 | |||
| | |||
|- | |- | ||
| | |Investments ($million) | ||
| style=" | | style="color: red;" |-$132 | ||
| | | -- | ||
| -- | |||
| -- | |||
|- | |- | ||
| | |Other Investing Activities ($million) | ||
| style=" | | style="color: red;" |-$1,222 | ||
| style=" | |$100 | ||
| style="color: red;" |-$4 | |||
| style="color: red;" |-$18 | |||
|- | |- | ||
| | |Net Cash Flows-Investing ($million) | ||
| style=" | | style="color: red;" |-$7,868 | ||
| style=" | | style="color: red;" |-$3,132 | ||
| style="color: red;" |-$1,436 | |||
| style="color: red;" |-$2,337 | |||
|- | |- | ||
| | |'''Cash Flows-Financing Activities''' | ||
| | | | ||
| | | | ||
| | | | ||
| | |||
| | |||
|- | |- | ||
| | |Sale and Purchase of Stock ($million) | ||
| | |$699 | ||
| | |$12,675 | ||
|$1,555 | |||
|$727 | |||
|- | |- | ||
| | |Net Borrowings ($million) | ||
| style=" | | style="color: red;" |-$5,732 | ||
| style=" | | style="color: red;" |-$2,488 | ||
|$798 | |||
|$89 | |||
|- | |- | ||
| | |Other Financing Activities ($million) | ||
| | | -- | ||
| | | -- | ||
| -- | |||
| -- | |||
|- | |- | ||
| | |Net Cash Flows-Financing ($million) | ||
| style=" | | style="color: red;" |-$5,203 | ||
| | |$9,973 | ||
|$1,529 | |||
|$574 | |||
|- | |- | ||
| | |Effect of Exchange Rate ($million) | ||
| style=" | | style="color: red;" |-$183 | ||
| style=" | |$334 | ||
|$8 | |||
| style="color: red;" |-$23 | |||
|- | |- | ||
| | |Net Cash Flow ($million) | ||
| style=" | | style="color: red;" |-$1,757 | ||
|$13,118 | |||
|$2,506 | |||
|$312 | |||
|} | |} | ||
{| class="wikitable" | {| class="wikitable" | ||
|+ | |+Income statement | ||
!Year end date | |||
!31/12/2021 | |||
!31/12/2020 | |||
!31/12/2019 | |||
!31/12/2018 | |||
|- | |- | ||
|Total Revenue | |||
|$53,823 | |||
|$31,536 | |||
|$24,578 | |||
|$21,461 | |||
|- | |- | ||
| | |Cost of Revenue | ||
|$40,217 | |||
|$24,906 | |||
|$20,509 | |||
|$17,419 | |||
|- | |- | ||
| | |'''Gross Profit''' | ||
|'''$13,606''' | |||
|'''$6,630''' | |||
|'''$4,069''' | |||
|'''$4,042''' | |||
|- | |- | ||
| | |'''Operating Expenses''' | ||
| | |||
| | |||
| | |||
| | |||
|- | |||
|Research and Development | |||
|$2,593 | |||
|$1,491 | |||
|$1,343 | |||
|$1,460 | |||
|- | |- | ||
| | |Sales, General and Admin. | ||
| | |$4,517 | ||
| | |$3,145 | ||
|$2,646 | |||
|$2,835 | |||
|- | |- | ||
| | |Non-Recurring Items | ||
|style=" | | style="color: red;" |-$27 | ||
| | | -- | ||
|$149 | |||
|$135 | |||
|- | |- | ||
| | |Other Operating Items | ||
| | | -- | ||
| | | -- | ||
| -- | |||
| -- | |||
|- | |- | ||
| | |'''Operating Income''' | ||
|style=" | |'''$6,523''' | ||
|style=" | |'''$1,994''' | ||
|style="color: red;" |'''-$69''' | |||
|style="color: red;" |'''-$388''' | |||
|- | |- | ||
| | |Add'l income/expense items | ||
|style=" | | $191 | ||
| | | style="color: red;" |-$92 | ||
| | | $89 | ||
|$46 | |||
|- | |||
| | |Earnings Before Interest and Tax | ||
|$6,714 | |||
|$1,902 | |||
|$20 | |||
| style="color: red;" |-$342 | |||
|- | |- | ||
| | |Interest Expense | ||
| | |$371 | ||
| | |$748 | ||
| | |$685 | ||
|$663 | |||
|- | |- | ||
| | |Earnings Before Tax | ||
| | |$6,343 | ||
|style=" | |$1,154 | ||
|style=" | | style="color: red;" |-$665 | ||
| style="color: red;" |-$1,005 | |||
|- | |- | ||
| | |Income Tax | ||
| | |$699 | ||
|$292 | |||
|$110 | |||
|$58 | |||
|- | |- | ||
| | |Minority Interest | ||
|style=" | | -- | ||
|style=" | | -- | ||
|style=" | | -- | ||
| | | -- | ||
|- | |||
|Equity Earnings/Loss Unconsolidated Subsidiary | |||
| style="color: red;" |-$125 | |||
| style="color: red;" |-$141 | |||
| style="color: red;" |-$87 | |||
|$87 | |||
|- | |- | ||
|Net Income-Cont. Operations | |||
|$5,519 | |||
|$721 | |||
| style="color: red;" |-$862 | |||
| style="color: red;" |-$976 | |||
|- | |- | ||
| | |'''Net Income''' | ||
| style=" | |'''$5,519''' | ||
|'''$721''' | |||
| style="color: red;" |'''-$862''' | |||
| style="color: red;" |'''-$976''' | |||
|- | |- | ||
| | |'''Net Income Applicable to Common Shareholders''' | ||
| style=" | |'''$5,519''' | ||
|'''$721''' | |||
| style="color: red;" |'''-$862''' | |||
| style="color: red;" |'''-$976''' | |||
|} | |} | ||
{| class="wikitable" | {| class="wikitable" | ||
|+ | |+Financial ratios | ||
!Year end date | !Year end date | ||
!31/12/2021 | !31/12/2021 | ||
Line 1,794: | Line 1,642: | ||
!31/12/2018 | !31/12/2018 | ||
|- | |- | ||
|''' | | colspan="5" |'''Liquidity Ratios''' | ||
|- | |- | ||
| | |Current Ratio | ||
| | |138% | ||
| | | 188% | ||
| | | 113% | ||
| | | 83% | ||
|- | |- | ||
| | |Quick Ratio | ||
| | |108% | ||
| | |159% | ||
| | |80% | ||
| | |52% | ||
|- | |- | ||
| | |Cash Ratio | ||
| | |90% | ||
| | |136% | ||
| | |59% | ||
| | |39% | ||
|- | |- | ||
| | | colspan="5" |'''Profitability Ratios''' | ||
| | |||
|- | |- | ||
| | |Gross Margin | ||
| | |25% | ||
| | |21% | ||
| | |17% | ||
| | |19% | ||
|- | |- | ||
| | |Operating Margin | ||
| | |12% | ||
| | |6% | ||
| | |0% | ||
| | |0% | ||
|- | |- | ||
| | |Pre-Tax Margin | ||
| | | 12% | ||
| | | 4% | ||
| | | 0% | ||
| | |0% | ||
|- | |- | ||
| | |Profit Margin | ||
| | |10% | ||
| | |2% | ||
| | |0% | ||
| | |0% | ||
|- | |- | ||
| | |Pre-Tax ROE | ||
| | |21% | ||
| | |5% | ||
| | |0% | ||
| | |0% | ||
|- | |- | ||
| | |After Tax ROE | ||
| | |18% | ||
| | |3% | ||
| | |0% | ||
| | |0% | ||
|- | |} | ||
| | ===Relative valuation approach=== | ||
| | As noted earlier in this report, 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, so that's the approach that Stockhub suggests using to determine the estimated value of the company (the valuation based on the discounted cash flow approach can be found in the valuation section of this report); nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the using the relative valuation approach. | ||
====What's the expected return of an investment in Tesla using the relative valuation approach?==== | |||
Accordingly, Stockhub estimates that the expected return of an investment in Tesla Inc over the next five years is 4.4x. In other words, an £1,000 investment in the company is expected to return £4,400 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 4.4x), then an investment in the company is considered to be a 'suitable' one. | |||
====What are the assumptions used to estimate the return figure?==== | |||
{| class="wikitable" | |||
|+Key inputs | |||
!Description | |||
!Value | |||
!Commentary | |||
|- | |- | ||
| | | Which type of multiple do you want to use? | ||
| | | Growth-adjusted EV/sales | ||
| | | For the numerator, Stockhub believes that to account for the different financial leverage levels of its peers, it's best to use enterprise value (EV), rather than price. For the denominator, Stockhub believes that because it expects Tesla to reinvest almost all of its revenue back into the business over the five year forecast period and therefore its earnings are expected to be abnormally low over the period, it's best to use sales. Accordingly, Stockhub suggests valuing its company using the EV/sales ratio. However, Stockhub feels that to take into account the different business lifecycle stages of its peers, the most suitable valuation multiple to use is the growth-adjusted EV/sales multiple<ref group="Note" name="Note15" />, rather than the EV/sales multiple. | ||
|- | |- | ||
| | |In regards to the growth-adjusted EV/sales multiple, for the sales figure, which year to you want to use? | ||
| | |||
| - | |Year 5 | ||
|Stockhub suggests that with sales forecast to grow exponential over the five year forecast period, it's best to use forward-looking data, rather than historic data. | |||
In regards to the growth-adjusted EV/sales multiple, for the sales figure, Stockhub suggests that in order to account for the forecasted exponential growth of the business, it's best to use one at the end of the forecast period (i.e. Year 5). | |||
|- | |- | ||
| | |In regards to the growth-adjusted EV/sales multiple, for the sales growth figure, which year(s) do you want to use? | ||
| | |Year 6 to 8, from now | ||
|Stockhub suggests that for the sales growth figure, it's best to use Year 6 to 8. | |||
| | |||
|- | |- | ||
| | |In regards to the growth-adjusted EV/sales multiple, what multiple figure do you want to use? | ||
|89x | |||
|In Stockhub's view, Tesla closest peer is [[Apple]]. [[Apple]] trades on a multiple of 89x. | |||
| | |||
| | |||
|- | |- | ||
| | |Which financial forecasts to use? | ||
| | |Stockhub | ||
| | |The only available forecasts are the ones that are supplied by the Stockhub company (the forecasts can be found in the financials section of this report), so Stockhub suggests using those. | ||
|- | |- | ||
| | | What's the current value of the Stockhub company? | ||
|$ | |$688 billion | ||
| | |As at 21st May 2022, the current value of its company at $688 billion. | ||
|- | |- | ||
| | |Which time period do you want to use to estimate the expected return? | ||
| | |Between now and five years time | ||
| | |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. | ||
| | |} | ||
| | |||
===Tesla peer(s)=== | |||
{| class="wikitable sortable" | |||
|+Valuation table | |||
|- | |- | ||
!Investments!! Industry !!Enterprise value/sales!!1-year forward revenue growth rates (%)!!Growth-adjusted enterprise value/sales ratio | |||
|- | |- | ||
| | | [[Apple]]||Internet content & communication||7.27x<ref name=":0">Morningstar, Inc.</ref>||8.20%<ref name=":0" />|| style="background: blue; color: white;" |89x | ||
| | |} | ||
| | |||
| | ===Economic links to cash flow patterns === | ||
| | {| class="wikitable" | ||
|+Economic links to cash flow patterns | |||
|- | |- | ||
!Cash flow type!!Introduction!!Growth!!Shake out!!Mature!!Decline | |||
|- | |- | ||
| | |Operating|| style="background: red; color: white;" |-|| style="background: green; color: white;" |+ | ||
| | | style="background: orange; color: white;" | +/-|| style="background: green; color: white;" |+|| style="background: red; color: white;" |- | ||
| | |||
| | |||
| | |||
|- | |- | ||
| | |Investing|| style="background: red; color: white;" |-|| style="background: red; color: white;" |-|| style="background: orange; color: white;" |+/-|| style="background: red; color: white;" |- | ||
| | | style="background: green; color: white;" | + | ||
| | |||
| | |||
| | |||
|- | |- | ||
|Financing|| style="background: green; color: white;" |+|| style="background: green; color: white;" |+|| style="background: orange; color: white;" |+/-|| style="background: red; color: white;" |-|| style="background: orange; color: white;" |+/- | |||
|} | |||
|} | |} | ||
== Notes== | == Notes== | ||
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Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Tesla's beta is 2.12, and is, accordingly, 112% above the market beta (of 1); assuming that a 'high' level of riskiness is 50% or more above the market beta, then the riskiness of investing in Tesla is considered to be 'high' (112%>50%). | Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Tesla's beta is 2.12, and is, accordingly, 112% above the market beta (of 1); assuming that a 'high' level of riskiness is 50% or more above the market beta, then the riskiness of investing in Tesla is considered to be 'high' (112%>50%). | ||
'''Current | '''Current Ratio''' | ||
The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its short-term obligations. It compares a firm's current assets to its current liabilities, and is expressed as follows:- | The current ratio is a liquidity ratio that measures whether a firm has enough resources to meet its short-term obligations. It compares a firm's current assets to its current liabilities, and is expressed as follows:- | ||
Line 3,003: | Line 1,883: | ||
Acceptable current ratios vary from industry to industry and from business lifecycle stage. | Acceptable current ratios vary from industry to industry and from business lifecycle stage. | ||
'''Quick | '''Quick Ratio''' | ||
The quick ratio, also known as the acid-test ratio, is a type of liquidity ratio, which measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. It is defined as the ratio between quickly available or liquid assets and current liabilities. Quick assets are current assets that can presumably be quickly converted to cash at close to their book values. | The quick ratio, also known as the acid-test ratio, is a type of liquidity ratio, which measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. It is defined as the ratio between quickly available or liquid assets and current liabilities. Quick assets are current assets that can presumably be quickly converted to cash at close to their book values. | ||
Line 3,011: | Line 1,891: | ||
The quick ratio is similar to the current ratio, but provides a more conservative assessment of the liquidity position of firms as it excludes inventory, which it does not consider as sufficiently liquid. | The quick ratio is similar to the current ratio, but provides a more conservative assessment of the liquidity position of firms as it excludes inventory, which it does not consider as sufficiently liquid. | ||
'''Cash | '''Cash Ratio''' | ||
The cash ratio is a liquidity measure that shows a company's ability to cover its short-term obligations using only cash and cash equivalents. | The cash ratio is a liquidity measure that shows a company's ability to cover its short-term obligations using only cash and cash equivalents. | ||
Line 3,020: | Line 1,900: | ||
A calculation greater than 1 means a company has more cash on hand than current debts, while a calculation less than 1 means a company has more short-term debt than cash. | A calculation greater than 1 means a company has more cash on hand than current debts, while a calculation less than 1 means a company has more short-term debt than cash. | ||
{| class="wikitable" | {| class="wikitable" | ||
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==References== | ==References== | ||
<references /> | <references /> | ||