Tesla, Inc.

Summary

• Tesla is on a mission to accelerate the world's transition to sustainable energy.
• The Stockhub company estimates that the expected return of an investment in the company 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.

Operations

What's the mission of the company?

Tesla is a company that's on a mission to accelerate the world's transition to sustainable energy.

What's the main offerings of the company?

Model S

What is the offering?

Model S is an electric car.

Model 3

What is the offering?

Model 3 is an electric car.

Model X

What is the offering?

Model X is an electric car.

Model Y

What is the offering?

Model Y is an electric car.

Powerwall

What is the offering?

Powerwall is a home energy storage system (i.e. a type of battery).

Market

Total Addressable Market

Here, the total addressable market (TAM) is defined as the global sustainable energy market, and based on a number of assumptions, it is estimated that the size of the market as of today (18th March 2022), in terms of revenue, is $890 billion.

Serviceable Available Market

Here, the serviceable available market (SAM) is defined as the global electric vehicle market, and based on a number of assumptions, it is estimated that the size of the market as of today (18th March 2022), in terms of revenue, is $200 billion.

Serviceable Obtainable Market

Here, the serviceable obtainable market (SOM) is defined as the US electric vehicle market, and based on a number of assumptions, it is estimated that the size of the market as of today (18th March 2022), in terms of revenue, is $16 billion.

Team

Chief Executive Officer

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 us 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

Zachary Kirkhorn is Chief Financial Officer of Tesla and served the position since March 2019. Previously, Zach served in various finance positions continuously since joining Tesla in March 2010, other than between August 2011 and June 2013 during which he attended business school, including most recently as Vice President, Finance, Financial Planning and Business Operations from December 2018 to March 2019. Zach holds dual B.S.E. degrees in economics and mechanical engineering and applied mechanics from the University of Pennsylvania and an M.B.A. from Harvard University.

Senior Vice President

Andrew Baglino has served as Tesla's Senior Vice President, Powertrain and Energy Engineering since October 2019. Previously, Drew served in various engineering positions continuously since joining Tesla in March 2006. Drew holds a B.S. in electrical engineering from Stanford University.

Valuation

Which time period to use to estimate the expected return?

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.

Which valuation approach to use?

One of the simplest ways to estimate the value a company is to use the relative valuation approach, which bases the valuation of the company on the valuation of similar companies.

Relative valuation approach

Which type of multiple to use?

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 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 the 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, rather than the EV/sales multiple.

Stockhub suggests that with sales expected 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 expected exponential growth of the business, it's best to use one at the end of the forecast period (i.e. Year 5). Stockhub also suggests that for the sales growth figure, it's best to use Year 6 to 8.

Which are the peers?

Valuation table

Investments	Industry	Enterprise value/sales	1-year forward revenue growth rates (%)	Growth-adjusted enterprise value/sales ratio
Apple Inc.	Internet content & communication	7.27x	8.20%	89x

Which forecasts to use?

The only available forecasts are the consensus ones that are supplied by Morningstar, so Stockhub suggests using those.

What's the expected return?

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 return figure estimate is based on the following key assumptions: an industry (online advertising) standard growth-adjusted enterprise value/sales multiple of 89x, Stockhub's year-5 revenue estimate (of $82.8 billion), Stockhub's year-6 to year-8 compound annual growth rate estimate (of 53.80%), net cash of ccc and the current estimated company valuation (of $900.80 billion).

The calculation is as follows: (89 x $82.8 billion x 0.538) / $900.80 billion = 4.4x.

Actions

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To contact Tesla, click here.