TSLA: Recovering from inflation but still overvalued

My research shows that Tesla, INC. is a SELL based on a target price of US$194, Tesla, Inc.
implying a downside of 6%. I derive this target price from an FCFF-based valuation
using a WACC of 10.4% and a terminal growth rate of 5%. Recommendation: SELL
Current price: US$207
Target price: US$194
Highlights: Up/(downside): (6)%
• The growing EV market drives revenue growth
• New product launches and production scaling could impact gross margins
• The energy business could transform into a major growth contributor Stock data
RIC code TSLA.O
Risks: Production delays and Elon Musk’s in-person risk, supply chain disruptions, high Index .INX
dependence on battery suppliers, and Regulatory challenges for full self-driving. S&P 500 (5 July 2024) 5,567.19
Sushant Prashar Market cap (US$ m) 6,62,260
[email protected] Shares outstanding (million) 3,189
Valuation table
Par (US$) 0.00
Year end Dec 22A 23A 24E 25E 26E
PE (x) 56.0 48.9 39.1 30.6 36.5
Recurring net profit growth (%) 133.1 14.8 14.4 27.8 (16.2)
Recurring EPS (US$) 3.7 4.2 5.3 6.8 5.7
Recurring EPS growth (%) 127.2 14.5 25.2 27.8 (16.2)
PBV (x) 14.7 10.6 8.3 6.8 5.9
Please refer to important BVPS (US$) 14.1 19.6 25.0 30.4 34.9
ROE (%) 33.6 27.9 23.8 24.5 17.4
disclaimers and disclosures at
DPS (US$) - - - 1.4 1.1
the end of the report. Dividend yield (%) na na na 0.7 0.5
Enterprise value (US$ m) 6,43,174 6,38,396 6,25,958 6,13,577 6,04,493
EV-to-EBITDA (x) 36.6 35.0 24.3 19.9 22.8

| Sources: Company data, market screener, Bloomberg 30 July 2024 1

TSLA: Benefiting from the first mover’s advantage

The growing EV market drives revenue growth

Story The global electric vehicle (EV) market is projected to continue its expansion, with estimates predicting a
rise from US$230bn in 2023 to US$900bn by 2030, according to BloombergNEF. As a key player, Tesla
Sales benefits from this trend with its range of EVs and innovative technologies. In 2023, Tesla's Model 3 and
Model Y accounted for 85% of the company's automotive sales, maintaining their positions as top-selling
electric vehicles globally. With the increasing adoption of EVs and Tesla's robust brand presence, the
company is poised for significant revenue growth in the coming years.
FVMR
New product launches and production scaling could impact gross margins
P5F Background: Tesla, Inc. is an American electric
Tesla plans to introduce the Model 2 referred to as project ‘Redwood’, a more affordable vehicle, in early vehicle and clean energy company, established in
2025, targeting a starting price of around US$25,000. This strategic move aims to capture a broader market 2003. It focuses on EVs, battery energy storage,
Team segment and drive volume growth. The production of Model 2 will require Tesla to scale up its and solar energy solutions. Tesla operates in two
Gigafactories, particularly in Texas and Berlin, which could impact the production capacity of existing main segments: Automotive and Energy, and the
models. However, Tesla's ongoing investment in automation and supply chain optimization is expected to former is currently the main source of revenue.
WCB mitigate these challenges.
The company is a pioneer in EV technology, with a
product lineup including the Model S, 3, X, Y, and
The energy business could transform into a major growth contributor the upcoming Cybertruck and Model 2.
ESG Tesla commands about 22% of the global battery
According to Wood Mackenzie, the global energy storage market is anticipated to grow at a CAGR of 19%, electric vehicle (BEV) market share as of 2023,
reaching approximately US$500bn by 2035. Tesla's energy division, which includes the Powerwall,
Value Powerpack, and Megapack products, contributed 8% to total revenues in 2023, growing by 50% year-over-
selling approximately 2 million cars. The company
has a strong presence in key markets such as the
year. The deployment of the Megapack, in particular, saw a 200% increase, underscoring the strong demand United States, China, and Europe.
for large-scale energy storage solutions. With the global push towards renewable energy, Tesla's energy
Risks products are expected to play a crucial role in stabilizing power grids and supporting the energy transition.

Sources: A. Stotz Investment Research, BloombergNEF, Wood Mackenzie, Tesla.com 30 July 2024 2
The automotive industry is shifting to the technology era

China is a High-Potential Market for EVs China was always the largest car market
Story The automotive industry is shifting from hardware to software, emphasizing enhancing software
functionalities and services. By 2025, consumer spending on EVs is expected to reach US$627 billion,
increasing by 17% compared to 2023. This dynamic has allowed new entrants in Europe and abroad—
Sales especially in China. Indeed, in 1Q23, China was by far the largest EV market with 55% of global EV sales, a
total of 3.4 million units. Moreover, thanks to China’s comprehensive supply chain advantages, low costs in
logistics and labor, and beneficial policies promoting low-carbon vehicles, China is a competitive and crucial
FVMR market for automotive manufacturers.
Technological and infrastructure advancements boost production efficiency
The EV market is expanding due to technological advancements, government policy, and infrastructure
P5F support. According to the McKinsey Global Institute, the progress in robotics and AI technologies could
potentially replace 30% to 60% of tasks in various occupations. This technological advancement helps to
enhance manufacturing and supply chain efficiency. Additionally, the industry also benefits from
Team infrastructure support. According to Grandview Research, the EV charging infrastructure market could reach
US$121 billion by 2030, growing at a 25% CAGR. These factors should foster the growth of EV production EV charging infra to multiply fivefold
and sales.
WCB Batteries to be the new industry control point in the EV Era
More than a third of the value of a BEV is associated with the battery. China was the largest supplier of
materials for the lithium-ion batteries used in Tesla’s EVs, based on Nikkei’s supply chain analysis. This
ESG means that increased geopolitical tensions between the US and China could eventually make it difficult for
Tesla and other EV manufacturers to buy batteries. Therefore, to mitigate the impact of geopolitical
tensions, especially in Europe, automotive manufacturers need to diversify their inputs and production or
Value put factories in areas where they sell products to customers to avoid supply chain disruption.

Risks
Sources: Spherical Insights, Kroll Industry Insights 2023, Business Research Insights, GFK, McKinsey, Good Car Bad Bar Data 2022, Statista, the World Resources Institute, Yahoo Finance, Rocky
30 July 2024 3
Mountain Institute, Deloitte, Canalys, Grandview Research, Nikkei, EV Volumes, F&I tools
TSLA: Constraints to growth are neutral

Constraints to growth analysis (Neutral) Tesla vehicles delivery growth (%)

Story Tesla is striving to maintain its rapid growth while navigating the automotive and energy sectors' complexities.
Here, I will analyze the main constraints to Tesla's growth: capital, operations, market, and people.

Sales Capital (Neutral) Tesla plans to spend over $10 billion in 2024 to support its next growth phase,
particularly in manufacturing and EV infrastructure expansion. Despite substantial capital investment in recent
years, including $8.9 billion in 2023, funding remains robust due to sustained growth. Efficient capital
FVMR management and continued investment are critical for Tesla to support its ambitious projects and maintain its
growth trajectory.
Operations (Major) Tesla faces significant operational challenges, including scaling production at its
P5F Gigafactories in Texas, Berlin, and potentially Mexico. The company is also heavily investing in expanding its
Supercharger network, which is capital-intensive and has long payback periods. Additionally, Tesla is in an
"intermediate low-growth period" due to the plateauing of current model sales and the time required to bring
Team new models to market. Effective operational management is vital to overcoming these hurdles.
Market (Neutral) Tesla's market position is strong, yet it faces intense competition from both established Tesla energy storage deployment growth (%)
automakers and new entrants in the EV market. The company expects slower growth in vehicle deliveries in
WCB 2024 compared to previous years, which could impact market share if competitors continue to innovate and
expand. Tesla's ability to adapt to market changes and regulatory environments will be crucial for sustained
success.
ESG People (Minor) Tesla benefits from a talented and dedicated workforce, but attracting and retaining top
talent in a highly competitive market poses ongoing challenges. The company's culture of innovation and the
Value leadership of CEO Elon Musk are significant assets, yet managing human resources effectively remains
essential to support continuous growth and innovation.

Risks
Sources: company data 30 July 2024 4
TSLA: FY4Q23 saw a big drop in EBIT margin

In 1Q24, Tesla experienced a revenue decrease of

(US$ m) 1Q23 2Q23 3Q23 4Q23 1Q24 YoY (%)
Story Revenue 23,329 24,927 23,350 25,167 21,301 (8.7)
8.7% YoY.
The company saw an 18% YoY decrease in gross
Cost of sales (18,818) (20,394) (19,172) (20,729) (17,605) (6.4) margin and a higher YoY decrease in EBIT margin
Sales Gross profit 4,511 4,533 4,178 4,438 3,696 (18.1) of 56%.
SG&A (1,847) (2,134) (2,414) (2,374) (2,525) 36.7
TSLA reported 1Q24 recurring EPS of US$0.367,
Other (exp)/inc - - - - - nm which was -54% YoY.
FVMR EBIT 2,664 2,399 1,764 2,064 1,171 (56.0)
Finance cost (29) (28) (38) (61) (76) 162.1
Other inc/(exp) 165 566 319 188 458 177.6
P5F Earnings before taxes 2,800 2,937 2,045 2,191 1,553 (44.5)
Income tax (261) (323) (167) 5,752 (409) 56.7
Earnings after taxes 2,539 2,614 1,878 7,943 1,144 (54.9)
Team Equity income - - - - - nm
Minority interest (21) 89 (27) (16) 27 nm
Earnings from cont. operations 2,518 2,703 1,851 7,927 1,171 (53.5)
WCB Forex gain/(loss) & unusual items - - - - - nm
Net profit 2,518 2,703 1,851 7,927 1,171 (53.5)

ESG Recurring profit

EBITDA
2,518
4,756
2,703
4,707
1,851
4,234
7,927
4,528
1,171
3,663
(53.5)
(23.0)
Recurring EPS (US$) 0.725 0.776 0.529 2.264 0.336 (53.7)
Value Reported EPS (US$) 0.794 0.851 0.582 2.487 0.367 (53.8)
Profits (%) 1Q23 2Q23 3Q23 4Q23 1Q24 Diff (%)
Gross margin 19.3 18.2 17.9 17.6 17.4 (2.0)
Risks Operating margin 11.4 9.6 7.6 8.2 5.5 (5.9)
Net margin 10.8 10.8 7.9 31.5 5.5 (5.3)

Sources: A. Stotz Investment Research, Refinitiv. 30 July 2024 5

TSLA: Revenue structure

Story In 2023, Tesla earned about US$97bn in revenue, mostly from selling cars, which made up
94% of sales, Tesla offers four main electric vehicle models – Model 3, Model Y, Model X,
and Model S – designed for different types of customers. The energy sector comprised 6%
Sales of revenue, driven by products such as Powerwall, Megapack, and solar energy solutions.

FVMR Tesla’s revenue sources were diversified across geographic regions in 2023, with the US,
China, and other countries contributing 47%, 22%, and 31% respectively. The company
achieved sales of 1.8 million cars during the year, produced at facilities in the USA, China,
P5F and Germany. Notably, Model 3 and Model Y emerged as the top-selling models,
collectively accounting for approximately 96% of the total revenue generated by Tesla in
that period.
Team
Revenue breakdown, by Segment and Geographic regions 2023
WCB Energy generation and
Automotives 94% USA
storage 6%
ESG 31%
47% CHINA
Value
22% OTHERS
Risks
Sources: A. Stotz Investment Research, company data, Refinitiv, market screener 30 July 2024 6
TSLA: A. Stotz Four Elements

Overall, Tesla appears neutral

Worst Neutral Best
Story compared to its peers regarding
fundamentals, valuation,
momentum, and risk.
Sales Fundamentals: Tesla is among the
Fundamentals Valuation top 30% of 1,830 non-financial
companies with strong
FVMR fundamental ratios.
Valuation: Tesla is ranked in the
bottom 20% for valuation. Its P/E
P5F and P/B ratios are higher than
those of the benchmark.
Momentum: Tesla ranks in the top
Team 40% for momentum, with both
price and fundamental momentum
showing neutral behavior.
WCB Risk: The company's balance sheet
Momentum Risk
risk is high, even with a negative
net debt-to-equity ratio. Price risk,
ESG as indicated by Beta, is a significant
factor contributing to the overall
risk.
Value
Risks Note: Benchmarking against 1,830 non-financial companies in USA

Sources: A. Stotz Investment Research, Refinitiv. Notes: *Bars are decile rankings of the most recent period. **Past 12 months of published data. na = not available, nm = not meaningful.
Valuation is based on historical prices. 30
30 July
July 2024
2024 7
7
TSLA: Leading yet facing significant competition

Ranking (100% is best) 61% Rivalry among competitors 80%

Story
Score
Sales
Are there many competitors of roughly equal size? 4
FVMR While Tesla faces competition from large EV manufacturers
like BYD, NIO, and Xpeng, none match Tesla’s scale and
market dominance, leading to fewer true rivals of the same
P5F size

Is it a slow growth industry? 4

Team
The EV industry is experiencing rapid expansion due to
technological advancements and growing demand, but the
WCB overall prices vary significantly by region and market segment,
influencing growth perception

ESG Is there some technological disruption going on within the 2

industry?

Value The EV industry shows substantial technological advancement

and innovation, with significant distribution across different
companies, making it a dynamic field with diverse
Risks technological progress.

Sources: A. Stotz Investment Research, company data, Refinitiv, market screener, company data 30 July 2024 8
TSLA: Balanced supplier-customer dynamics

Bargaining power vs. suppliers 53% Bargaining power vs. customers 80%
Story
Score Score
Sales
Do the suppliers have strong control of inputs that the 2 Do the customers have many alternatives? 4
company needs?
FVMR Suppliers have moderate control over inputs due to their Customers have numerous alternatives in the EV market,
specialized products. However, Tesla's scale and negotiation impacting their loyalty and choice, making it crucial for Tesla
P5F power reduce their control over the supply chain. to maintain competitive offerings.

Can the customers put pressure on the supplying 4

Team Is it hard for the company to switch from one supplier’s
products to the other?
4 companies?

Switching suppliers can be challenging for Tesla due to the Customers generally have limited direct influence on
WCB specialized nature of some components, affecting the ease of suppliers, as most of their pressure is indirect through market
finding suitable alternatives. competition and brand preferences.

ESG
Would it be difficult for the company to backward integrate 2 Are the customers price sensitive?
and eliminate the supplier?
4
Value
Tesla could feasibly backward integrate to reduce dependency Customers are somewhat price-sensitive, especially in the EV
on suppliers, given its strong resources and expertise, market where price variations impact buying decisions,
Risks especially in key areas like battery production. influencing Tesla’s pricing strategies.

Sources: A. Stotz Investment Research, company data, Refinitiv, market screener, company data 30 July 2024 9
TSLA: Moderate entry, high substitutes

Threat of new entrants 67% Threat of substitutes 67%

Story
Score Score
Sales
Is it easy for any company to enter the industry? 3 Are the customer’s switching costs low? 5
FVMR Entering the EV industry is moderately difficult due to high Customer switching costs in the EV market are high due to
capital requirements, advanced technology needs, and brand loyalty, technology familiarity, and infrastructure
P5F regulatory challenges, but opportunities exist for innovative
newcomers.
investments, making it difficult for customers to switch easily.

Can any company get access to raw materials and labor

Team inputs of the process and start the business?
3 Is there little perceived difference in products? 2
Accessing raw materials and skilled labor is somewhat There is a significant perceived difference in EV products,
WCB challenging due to the competitive demand, but feasible for driven by brand reputation, technology, and performance,
companies with adequate resources and strategic allowing companies to differentiate themselves in the market.
partnerships.
ESG Could new entrants easily reach economies of scale to 4
match current competitors’ costs? Are there new competitors that can “leapfrog” current 3
competitors’ business model?
Value Reaching economies of scale is difficult for new entrants, as
New competitors face challenges in leapfrogging established
established companies like Tesla benefit from extensive
production and cost efficiencies, creating a significant business models due to the advanced technology and strong
Risks competitive barrier. market positions of current leaders, but innovative
approaches can offer opportunities.

Sources: A. Stotz Investment Research, company data, Refinitiv, market screener, company data 30 July 2024 10
TSLA: Leadership and ownership

Institutional holdings (%)

Story
Sales
FVMR
P5F Chairman CEO
Robyn Denholm Elon Musk
Team
Insider holdings (%)
WCB
Top shareholders % O/S* Holdings style % of inst**
Elon Musk 13.1 Aggressive Growth -
ESG Vanguard group
Blackrock
6.3
5.4
Deep Value
GARP***
0
12
Capital research and management company 4.9 Growth 48

Value State street corporation

Total top 5 shareholders' ownership
3.2
32.9
Index
Value
20
5
Total institutional ownership 34.5 Yield 0
Estimated free float 86.9 Others 15
Risks Total 100

Sources: Company data, Wikipedia 30 July 2024 11

TSLA: A. Stotz Profitable Growth

Tesla’s profitable growth climbed

Story from #6 in 2020 to #2 in 2023,
ranking it in the top 10% of 950
large cons. Disc. Companies. This
Sales trend is also evident in profitability.
Tesla maintained strong growth
Profitable Growth from 2020 to 2022. However, in
FVMR '20 '21 '22 '23 PTM 2023 and PTM growth slowed
dropping Tesla to #6
6 2 1 2 1
Asset efficiency has ranked #6 in
P5F PTM. However, strong Expense
control has more than offset the
poor Asset efficiency. It has shown
Team Profitability
'20 '21 '22 '23 PTM
Growth
'20 '21 '22 '23 PTM
world-class performance
consistently and is the main driver
6 2 1 1 1 1 1 2 5 6 of the overall Profitable Growth
WCB rank.
Sales growth has maintained a
world-class ranking from 2020 to
ESG 2023. Conversely, Tesla has
experienced a dramatic fall in sales
Asset efficiency Expense control Revenue growth Expense direction
growth in PTM ranking #4.
Value '20 '21 '22 '23 PTM
7 6 4 5 6
'20 '21 '22 '23 PTM
6 2 1 1 1
'20 '21 '22 '23 PTM
1 1 1 2 4
'20 '21 '22 '23 PTM
1 2 1 6 5
However, Tesla’s expense direction
fell dramatically from #1 to #5
although not affecting the
Risks Benchmarked against 950 large Cons. Disc. companies worldwide. company’s expense control much.

Source: A. Stotz Investment Research. Notes: 1 = top ranking and 10 = worst. Most recent year’s data is based on the past 12 months (PTM) of published data. 30
30 July
July 2024
2024 12
12
TSLA: Global benchmarking
2020 2021 2022 2023 PTM
Profitability & growth ranking against 950 Cons. Disc. companies worldwide (1=Best) 6 2 1 2 1
Story
Profitability: Top ranked in past 3 years Growth: Continuous downtrend
Tesla: ROA (%) & ranking Tesla: EPS growth (%) EPS
Tesla: growth (%) & ranking
& ranking
Sales Dec-20 Dec-21 Dec-22 Dec-23 PTM*
Best
Dec-20
205
Dec-21
608
Dec-22 Dec-23 PTM*
Best 18 16 14
2 10 2 118

FVMR 3
4
3
4
5 5 17
2 6 13
P5F 6
7 7
8 8
9 9

Team Worst Worst

Return on assets (%) EPS growth indices, rebased to 100

20 2,500
WCB 18
16 2,000
14

ESG 12
10
1,500

8 1,000

Value 6
4 500
2
- -
Risks Dec-20 Dec-21 Dec-22 Dec-23 PTM* Dec-20 Dec-21 Dec-22 Dec-23 PTM*
Tesla World Cons. Disc. USA Cons. Disc. Tesla World Cons. Disc. USA Cons. Disc.

Sources: Refinitiv, company data , A STOTZ investment research 30

30 July
July 2024
2024 13
13
TSLA: Global benchmarking – Breaking down profitability
2020 2021 2022 2023 PTM
Profitability ranking against 950 Cons. Disc. companies worldwide (1=Best) 6 2 1 2 1
Story
Asset utilization: Stable near the middle Net margin: World Class
Tesla: Asset turnover (%) & ranking Tesla: Net margin (%) & Tesla:
rankingNet margin (%) & ranking
Sales Dec-20 Dec-21 Dec-22 Dec-23 PTM* Dec-20 Dec-21 Dec-22 Dec-23 PTM*
Best Best 16 15 14
2 2 11
FVMR 3
4 113
3
4
5 102 5
94 97 2
P5F 6
7 73
6
7
8 8
9 9

Team Worst Worst

Asset turnover (%) Net margin (%)
120 18
WCB 100
16
14
80 12
ESG 60
10
8
40 6
Value 20
4
2
- -
Risks Dec-20
Tesla
Dec-21 Dec-22
World Cons. Disc.
Dec-23 PTM*
USA Cons. Disc.
Dec-20
Tesla
Dec-21 Dec-22
World Cons. Disc.
Dec-23 PTM*
USA Cons. Disc.

Sources: Refinitiv, company data , A STOTZ investment research

30
30 July
July 2024
2024 14
14
TSLA: Global benchmarking – Breaking down growth
2020 2021 2022 2023 PTM
Growth ranking against 950 Cons. Disc. companies worldwide (1=Best) 1 1 2 5 6
Story
Sales growth: Dramatic downturn since 2 years Net margin change: Volatile
Tesla: Sales growth (%) & ranking Tesla:
Tesla: Net margin change (%) Net margin change (%) & ranking
& ranking
Sales Dec-20 Dec-21 Dec-22 Dec-23 PTM*
Best
Dec-20
5
Dec-21 Dec-22
5
Dec-23 PTM*
Best 28 71 51
2 19 2 8
FVMR 3
4 10
3
4
5 5 0
6 (0)
P5F 6
7 7
8 8
9 9

Team Worst Worst

Jan-00
Jan-00
Sales growth (%) Net margin change contribution to EPS growth (%)
80 600 537.7
WCB 70 500
60 400
50
ESG 40
300
200 176.3
30
20 100 66.3
Value 10
-
(1.8)
2.9
-
(10) (100)

Risks Dec-20
Tesla
Dec-21 Dec-22
World Cons. Disc.
Dec-23 PTM*
USA Cons. Disc.
Dec-20
Tesla
Dec-21 Dec-22
World Cons. Disc.
Dec-23 PTM*
USA Cons. Disc.

Sources: Refinitiv, company data , A STOTZ investment research

30
30 July
July 2024
2024 15
15
TSLA: Environmental

Overall ESG Score (100% is best): 67% Environmental 80%

Story
Social 100% Governance 20%
Sales
Environmental Yes/No?
FVMR Does the company have a resource reduction policy? Yes
Tesla minimizes its environmental footprint through recycling
P5F Has the company faced any environmental controversies? No

None found.
Team Does the company have an emissions/waste policy? Yes

WCB It has established waste controls and high-quality wastewater systems to be recycled in its factories.

Is the company engaged in emissions trading or any other way tries to reduce its climate footprint? No

ESG None found.

Does the company have any environmental, eco, "green," or organic products? Yes
Value Tesla focuses on sustainable initiatives.

Risks
30 July 2024 16
TSLA: Social

Overall ESG Score (100% is best): 67% Environmental 80%

Story
Social 100% Governance 20%
Sales
Social Yes/No?
FVMR Does the company have any health & safety policy? Yes

Tesla prioritizes its employee health and safety measures

P5F Does the company have a human rights policy? Yes

The company’s policy towards employees is based on the fundamentals of human rights.
Team Does the company have a fair competition policy, e.g., anti-corruption, anti-bribery, business ethics? Yes
Tesla enforces strict anti-corruption and fair competition policy
WCB
Has the company implemented quality management systems? Yes

ESG Tesla follows ISO certified quality-management standards

Does the company derive any revenue from weapons, alcohol, gambling, tobacco, or pornography? No
Value This is not the case.

Risks
30 July 2024 17
TSLA: Governance

Overall ESG Score (100% is best): 67% Environmental 80%

Story
Social 100% Environmental 20%
Sales
Governance Yes/No?
FVMR Does the company have board independence in line with or above the country average? Yes

Tesla has independent board members

P5F Is the Chairman also CEO (or equivalent)? Yes

Elon musk is chairman and CEO of Tesla

Team Does the company have any shareholder rights policy? Yes

WCB Tesla has shareholders rights policy

Does the company have any insider dealings or accounting controversies? Yes

ESG Tesla has faced insider dealings and accounting controversies involving senior executives

Does the company have any CSR sustainability or ESG reporting? Yes
Value The CSR and ESG reports are available in the sustainability report.

Risks
30 July 2024 18
TSLA: Profit and loss statement

Story Actual Forecast

(YE Dec, US$ m) 2021A 2022A 2023A 2024E 2025E 2026E 2027E 2028E
Sales Revenue 53,823 81,462 96,773 1,22,902 1,57,314 1,96,643 2,45,803 3,07,254
Cost of goods & services (40,217) (60,609) (79,113) (93,405) (1,19,559) (1,49,448) (1,86,811) (2,30,441)
Gross profit 13,606 20,853 17,660 29,496 37,755 47,194 58,993 76,814
FVMR SG&A (7,110) (7,021) (8,769) (12,290) (15,731) (29,496) (39,329) (47,624)
Other operating (exp)/inc - - - - - - - -
EBIT 6,496 13,832 8,891 17,206 22,024 17,698 19,664 29,189
P5F Interest expense (net) (315) 130 910 1,153 1,424 1,922 2,297 2,542
Other non-operating inc/(exp) 166 110 50 51 52 61 70 78
Earnings before taxes (EBT) 6,347 14,072 9,851 18,409 23,499 19,681 22,032 31,808
Team Income tax (699) (1,132) 5,001 (1,473) (1,880) (1,574) (1,763) (3,499)
Earnings after taxes (EAT) 5,648 12,940 14,852 16,937 21,619 18,106 20,269 28,309
Equity income/Minority interest (120) (4) 25 17 43 36 41 28
WCB Earnings from cont. operations 5,528 12,936 14,877 16,954 21,662 18,142 20,310 28,338
Forex/Exceptionals before tax (4) (353) 122 - - - - -
Net profit 5,524 12,583 14,999 16,954 21,662 18,142 20,310 28,338
ESG Earnings per share adj.
Net profit 5,524 12,583 14,999 16,954 21,662 18,142 20,310 28,338
Less: Pref. share dividend & other adj. 9 1 - - - - - -
Value Proft attributable to common shares 5,533 12,584 14,999 16,954 21,662 18,142 20,310 28,338
Add: Exceptional items after tax 90 242 - - - - - -
Add: Forex loss/(gain) after tax (86) 82 (183) - - - - -
Risks Recurring profit after tax 5,537 12,908 14,816 16,954 21,662 18,142 20,310 28,338
Recurring FDEPS (US$) 1.6 3.7 4.2 5.3 6.8 5.7 6.4 8.9

Sources: A. Stotz Investment Research, company data, Refinitiv. 30 July 2024 19

TSLA: Balance sheet - Assets

Story Actual Forecast

(YE Dec, US$ m) 2021A 2022A 2023A 2024E 2025E 2026E 2027E 2028E
Sales Cash & short-term investments 17,707 22,185 29,094 40,485 52,030 60,444 71,297 83,882
Accounts receivable 1,913 2,800 3,424 4,950 6,118 7,647 9,149 10,242
Inventories 5,757 12,839 13,626 16,865 20,591 26,153 28,022 33,286
FVMR Other current assets 1,723 3,093 3,472 3,687 4,719 5,899 8,603 11,983
Total current assets 27,100 40,917 49,616 65,987 83,458 1,00,144 1,17,071 1,39,393
Long-term investments - - - - - - - -
P5F Net fixed assets 31,176 36,635 45,123 51,703 59,088 65,326 73,616 83,137
Intangible assets 1,517.0 399.0 362.0 391.0 397.9 411.4 458.5 567.0

Team Goodwill
Other long-term assets
200.0
2,138
194.0
4,193
253.0
11,264
291.0
12,728
334.6
14,638
368.1
17,126
404.9
20,037
445.3
25,247
Total assets 62,131 82,338 1,06,618 1,31,101 1,57,916 1,83,376 2,11,588 2,48,789

WCB
ESG
Value
Risks
Sources: A. Stotz Investment Research, company data, Refinitiv. 30 July 2024 20
TSLA: Balance sheet - Liabilities and equity

Story Actual Forecast

(YE Dec, US$ m) 2021A 2022A 2023A 2024E 2025E 2026E 2027E 2028E
Sales Overdrafts & short-term loans 1,589 1,502 2,373 1,674 1,339 1,071 857 686
Accounts payable 13,944 20,323 20,242 25,427 32,879 40,683 49,816 60,171
Other current liabilities 4,172 4,884 6,133 8,480 10,225 12,782 14,748 17,821
FVMR Total current liabilities 19,705 26,709 28,748 35,581 44,443 54,536 65,421 78,677
Long-term debt 5,245 1,597 2,857 2,510 2,008 1,607 1,285 1,028
Other long-term liabilities 6,166 8,543 11,646 12,706 13,875 15,165 16,606 18,167
P5F Total liabilities 31,116 36,849 43,251 50,797 60,326 71,308 83,312 97,872
Minority interest 826 785 733 716 673 637 596 568
Paid-up capital - Common shares 29,804 32,180 34,895 34,895 34,895 34,895 34,895 34,895
Team Paid-up capital - Preferred shares - - - - - - - -
Retained earnings 331 12,885 27,882 44,836 62,165 76,679 92,927 1,15,598

WCB Revaluation/Forex/Others
Total equity
54
30,189
(361)
44,704
(143)
62,634
(143)
79,588
(143)
96,917
(143)
1,11,431
(143)
1,27,679
(143)
1,50,350
Total liab & shareholders' equity 62,131 82,338 1,06,618 1,31,101 1,57,916 1,83,376 2,11,588 2,48,789

ESG Book value per share adj.

Total Equity 30,189 44,704 62,634 79,588 96,917 1,11,431 1,27,679 1,50,350
Less: Preferred shareholders' equity - - - - - - - -
Value Less: Hybrid debt & others
Common shareholders' equity
-
30,189
-
44,704
-
62,634
-
79,588
-
96,917
-
1,11,431
-
1,27,679
-
1,50,350
BVPS (US$) 9.7 14.1 19.6 25.0 30.4 34.9 40.0 47.1
Risks
Sources: A. Stotz Investment Research, company data, Refinitiv. 30 July 2024 21
TSLA: Balance sheet - Cash flow statement

Story Actual Forecast

(YE Dec, US$ m) 2021A 2022A 2023A 2024E 2025E 2026E 2027E 2028E
Sales Net income 5,524 12,583 14,999 16,954 21,662 18,142 20,310 28,338
Depreciation & amortization 2,911 3,747 9,334 8,555 8,798 8,809 8,755 9,667
Calculated chg in net working capital 3,940 (2,248) (622) 2,552 3,271 2,089 5,025 3,690
FVMR Other non-cash & balancing items (878) 642 (10,455) (3,033) (4,158) (5,068) (5,804) (6,359)
Operating cash flow 11,497 14,724 13,256 25,028 29,573 23,971 28,287 35,336
Capital expenditures (7,742) (6,236) (8,899) (12,186) (12,119) (10,061) (11,366) (13,006)
P5F (Inc)/dec in other investments (126) (5,737) (6,685) (1,464) (1,909) (2,488) (2,911) (5,210)
Investing cash flow (7,868) (11,973) (15,584) (13,650) (14,028) (12,549) (14,277) (18,216)

Team Increase/(dec) in debt

Dividend paid
(5,732)
-
(3,866)
-
2,116
-
(1,046)
-
(837)
(4,332)
(669)
(3,628)
(536)
(4,062)
(428)
(5,668)
Change in equity 707 541 700 - - - - -

WCB Others
Financing cash flow
(178)
(5,203)
(202)
(3,527)
(227)
2,589
1,060
14
1,169
(4,000)
1,290
(3,008)
1,441
(3,157)
1,561
(4,535)
Net inc/(dec) in cash & cash equi (1,574) (776) 261 11,391 11,545 8,414 10,853 12,585

ESG Beginning cash

Adjustment for historic data
19,384
(103)
17,707
5,254
22,185
6,648
29,094
-
40,485
-
52,030
-
60,444
-
71,297
-
Ending cash 17,707 22,185 29,094 40,485 52,030 60,444 71,297 83,882

Value
Risks
Sources: A. Stotz Investment Research, company data, Refinitiv. 30 July 2024 22
TSLA: Ratios

Story Actual Forecast Recent quarters

Sales (YE Dec)

Internal liquidity (x)
2021A 2022A 2023A 2024E 2025E 2026E Sep '23 Dec '23 Mar '24

Current ratio 1.4 1.5 1.7 1.9 1.9 1.8 1.7 1.7 1.7
FVMR Quick, or acid test ratio
Working cap. mgmt (Days)
1.1 1.1 1.3 1.4 1.4 1.4 1.2 1.3 1.2

Inventory conversion period 44 55 60 59 56 56 66 59 76

P5F Receivables collection period

Days from raw mat to coll
13
57
10
66
12
72
12
71
13
69
13
69
11
77
10
70
15
91
Payables deferral period 100 102 92 88 88 89 94 86 104

Team Cash conversion cycle

Profitability ratios (%)
(44) (36) (21) (17) (19) (20) (17) (16) (13)

Gross profit margin 25.3 25.6 18.2 24.0 24.0 24.0 17.9 17.6 17.4

WCB EBIT margin

EBIT return on avg assets
12.1
11.4
17.0
19.1
9.2
9.4
14.0
14.5
14.0
15.2
9.0
10.4
7.6
7.6
8.2
8.2
5.5
4.3
Return on average assets 9.7 17.4 15.9 14.3 15.0 10.6 8.0 31.6 4.3
Financial risk (x)
ESG Liabilities-to-assets (%) 50.1 44.8 40.6 38.7 38.2 38.9 42.3 40.6 40.4
Debt-to-equity 0.2 0.1 0.1 0.1 0.0 0.0 0.1 0.1 0.1
Net debt-to-equity (0.4) (0.4) (0.4) (0.5) (0.5) (0.5) (0.4) (0.4) (0.3)
Value Times-interest-earned 25 105 117 94 157 166 111 74 48
Effective interest rate (%) 4.0 3.4 3.7 5.8 5.2 5.3 4.5 5.1 5.7

Risks
Sources: A. Stotz Investment Research, company data, Refinitiv. 30 July 2024 23
TSLA: Ratios (continued)

Story Actual Forecast Recent quarters

Sales (YE Dec)

General growth (YoY, %)
2021A 2022A 2023A 2024E 2025E 2026E Sep '23 Dec '23 Mar '24

Revenue 70.7 51.4 18.8 27.0 28.0 25.0 8.8 3.5 (8.7)
FVMR Assets
Gross profit
19.1
105.2
32.5
53.3
29.5
(15.3)
23.0
67.0
20.5
28.0
16.1
25.0
26.2
(22.4)
29.5
(23.2)
25.8
(18.1)
Operating profit 225.8 112.9 (35.7) 93.5 28.0 (19.6) (52.2) (47.5) (56.0)

P5F Attributable profit

EPS
700.6
649.2
127.8
117.5
19.2
17.6
13.0
12.7
27.8
27.8
(16.2)
(16.2)
(43.8)
(44.4)
113.0
111.6
(53.5)
(53.8)
Recurring EPS 585.2 127.2 14.5 25.2 27.8 (16.2) (44.4) 110.0 (53.7)

Team Du Pont analysis (%)

Net profit margin 10.3 15.4 15.5 13.8 13.8 9.2 7.9 31.5 5.5
Revenue per US$100 of assets 94.2 112.8 102.4 103.4 108.9 115.2 101.2 100.4 78.9
Assets/equity (x) 2.2 1.9 1.8 1.7 1.6 1.6 1.8 1.7 1.7
WCB Return on equity 21.1 33.6 27.9 23.8 24.5 17.4 14.2 54.6 7.4
Others (%)
Effective tax rate 11.0 8.3 - 8.0 8.0 8.0 8.2 - 26.3
ESG Dividend payout ratio - - - - 20.0 20.0 - - -

Value
Risks
Sources: A. Stotz Investment Research, company data, Refinitiv. 30 July 2024 24
TSLA: Free cash flow data

Story Actual Forecast Fade period*

(YE Dec, US$ m) 2021A 2022A 2023A 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Sales EBIT 6,496 13,832 8,891 17,206 22,024 17,698 19,664 29,189 35,650 40,694
Est tax rate (%) 11 8 - 8 8 8 8 11 16 16
NOPAT 5,780 12,691 8,891 15,830 20,262 16,282 18,091 25,978 29,946 34,183
FVMR Add: Depre & amort 2,911 3,747 9,334 8,555 8,798 8,809 8,755 9,667 11,132 12,694
Cash NOPAT 8,691 16,438 18,225 24,385 29,060 25,091 26,846 35,645 41,079 46,877
Chg in A/R (27) (887) (624) (1,526) (1,168) (1,529) (1,502) (1,092)
P5F Chg in inventory (1,656) (7,082) (787) (3,239) (3,726) (5,563) (1,868) (5,264)
Chg in oth curr asst (377) (1,370) (379) (215) (1,032) (1,180) (2,704) (3,380)
Chg in A/P 5,442 6,379 (81) 5,185 7,452 7,805 9,133 10,354
Team Chg in oth curr liabs 558 712 1,249 2,347 1,745 2,556 1,966 3,073
Less: Chg in work cap 3,940 (2,248) (622) 2,552 3,271 2,089 5,025 3,690
Less: CAPEX (7,742) (6,236) (8,899) (12,186) (12,119) (10,061) (11,366) (13,006)
WCB Less: Chg in invest cap (10,728) (12,233)
FCF to firm 4,889 7,954 8,704 14,751 20,212 17,118 20,506 26,330 30,351 34,644
FCF to equity (1,173) 3,934 10,664 13,454 19,195 16,302 19,860 25,815 30,524 34,821
ESG FCF per share (US$) 1.4 2.3 2.5 4.6 6.3 5.4 6.4 8.3 9.5 10.9
NOPAT growth (%) 288.1 119.6 (29.9) 78.0 28.0 (19.6) 11.1 43.6 15.3 14.1
FCF growth (%) 5.7 62.7 9.4 69.5 37.0 (15.3) 19.8 28.4 15.3 14.1
Value
Risks
Sources: A. Stotz Investment Research, company data, Refinitiv.
30 July 2024 25
Note: *Shows the two first years of the fade period.
TSLA: Relative valuation

On the forward 2024E PE multiple, Tesla trades at

Story a significant premium to the Consumer
Discretionary sector in the US, Asia ex Japan, and
the world. Thus, Tesla looks expensive on a PE
Sales basis.
I expect its EPS growth to range between 25-28%
in 2024 and 2025 assuming the boom in net
FVMR margins due to the approval of the FSD licensing
agreement and boom in the energy segment.
Thus, Tesla seems to be fairly valued in terms of
P5F the PEG ratio compared to the other valuation
metrics.

Team
WCB PE ratio (x) 2022A 2023A 2024E 2025E
TSLA 54.7 47.5 39.2 30.6
USA 31.5 31.9 27.6 23.7
ESG Asia ex Japan 21.8 17.4 13.4 11.4
World 22.9 21.9 19.5 17.1
EPS growth (%)
Value TSLA 127.2 14.5 24.9 28.0
USA 11.0 18.6 114.3 10.2

Risks Asia ex Japan

World
23.5
4.1
34.0
24.1
30.3
12.1
17.3
14.2

Sources: A. Stotz Investment Research, Refinitiv 30 July 2024 26

TSLA: Relative valuation

On the forward 2024E PB multiple, Tesla looks in

Story line with the Consumer Discretionary sector in the
US. The disparity between Tesla, Asia, and the
global market further highlights the expensive
Sales valuations with a bigger gap.
I forecast its return on equity (ROE) to be around
24% in 2024E, higher than the sector average in
FVMR Asia and the global markets but still lower than
the US. Sector average. This results in Tesla
trading at a significant premium based on the
P5F 2025E PB-to-ROE multiple.

Team
WCB PB ratio (x) 2022A 2023A 2024E 2025E
TSLA 14.4 10.3 8.3 6.5
USA 8.2 10.0 8.2 6.8
ESG Asia ex Japan 1.9 2.1 1.9 1.7
World 3.1 3.7 3.4 3.0
ROE (%)
Value TSLA 33.6 27.9 23.8 24.0
USA 25.9 31.4 29.6 28.6

Risks Asia ex Japan

World
8.9
13.5
12.4
17.0
14.5
17.4
14.9
17.7

Sources: A. Stotz Investment Research, Refinitiv 30 July 2024 27

TSLA: Valuation and target price

I assume a risk-free rate of 3.7% and a market

Story Calculation of cost of equity (COE, %)
Market: United States of America
Estimate equity risk premium for the US. market of 6%.
US$ Equity value per share (US$) Tesla has been a high-beta stock, so I assume a
Market risk-free rate 3.7
250 Current stock price (US$) beta of 1.3x, slightly lower than its previous
Sales Market equity risk premium
Market return
6.0
9.7
194 208
averages. I forecast a capital structure with
Company beta (x) 1.3 200 around 13% debt to total capital. This results in a
COE 11.2 173 WACC and a discount rate of 10.4%. I used an
FVMR Calculation of WACC Average 150
FCFF-based model to value Tesla.
Cost of debt 5.8 I used a very high terminal growth because of the
Average tax rate 13.5
100 88 industry expectations of a 60% forward CAGR in
P5F After tax cost of debt
Cost of preferred stock
5.0
-
the energy segment in which Tesla is the leading
player.
Debt as a % of total capital 12.8 50
- In the base case scenario, I anticipate sales
Team Preferred stock as a % of total capital
Equity market value as a % of total capital 87.2
- growth of 26% until 2028E, leading to a value of
Weighted average cost of capital 10.4 DDM FCFF FCFE US$194 per share based on the FCFF
TSLA: Valuation (US$ m) DDM % FCFF % FCFE % methodology. This represents a 16% downside
WCB PV of cash flow in years 2024-28 12,132 4 70,989 11 67,649 12 compared to the current market price.
PV of fade period 85,712 30 1,78,870 29 1,60,664 29
In my sensitivity analysis (on the following page),
PV of terminal value 1,83,279 65 3,44,624 56 2,94,040 53
the optimistic case assumes a sales growth of
ESG Present value of future cash flows
Add: Cash & ST investments
2,81,124
na*
100
-
5,94,482
29,094
96
5
5,22,352
29,094
95
5
28% until 2028E, resulting in a target price of
Add: Long-term investments na - - - - - US$193 When the sales growth is assumed to be
23.5%, the stock price yields a value of US$193.9
Value Corporate value
Less: Total debt, preferred stock & minorities
2,81,124
na
100
-
6,23,576
(5,963)
101
(1)
5,51,446
na
100
- per share.
Shareholder value 2,81,124 100 6,17,613 100 5,51,446 100
Number of shares (m) 3,189 3,189 3,189
Risks Equity value per share (US$) 88 194 173

Sources: A. Stotz Investment Research, company data, Refinitiv. 30 July 2024 28

TSLA: Sensitivity analysis

Story Fundamentals (%, five year-average) Valuation (US$)

Sales TSLA
What if sales growth changed by X% from base case?
EPS growth Net margin ROE DDM FCFF FCFE PEG PB/ROE

+10 (28.6%) nm 10.8 21.5 106.7 192.9 172.7 36.3 167.6

Base case of 26.0% nm 10.9 20.6 88.2 193.7 172.9 32.4 164.0
FVMR -10 (23.4%) nm 10.9 19.8 72.7 193.9 172.7 28.6 160.5
What if gross margin changed by X percentage points from base case?
+2 (26.2%) nm 12.8 23.0 95.2 204.1 182.8 61.1 188.2
P5F Base case of 24.2% nm 10.9 20.6 88.2 193.7 172.9 32.4 164.0
-2 (22.2%) nm 9.0 18.0 83.5 183.2 163.1 9.5 140.3
What if discount rate changed, by changing the risk factor (beta) from base case?
Team +10 (Beta 1.375x, COE 12.0%)
Base case of 1.25x (COE 11.2%)
75.0
88.2
177.8
193.7
157.2
172.9
-10 (Beta 1.125x, COE 10.5%) 105.3 213.1 192.3
WCB What if terminal growth rate changed by X percentage points from base case?
+1 na na na
Base case of 5% 88.2 193.7 172.9
-1 76.8 170.4 153.0
ESG Note: PEG and PB/ROE are based on 2024E relative to the Cons Disc sector in USA.

Value
Risks
Sources: A. Stotz Investment Research, company data, Refinitiv. 30 July 2024 29
TSLA: The primary risk is a delay in launch and production ramp-up

Production delays and Elon Musk’s in-person risk

Story The primary risk for Tesla is production delays accompanied by the personal risk associated with Elon Musk,
Musk is known for being manipulative, often influencing prices of dogecoin for secret profits with his
Twitter activity. Such manipulative behavior poses a significant risk to Tesla, as similar tactics within the
Sales company would be difficult to detect. This uncertainty in leadership could impact business outcomes.
Automotive margins shrinking
Supply chain disruptions

FVMR Tesla's extensive supply chain, sourcing numerous parts from various suppliers, faces risks from material
pricing, geopolitical events, and natural disasters. Previous semiconductor shortages from Taiwan and China
significantly affected Tesla’s manufacturing costs. Localized procurement challenges and inadequate supply
chain automation could lead to production disruptions and increased costs, adversely affecting business
P5F outcomes.
High dependence on battery suppliers
Team Tesla's reliance on key suppliers such as Panasonic and Contemporary Amperex Technology Co. Limited
(CATL) for battery cells limits flexibility in changing suppliers. Supply disruptions could hinder the production
of vehicles and energy storage products. Fluctuating prices and unstable supply may result in unexpected
WCB costs and write-offs, harming business and operational results.

Regulatory Challenges for Full Self-Driving

ESG Despite its benefits, Tesla’s Full Self-Driving (FSD) software faces significant safety concerns and regulatory
scrutiny. The NHTSA reported a fatal accident rate of 1.35 deaths per 100 million miles traveled in 2022.
Ongoing debates in various states about banning this technology could, if enacted, hinder Tesla's
Value development of new income streams and negatively impact its business model.

Risks
Sources: Company data, market screener, Bloomberg 30 July 2024 30
Story
Sales
FVMR
P5F
Team
WCB
ESG
Value
Risks
30 July 2024 31