Tesla, Inc. is an American electric vehicle (EVh) manufacturer, energy storage company, and solar panel manufacturer based in Palo Alto, California. In the following report, Tesla’s value drivers will be summarised and their influence on key valuation parameters will be analysed.
Tesla’s valuation based on Multiples will be evaluated, followed by recommendations to investors. The valuation is based on Bloomberg data as well as an equity report by Barclays, as it successfully acknowledges different future scenarios, as well as their probabilities. In addition, the equity research on electric trucks conducted by Deutsche Bank has been used to identify electric trucks market potential as a value driver for Tesla.
Table of Contents
1. INTRODUCTION
2. INTERNAL VALUE DRIVERS
2.1. TECHNOLOGY & INNOVATION:
2.2. ELON MUSK:
2.3. LAUNCH OF NEW MODELS (MODEL 3 AND MODEL 8)
3. EXTERNAL VALUE DRIVERS
3.1. ELECTRIC VEHICLES MARKET IN THE FUTURE
3.2. REGULATIONS AND LAWS
3.3. COMPETITION
4. VALUATION
4.1. RELATIVE VALUATION
4.2. SCENARIO ANALYSIS
5. RECOMMENDATION
Research Objectives and Themes
This report aims to summarize the value drivers of Tesla, Inc. and analyze their specific impact on key valuation parameters, ultimately providing evidence-based investment recommendations based on multiple valuation methods and scenario analysis.
- Identification of internal value drivers (technology, leadership, and product launches).
- Assessment of external market dynamics including regulatory environments and competition.
- Evaluation of Tesla's valuation using relative multiple-based methods.
- Performance of scenario-based intrinsic valuation projections.
- Development of strategic investment recommendations.
Excerpt from the Book
2.1. Technology & Innovation
Regarding the innovation of the battery and its range (250 miles), Tesla has an important edge over its competitors. Moreover, Tesla is planning to build a worldwide network of supercharger stations that can deliver 200 miles of charge in about half an hour, compared to several hours of charge at an ordinary station (Bullis, 2013). Along with batteries, Tesla is also betting on autonomous vehicles and software upgrade technology that continuously improves the engine remotely (Goldfarb, 2017).
Tesla invested tremendously into its research and development (R&D) department in order to attract the brightest talents, and also into production plants (e.g. Gigafactory 1) in order to internalize most processes. As shown in Exhibit (A), these factors translate in burning large amounts of cash in both operating and investing activities in the past four years. By the end of 2017, the estimate of cash burnt in Tesla will amount to $10bn (Welch, 2017).
Summary of Chapters
1. INTRODUCTION: Provides an overview of Tesla as an American manufacturer and outlines the scope of the report regarding value drivers and valuation methods.
2. INTERNAL VALUE DRIVERS: Examines Tesla's R&D, battery innovation, the role of Elon Musk, and the financial impact of launching new models like the Model 3 and Model 8.
3. EXTERNAL VALUE DRIVERS: Analyzes market trends for electric vehicles, the impact of international regulations and government subsidies, and the competitive landscape.
4. VALUATION: Details the application of relative valuation using comparable company multiples and discusses the findings from a forward-looking scenario analysis.
5. RECOMMENDATION: Concludes that Tesla is currently overvalued and suggests a short position on the stock leading into 2018.
Keywords
Tesla, Electric Vehicles, Valuation, Multiples, Cash Flow, R&D, Elon Musk, Model 3, Market Drivers, Competition, Equity Research, Scenario Analysis, Investment, Innovation, Sustainability
Frequently Asked Questions
What is the primary focus of this research report?
The report focuses on evaluating Tesla, Inc.'s internal and external value drivers to assess the company's current market valuation and provide investment advice.
What are the central themes discussed in the analysis?
Key themes include the impact of battery technology, the influence of CEO Elon Musk, the challenges of scaling production for new models, and the role of global environmental policies.
What is the main objective of the valuation section?
The objective is to determine whether Tesla's stock is overvalued or undervalued by comparing it to industry peers and applying a scenario-based projection of future revenues.
Which scientific or analytical methods were employed?
The report utilizes relative valuation using comparable company analysis and a scenario-based model incorporating three distinct probability-weighted outcomes.
What specific aspects are covered in the main body of the work?
The body covers internal factors like R&D and technological superiority, external market factors like competition and regulation, and the financial implications of high cash burn rates.
How would you summarize the key characteristics of this study?
The study is characterized by its focus on disruptive technology, high-growth potential, capital-intensive expansion strategies, and the resulting financial volatility.
How does the report view the impact of Elon Musk on Tesla's value?
Elon Musk is identified as a critical value driver, primarily due to his unique ability to market his vision for the future and attract substantial capital despite consistent net income losses.
What is the conclusion regarding Model 3 production?
The report concludes that delays in the production and delivery of the Model 3 are major risks that negatively affect operating cash flows and increase the probability of needing further debt or equity financing.
Why is the Multiples-based valuation considered problematic for Tesla?
It is difficult to apply because Tesla lacks direct competitors, is still in a high-growth developing stage, and has significantly higher R&D spendings than traditional automotive companies.
- Quote paper
- Anonym (Author), 2017, Tesla's Value Drivers. An Analysis, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/417955
