Revisiting Tesla in January 2023: The Great Unraveling or a Return to Normalcy?
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- Опубликовано: 30 май 2024
- I have valued Tesla multiple times over the last decade, but my most recent valuation of the company was in November 2021, just as it's market cap crested $1 trillion and the stock was trading at $1200+ a share ($400 in current share count terms). I valued the company at about $576/share, and noted that even with my optimistic assumptions for revenues and margins, I could not get the value to the pricing. In the last year, the market has turned for Tesla, and I revalue the company, with updated information on the company, its founder/CEO and the market. While my overall market, margins and reinvestment assumptions have not only not changed, but been reaffirmed by Tesla's operating results in 2022, the value per share that I get is $130, about 10% below the price at close of trading on Jan 25, 2023. The stock is slightly overvalued, and perhaps more so after today's post earnings jump in its price, but it is in play. More generally, I use the Tesla valuation to talk about the dangers of tying companies to personalities, how some companies may evade the laws of business for a while, before it catches up with them, and the very real issue of how political is permeating investing and business. Put simply, it is very likely that those who agree (disagree) politically with Musk are now more likely to Tesla bulls (bears).
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Slides: pages.stern.nyu.edu/~adamodar...
Blog Post: aswathdamodaran.blogspot.com/...
Valuation of Tesla on Jan 25, 2023: pages.stern.nyu.edu/~adamodar...
2010 Honda Civic? I like this guy
You’re the man. I’m a Tesla guy and I always appreciate your unbiased valuations. It helps me keep my emotions out of it and look at it objectively.
There is no such thing as unbiased. Maybe cold logic perspective.
Please professor, upgrade your Honda Civic so you're better protected against any traffic accident. Must protect you at ALL COSTS! You are too precious, thank you for the great video.
Buy a Tesla. Safest car in the world XD
As much as respect to your professor, Tesla was and has been insanely valued as a SAAS company instead of a auto company for that FSD hype that even Benz’s L3 is capable of partially being liable in customer driving accidents. Beside fundamentals and CEO’s discount/premium, the stock market rarely trades at fundamentals nowadays. I think you should consider an extra risk premium when liquidation event occurs that the most big market cap companies will be under enormous pressure from illiquid asset holders.
Appreciate your thoughts.
Thank you, professor. Even if Tesla isn't relevant for me, for external reasons, this video is a great discussion on valuation concepts. I learned a lot.
Thanks Professor, is always useful to have a neutral and independent view on Tesla from an outstanding valuation voice like yours. From my side, I believe we have to think about the potentials of the AI capabilities they are building, this can make a huge difference in terms of the future cash flow. But unfortunately, traditional finance people find difficulties in understanding this.
Hi Professor. Could you do a video on executive compensation and optimizing management pay incentive systems for performance? Comparing pay incentive systems, metrics,... I think it's a very interesting topic, linking corporate finance and corporate governance.
Thank you so much Aswath.
Thank you Sir. your thought process is amazing
Can we have a deep dive into Adani group - cutting through all the noise?
Aswath that is very interesting. Did you take into your evaluation the incomes from the software- the FSD AI? This is going ti change the income dramatically.
Really great as usual - thank you so much. I have a question: what about the potential extra revenue streams? (Let’s think about the most likely ones. Not Humanoids and Self-Driving but Solar city legacy tech mainly and maybe services - however services is maybe what is driving high margins already) - Do you think this extra businesses would change the mix as cloud changed Google valuation?
Excellent. Thanks for the insight and candor. Very refreshing these days.
love the new camera set-up prof
Thank you so much for doing this for us
Awesome, thank you!
Awesome video as always, thank you!
Thank you
Thanks for this update on your valuation model and for your analysis of the company. Your analyses are always valuable and interesting.
They really aren’t. This is a crappy analysis.
@@barbarjinx3802 Thank you for you deep insight Barbar.
@@GodofStories the bank account of any long tesla shareholder, mine included, is impressive. Much more impressive than this wrong and arrogant “analysis”. This guy knows nothing about tesla. But by all means listen to him. I couldn’t care less that you don’t want to be wealthy.
@@barbarjinx3802 Hey friend, do you want to share your valuation so we can learn from? Will be very helpful if you do.
Cheers!
Thanks for updating the Tesla evaluation, very objective perspective!
It’s not. It’s a terrible analysis.
Thanks, I found this extremely helpful. Do you think your model is generous or do you think it fairly accurately models out what you think is possible for the company in terms of revenue and operating margins?
It’s a terrible model divorces from the realities of tesla. It’s for people who don’t want to make any generational wealth.
@@barbarjinx3802 what do you mean? You think it’s too generous or not enough? What assumptions will you changev
Can someone please point out from where he got the lease commitments used in the valuation here? I am unable to find them anywhere in the 10K / 10Q - I mean the numbers mentioned there are different
Great video.
Can you give an update on Adani group and recently taken short position by Hidenburg
brilliant analysis as always
The price cuts and very aggressive ones at that came at the end of Q4. Therefore Q1 of year 2023 is the one to watch. January sales are going to be stupendous. That may be a sell time.
@@Pens4Life85 Tesla will sell more cars in January. Profits will be lower. But since only sales will be reported. You should sell TSLA stock.
@@Pens4Life85 when you reduce price from 70k to 55k. 15k is gone. What was that ? Profit or something else? It's not nuclear science. When you value a company, those with high margins are considered stronger. If your margins come down, means your competition is getting stronger. Hope that helps somewhat
@@Pens4Life85 Good. At 70k, profit was 25k per car. At 55k the profit is 10k per car. Now please do the math.
Wright found that every time total aircraft production doubled, the required labor time for a new aircraft fell by 20%. This has become known as "Wright's law"
Basically if Tesla production doubles, 20% less labor is needed to have that double output volume. That 20% will somewhat offset a hit of lowered prices.
When Tesla lower prices which ev company can do the same and still make decent profit. Only byd is out selling Tesla now, but at thin margins.
@@demonridera ASPs were not even near 70k last quarter and ASPs are not going down by 15k compared to that.
Do you guys even pretend to track orders, delivery times and pricing?
A significant portion of Q4 deliveries were orders from over a year ago - with prices even lower than now.
Great video/content. It would be interesting if you valued Lucid.
Shouldn’t it be the amount total of battery’s used in the autos be the measuring stick to value ALL auto companies, since all of them are transitioning to EVs replacing regular ICE vehicles. It’s a race to replace all vehicles to electric. Since EVs comprise about 10-15% worldwide, there is still over 85% market available to gain.
Time to revisit Tesla 👍👍
It seems that the last model on politics itself is the major effect on the Tesla shares, and even general traders are now hopping in on the good news.
It just brings me back to why not own a good business other than Tesla.
19:00 go read the quarterly letter again. We literally included a graph showing that asps have declined while operating margins have improved
There are too many confounding variables to take that chart seriously. The introduction of the model 3 and just the natural ramping up of Shanghai.
There have not been cost improvements to counteract 20% discounts on vehicles. Margins will come down.
Hello sir can you please value reliance industry and Hdfc bank ?
Very interesting and sound analysis Professor, and I totally agree on the small potential added value given by side business (small and with no particularly significant competitive advantage), yet I have few questions: first is related to the shift in the value chain, where, compared to the traditional automotive players, Tesla have smaller dependence on Tier1 manufacturers. Will you say that once the electrical car market evolves that might change?
Secondly, will Tesla be able to charge the same price in the future, due to electrical car commoditization, launch of cars with lower margins and maybe lost of brand recognition (who buys a Ford today even if it was the forst combustion car)?
Lastly, I'd like to hear your opinion on how the business model of the electrical car industry will change. I think about Volkswagen's electrical-prepared axis being offered to other car makers, or NIO's decision to go for batteries swapping. How will these affect Tesla?
Why is Teslas growth exponential compared to ICE linear growth ?
Hello professor! Could you, or anyone of your viewers please tell me what I'm missing: You set the cost of capital for Tesla at 10.15%, but as far as I'm aware, Tesla has no, or little debt, and cash to spare. Where does cost of capital come in to this valuation?
So what did it do with all its debt?
Thank you Professor for the great presentation. One concern though is that your valuation doesn’t include potential opportunities in Energy, semi trucks, etc. The growth in Energy and batteries could be a start of a new era, possibly turning Tesla into a multi bagger again. Would appreciate your opinion.
Man wish this man was my teacher no cap.
You forgot flat earth
He wont model energy until its a bigger part of the business. But I think thats where revenue can still increase at a higher rate than stated(thus enabling telsa to have higher revenue than any of todays automakers). Ofc lots of work from tesla needs to be done to prove this out.
How can I do those fancy distribution scenarios ??
20:02 looks like screenshots from Oracle Crystal Ball, an excel add in used for simulations
Please do valuation on Adanient
Perfectly balanced as all things should be
Super AD
I love your valuations of Tesla while I strongly disagree with them. I perceive your valuations as a fair valuation without optionalities, which is a floor to build on. You ignore FSD, because its not yet tangible, though if it came true it would make the company valuation explode.
Can you please value Asian Paints and Tata Steel?
If valuations are everything then how easy would it be to make money,seeing this video after 13days and Tesla share rose by 80% since jan and feb
So? Investments are long term son....
@@tastypymp1287ok keep buying the index then grandpa
Not in love with cars?
Then a Tesla is definitely for you!!
Thank you for your thoughts of how to value Tesla. It is important to hear someone as prestigious as you making a valuation. The fact that this time your valuation is near the market price and from your perspective slightly overvalued should not be used as a confirmation that you have taken into account all aspects necessary for a valuation of TESLA. Let us talk about profit and margins. First you said that you see Tesla as a car company. That does not consider that Tesla is developing autonomous driving and will be able to change the transportation industry paradigm not only with robotaxi service migrating to a Transportation as a service (TaaS) industry but also the logistics of businesses with the semi truck that Tesla started to sell in December 2022 and will ramp up with a new site in Nevada. The difference of an electric car to a fossil fuel car is its lower total ownership cost since maintenance and operating fuel is much lower. This will drive a huge demand for the semi truck business that will have high margins since the production costs are much lower then other competitors. Tesla will have a very high demand for this semi truck since the businesses that have a logistics fleet will lower their transportation costs which will make them taking away transportation business from their competitors. And once the robotaxi is available the revenues from TaaS will explode since the cost per mile will be competing with public transportation service and most people will no longer have their own car but use this service. The full self driving (FSD) service will generate additional software revenues and increase the operating margin of the company. On the other side Tesla is the most efficient manufacturer of industrial products since it has implemented agile (Scrum) manufacturing tecnica and excels at this. This is how they have been making innovations every single day in their factories and are constantly and relentlessly driving down production costs. I have been a business owner of a manufacturing industry and have the most respect and admiration for theses accomplishments that Tesla is making daily in their factory’s floor. That is one of the competitive advantages of Tesla and no other manufacturer has this kind of excellence worldwide. They are using this to produce also more parts becoming vertically integrated like in the battery production. But also the gigacasting is bringing the cost down and eliminating a important number of parts for production. Today a Tesla factory has 70% less industrial robotors then in the first factory in Fremont. The capital expenditure for new factories is therefore much lower and can be easily financed from the generated cashflow. This is important since it does not need external financing avoiding interest payments and having a huge cash position that generates more income and profits. Tesla will drive down costs since it produces fewer models and higher volume which drives down the costs by scaling production and having far less complexity compared with other manufacturing companies. Tesla does not have car dealership and the biggest charging stations network worldwide which saves the margin associated cutting out a middle man and generating revenue selling energy to each user of the charging network. Then there is the stationary batteries business that is starting to grow and has its own factory site. The migration to renewable energy requires BESS (battery energy storage system) and Tesla is well positioned to manufacture this kind of BESS as a mass product in very high demand. In Q4 2022 it increased the revenues for this division of Tesla and will grow at very high rates for the next 10 to 15 years together with solar and wind energy worldwide. I could continue gaining more details of this disruptions but visit www.RethinkX.com to have a deeper understanding of the change that is occurring right now and will disrupt many established industries in the transportation and energy sector. Tesla has a much bigger total addressable market (TAM) then the automobile business. It will allow the company to grow much more then you have been considering in sour valuation and will be able to archive overall much higher margins. I would like to see you including all these observations into your future valuations. Thank zou again for your point of view since this makes me more confident that Tesla is very undervalued since someone of your academic stance is not aware of all this aspects that will drive revenues and profits far beyond your projections and make the actual price look very undervalued.
4:36 yeah, he’s shown the traditional carmakers they are wrong. If you don’t think automobile companies to pay attention to quality control and long-term safety and reliability😂
sir ,
plz make valuation on APPLE
If everyone wants to be fair and don’t count Tesla business that are not making money right now like FSD and Botts then they have to do the same to the other auto companies too. The OEMs are currently struggling to make EV for profit and at mass scale. They are losing money making EV. Only Tesla and BYD (only in China market) are profitable. On top of that, they don’t have enough battery supplies. Their battery factories are schedule to be available in 2-3 years from now. But even if their factory is up and running, where are their contracts for mining metals like lithium ? The OEMs are hundred of billions in debts and going into a recession with decrease sales in there ICE cars and increase interest rates, they are going to file for bankruptcy and ask for bailouts. As they decrease their production, their cost of making ICE will increase and their suppliers will go out of businesses. Their biggest ICE market is in China and it’s shrunk by 40% in 2022 !!! At worse, Tesla will increase its market share because the OEM is shrinking.
So Tesla is a good buy?
@@summerbreeze5115 Before you invest in anything, stocks, bonds, real estates etc. You will need to ask yourself when you are planning to sell (or get out). If it's less than 1 year then go into bonds. For stocks, especially tech stock such as Tesla, you will need to wait 3 years at least. Tesla is a great buy but you will need to hold for at least 3 years. The longer the better. Just look at the total addressable market (TAM) and see who is the leader in them. Tesla is the leader in EV, storage energy, self driving using real AI (transportation), Robotic using real AI (labor TAM), etc . Also, these cars and robots are collection data that will be worth a lot to Tesla or someone else. All of the TAM combined is worth hundred of trillions. But if you look at the world GDP since the beginning for human history, it has been going exponentially the past 100 yrs and GDG is closely tied to labor. Thus the TAM for labor might even be quasi infinite. SO even if Tesla captures 5% of this, it's still 10-20 trillions, and Tesla can 100 x ?? You might think how can they keep the lead ? Just see where are the top engineers coming out are applying for work. Tesla and Space X are the top two choices for the past 4-5 years now.
It’s not a car. It’s closer to mobile computer.
The model and spreadsheet appear to be lacking in their consideration of various scenarios and the valuations of individual components of the company. Ark Invest, on the other hand, employs a more comprehensive approach by taking into account multiple scenarios and assigning value to each aspect of the company, including FSD, robotaxi, humanoids, energy generation and storage, autobidder software, supercharging network, dojo with their own chips, and 4680 batteries.
With decades of experience in valuation, it's apparent that the model's reliance on a 16% margin growth and arbitrary revenue growth is inadequate. This is evidenced by the fact that the model arrives at a valuation of $240 for Tesla, which is significantly lower than the conservative price targets set by Wall Street analysts.
It's also worth noting that the fact that Elon Musk is involved in multiple companies should not be taken as evidence of his importance being any less than that of other CEOs.
Which model arrives at a valuation of $240? Ark Invest?
The first paragraph is loaded with stuff that has a tremendously low probability of happening and is pretty irrelevant. Also are you really using ARK? Probably the worst and most biased fund out there.
The second paragraph? What? Comparing it to other Wall Street estimates is irrelevant. He’s doing his own valuation.
And for the last paragraph. I mean if he’s the CEO of 2 other companies, it is not unreasonable to suggest that his contributions are no longer that high.
Ark employs a Monte Carlo simulation model the last time I looked. Take a look at their recent performance and also the lack of industry experts in some of their thematic funds.
Ark invest assigns revenue numbers and profit margins to mythical segments arbitrarily
Hardly what I would consider good analysis
Really? You're using Cathie wood as an example? Lol
The Gandhi of valuation
Why is cost of capital 10% if Tesla has $10 billion in the bank? And they make $3b cashflow every quarter?
The shorts have been caught, again.
You didn’t have this stance 6 years ago 😂
14:36 Elon Musk is not the founder of Tesla. Martin Eberhard and Marc Tarpenning incorporated in July 2003. Elon came into the picture when he invested in 2004
Rusik will buy Tesla at 175$
Robotaxi fleet that replaces Uber. Energy storage business that’s bigger than their automobile business. Humanoid robots. It’s an AI company..that’s how. Possible?
Meanwhile Tesla still has level 2 self driving while Mercedes has level 3 self driving. And I don’t think the humanoid robot project is a serious project based on how many ppl they have working on it 😂
Tesla is more of a marketing company than an AI company.
@@luisnuno8985 a marketing company that spends $0 on advertising and one that doesn’t even have a PR dept then
@@EapenVEapen I have no clue why the other guy said Tesla is a marketing company, but Tesla does spend on marketing. You can have a look at their annual and quarterly reports.
And I totally get your rational for robotaxi and other things, but you need to understand that while valuations need a fair amount of storytelling - there should still be discipline. You need to be able yo estimate cash flows to some degree of confidence for all those businesses that you have said, and then you have to account fo the risk in those cash flows too.
I may have overlooked some press release, but Tesla didn't say anything about the $$$ regarding those businesses.
@@EapenVEapen who needs a marketing division when you've got a ceo that has cult like following? All he has to do is release one tweet and all of you will be dancing to his tune.
Tesla $217… Feb 9th 2023
( $215 ) Aug 20th 2023
I would question the assumption that Tesla is a Risk stock. Its profit making not a money losing startup. It also has pricing power. It was able to charge almost 20K more and also has enough margin to charge 20K less. This means they have the firepower to ruin competitors through predatory pricing. Also 10.5 as Cost of capital? This is a company throwing off enough cash to grow from internal accruals. So it doesnt need capital. Rather it has excess capital. If interest rates are growing up people will run to safety to profit making companies like Tesla and Tesla can lend out its excess cash at high rates.
You’re so afraid of being wrong that you’ll never be right
Look on the roads tesla is smaller thank u think
Congrats for saying in 2013 that revenue in 10years will be $65bn, which is around $80bn. That's pretty solid forecast so we all have to listen to you professor. I also see no Autonomous revenue in your comments for which Cathy Wood gives 60% of total Tesla value, which is ridiculous in my opinion to value a startup at. However, there is no way in the world that Tesla can arrive to $400bn in revenue :) Simply that would mean 8million vehicles at $50k (ignoring other sources of rev just for easy math). That's impossible because planet sells 5m luxury vehicles currently and you are giving it already almost 200% market share)) Impossible professor!!! You are also saying (by giving this revenue estimate) that Mercedes, BMW, Audi etc are all going to be wiped out. You are not even considering BYD which is #1 in China and VW which is #1 in Europe in EVs already and ahead of Tesla. So this is the first thing to review. Tesla has to bring prices down to $25k on avg to be able to sell 8m vehicles and that brings it to $200bn. Also cost of capital in next 10y, has to be more towards 13% then 10%. Investment grade bonds are giving already 6-8%. Why would I even consider Tesla at 10%??? Tesla price per share cannot be more than $50 in most optimistic scenario and I bet you that it will fall below $50 before end of 2024. My price target is $25 or about $80bn in market cap.
Invest in your education
Yes... Twitter distracted Elon musk. Not the brain company, the space company, the drilling company. We were all cool with that... But Twitter... Woah.... That's too difficult.... Brains and space are easy....
I think it does feel difficult in practical terms and time consuming. Plus, it’s the scale.
Neuralink, his contributions are marginal.
Boring company, is a joke.
Twitter is huge, far reaching, with real consequences on Tesla (eg political and government factors).
His actions and his words seems to be directly affecting his image, and his image affects Teslas branding.
Did you know that Crypto currency and Nfts will outsmart the banking system in the nearest future serving as a global fiat. Already making over 75% profit from my current investment.
You continue to make the same mistake of underestimating Tesla’s growth potential and cost savings. Just like you and many probably didn’t value AWS in Amazon in the early days. Tesla is not just a car company, it will also be a massive energy company, but using and selling free energy from the sun. It will also make robots to vastly reduce costs compared to competition. They will also sell their solar/energy storage/robots that they use for major cost savings as other profit pathways. You need to look through the windshield instead of the rear view mirror. Tesla should be valued as a new Apple + Aramco/Exxon combined as Tesla is disrupting those two mega behemoths as well.
Apple's valuation was never stratospheric. The highest it reached was a PE of ~35. Tesla reached a PE of even above 1000 in 2021.
@@ccc3 PE ratio is such a bad gauge. Apple, Amazon, Tesla all had infinity PE ratios when they were losing money in the earlier days. The transition to profitability is when they get the 1000 PE ratios. A better approach is to make a guesstimate of what their sustained profits will be in the future based on maintenance capex (removing costs spent for growth such as installing batteries and solar in all supercharging stations), in the case of Tesla, selling free energy from the sun definitely is more profitable than extracting oil from the ground, and building humanoid robots to reduce labor costs and then selling those robots for a profit, etc, it’s like the synergy of AWS for Amazon that everybody missed. Tesla is definitely different from a traditional car company with different cost saving opportunities and product profitability channels.
Where do you get the confidence that all of this is going to happen?
@@matteoperini19 possibly from Elon Musk having proven to do impossible things over and over again, such as getting China to allow first foreign company 100% ownership without a local 50% joint venture, landing reusable rockets in the ocean, mass producing model 3 to profitability, etc. The things I’ve listed are easier than the above impossible feats, and seems to be logical progressions of the company based on their strategic positions in the markets.
@@matteoperini19 don’t bet against the guy who said he was going to figure out how to land tickets in order to make space affordable.
Making lots of batteries isn’t rocket science. Just chemistry and logistics.
Watch James Stephenson take this nonsense apart point by misleading point. Bad analysis. Shallow with outdated and very wrong predictions .
Ur a proper bot lol
@@kathirvelgounder9673 Bot or not, he/she/it is 100% correct. James Stephenson does a great job speaking truth to this nonsense.
@@kathirvelgounder9673 no, I’m a long term tesla investor who is still way up.
You’re jealous.