A Do-it-Yourself (DIY) Valuation of Tesla: Of Investment Regret and Disagreement!

[@AswathDamodaranonValuation]

Remember that your share count should be multiplied by five, since there has been a 5 for 1 stock split since this valuation was done. Makes a HUGE difference!

[@wahidazizi5952]

I think there is an error in the spreadsheet - when I go to update the option value, cell B31 of valuation output does not compute

[@nsan48]

The wisest investor I've ever listened to. What a joy to hear your presentations sir.

[@lorenzmuller3542]

Just one thing I don't get: He's buying and selling so many times and missed a lot of gains. And I don't get it since relative valuations often do not change dramatically. Wouldn't it be better to stick with your winners?

[@wm6549]

@@lorenzmuller3542 I don't think he misses out on a lot of gains. If he sells a position, he is buying something else that could go up. Nothing would beat Tesla's gains though.

[@Imbmathews]

No wonder why I shouldn't be your follower on Valuation. What a presentation Mr. A. Damodaran, your speech is priceless. Bravo!!! 😊

[@TransMetroShorts]

You are a wonderful teacher Aswath - and sounds like you are a great human being too. Let’s marvel at the fact that your quality content is available to anyone in the world for free!! What a wonderful world :-) P.S. - I bought at slightly above your valuation and am still holding - I have my story ofcourse but as always you make me question my beliefs :-)

[@jonp3674]

This is a really great video, I especially applaud what you said at the end about keeping the debate friendly, I agree. Tesla uses about 70 kilowatt hours of batteries per vehicle which sell for maybe $60k average. So if Tesla were making 1 terawatt hour of batteries that would be enough for 7m vehicles (with revenues of $428bn) and an equally large battery storage business with something like the same level of revenues, maybe a bit more as stationary battery packs don't have to corner well at 60mph. This means close to a trillion in revenue. If you then look at Elon's forward guidance he has multiple times, including in the Q4 call (I include a link to the Q2 call last year) said that he is aiming to get the company to multiple terawatt hours of battery production. So the issue with valuing Tesla is how much faith to put in those statements he is making and what timescales to put them on. I mean Elon is for sure crazy but also he now regularly vertically lands rockets with such regularity it's boring, and everyone said that was impossible. I think this is the core split over the stock. People who believe what Elon is saying and think they might hit a terawatt hour or more this decade and bring in more than a trillion in revenue are thinking this is going to be the biggest stock in the world by a margin. That's why they think the stock is worth several thousand dollars right now. I think most level headed business people can't believe that a company of this size can sustain 50% growth for 5+ years. kzbin.info/www/bejne/iXiQZmyFqJd7a9E&t=3708

[@CesarDominguez_]

Sharing free knowledge just for the love of valuation. You are the man, professor. Thank you a lot for all your teachings.

[@nileshgada]

A Golden example & conviction of following your own process of buy & sell which was quite logical execution without which you would not have been able to put a limit buy price for Tesla @180 in june 2019 !! Plus a more than 300% gains is exciting & icing on the cake !! Excellent sir !! I have become a die hard fan & follower of you sir !!

[@user-xc7xf6mg2f]

Sometimes, it’s best to avoid responding to the trolls.. If we had to, wish we had the time or energy like the Professor. Well done, absolutely not necessary to explain every step of assumption, valuation is an art due to those assumptions being ours. This was legendary!

[@hectordehoyos3634]

Aswath Damodaran is the only person that values with fundamentals. It’s difficult for some professional personas to change because they have other interests.

[@platoscavealum902]

❤️ Aswath, thank you for sharing with us some of your extremely valuable time and thoughts.

[@MonsieurDee]

I don't think you will completely understand the valuable insights you have given me and how you have impacted my life. I always wish you all the best professor.

[@BrunoHenriqueMattos]

Thank you, Professor! Your classes are incredible. You have been inspiring me since I watched your first video. Please, keep going!

[@henryzhang9915]

Impeccable analysis. I learned some much, thank you sir.

[@udishomer5852]

That was the most thorough Tesla analysis I have seen so far, great work. May I point out that Tesla can be better evaluated as 6 different companies/departments: 1. Premium auto manufacturer that makes EVs 2. Solar manufacturer and installer: PV for residential/small commercial roofs/Solarglass roof 3. Energy storage business: Powerwall/Powerpack/Megapack 4. Autonomous driving technology developer: Autopilot/FSD 5. Services for Tesla cars: Insurance/Charging/Car servicing/Leasing/Internet streaming/Paid updates 6. (?) Ride hailing service provider: Robotaxis Its nearly impossible to accurately evaluate all these product lines, especially since Tesla does not give data in their reports about each product, however this is how Tesla should be looked at in my opinion.

[@udayhomeful]

Looks like value of premium car manufacturing part of Tesla is,around $430.00 and the remaining 5 units for free.

[@udishomer5852]

@@udayhomeful At the current share price of ~$770, the value of the other product lines is $340 per share (roughly $61 Billion). Of course this changes daily.... :)

[@ankitkalavagunta8951]

Professor please don't take the trolls seriously. We all love and appreciate you for sharing your ideas and thought process with the world.

[@MADMAX7330]

Fantastic valuation scenario run through, Aswath! There are some parts of the business will need to be evaluated as well, like the Autonomous robotaxi fleet and the semi trucks. And the robotaxi is certainly hard to do a solid valuation on.

[@AdA-rl4eo]

Great content! New to your channel and I’ll be all ears for new content. I’d love to know who the 1 dislike was.. must be a true Tesla bull who doesn’t want to hear it’s not worth $7000/share

[@remotaurog]

The best work on TSLA by a mile ,would love to see you back on CNBC ,you and Jim toe to toe.

[@zakirahman8763]

Thanks professor. Love the videos, keep them coming!

[@chrisschill9222]

Really really great material here and so much to learn from. Big thumps up to Aswath for making this all available!

[@ursyedis]

i am gonna hold on to tesla assuming that , they are gonna mutate to something bigger considering CEO likes to swing big and auto industry is something so old needs reinnovation which i think tesla will quickly start grabbing shares from other competitors. having said that , I am just random guy who is gathering knowledge regarding investment from random places wherever i can. you have made me to learn so much which otherwise wouldnt be possible. I know there are haters out there especially if its against tesla. but please dont stop what you are doing because people like us neither have financial support or support from big firms. people like you help us to get better. for whatever reason you do , some people really appreciate it .

[@MrOlenevod]

Well there are hundreds of fancy analysts with their made up price targets, and only Aswath who actually backs his valuations with FACTS AND LOGIC! Thank you Dean for being an island of sanity in this deranged ocean!

[@estefanello]

Man! He just covered all possible scenarios! "Pick your story"

[@SinisaStojanovic]

You don't know much about Professor, do you? Please leave this channel. ( go pray under Musk altar)

[@samirkamrouna6149]

You are truly a humble, kind and Great professor! I wish I can come from Sweden and have the opportunity to study one of your courses some day!

[@scottjacobs255]

Had a lot of fun playing around with the excel spreadsheet, thanks a lot for providing that. The number I got was a lot closer to your valuation then what the market thinks.

[@Vasleal]

Much has happened in the last year. I’d love to see an updated version of this video!

[@mauricioch]

Great video and thank you for sharing the spreadsheet. One thing I'd like to add to the debate: good companies usually have their stocks overvalued. The valuation was efective to determine the fair stock value, but let's think, if the story develops as the $2000/stock scenario, stocks would be around 4000 as the case leaves room for improvements (new markets, new products). So in my opinion, the valuation is good to try to predict possible behaviours of the real price of the stock but we should add the optimism/ pessimism factor. In the same thinking, a sistematic crisis could make teslas' stocks to go around $400 although being profitable.

[@vix182]

If you pick the “FAANG story” the primary assumption is they succeed with the autonomous Tesla Network (Uber competitor)... in that scenario it no longer makes sense to categorize their revenue as "like BMW" or "like Toyota”.

[@SinisaStojanovic]

Thank you, Professor, as always. 🙏

[@jackiechan8840]

Thanks for sharing your insights with us. It's much appreciated.

[@ramjiYahoo]

What a joy to hear your presentations sir

[@Mraje6666]

Why do you use a proforma WACC measure instead of calculating Tesla specific WACC?

[@AswathDamodaranonValuation]

Because a company-specific WACC reflects the company as is, and the stories that people tell about Tesla make it a very different company (software, ridesharing, energy) as it grows. When that’s the case, the worst think you can do is look in a WACC based upon what the company looks like today.

[@Mraje6666]

@@AswathDamodaranonValuation Got it, that makes sense

[@AlejandroVargas-mh5bt]

Dr. Damodaran I would like to know your thoughts on using a better coefficient to forecast the growth of the Automobile industry. Maybe the correlation between GDP and sales of the automobile industry could be used to measure the elasticity of the demand.

[@edwardwu9108]

I’m a big fan of yours. Why did Tesla exceed your valuation today?

[@go.seba.go88]

Hi Aswath, thank you for sharing this. All else unchanged, May I ask at what market price you might consider initiating a short position? Thank you!

[@saratpoluri]

Professor, please pay no attention to these so called "investors" who throw shade at you. It is painfully clear that the modern investor is a chump with extra money who plays the momentum game and is not very good at it either. The market these days seems largely driven by unbridled greed for FAANG like returns. A 10-20% growth with manageable risk is no longer enough for these people. It is a sort of fanaticism where the company they invest in is their deity. It is just noise. Tune them out.

[@Joao-fv5xg]

Excelente

[@patmanrick]

Here we are in 2023 and Tesla has hit $25bn revenues in a single quarter! Ive got Tesla at $80bn net income in 2030 based on iust the auto and energy businesses, will be interesting to see how the decade plays out

[@puneetaggarwaal]

Well for faang kinda valuation , we need to assume faang expected avg revenue in 2030 based on faang’s current market cap

[@brendansmith7842]

Hello Professor, never invested in tesla here but ive seen its crazy rise, wondering what you think right now.

[@1kf378]

Thank you for sharing. Your valuation is sound ! However, why don't you hold a great biz for next 5 to 10 years base on future value instead ? although the market price in short term is sometimes overvalue or undervalue (that nature of market). Like Ben Graham said: The market in short term is voting machine, but long term is weighing machine. Philip Fisher: 'If the job has been correctly done when a common stock is purchased, the time to sell it is almost never' ! Even Warren Buffett from value school... he is long term investor rather than sell a piece of great biz just because the ticker price is overvalue in short term ! In short... investing success is don't kill the golden goose (great biz) that laying out the golden eggs in long run.

[@azizsaba2379]

Thank you for sharing your insightful knowladge

[@HB_Auto]

Thank you very much professor! Love your videos

[@andrepires7167]

Wise man! Thank you!

[@henryzhang9915]

Thank you for the last Tesla video, I sold most at almost 900 (which I also bought at around 200) and intend to wait for a better price.

[@gauravmitm18]

Great work buddy!

[@AverageAngel]

Hi Aswath, nice video. I think Tesla is also currently overvalued, but, the stock market is not rational, the model does not take into account irrationality for long periods of time. Tesla could stay overvalued for a long time

[@sebastianp__864]

Thank you for the content Professor!

[@tornado1031]

has anyone studied the 3 slide carefully. ik that sir aswath won't mention the details for the research but if any of you guys know about it then kindly reply a yes cause i have too many doubts. thanks

[@tornado1031]

can anyone please tell me the sources of information for all those margins and revenues that sir aswath just presented i mean is this somethig the co provides because upon opening their form 10 K report and their 8K filings i didn't get any information i thik there's more to it. please reply if anybody is aware

[@KLm912]

I think there's one flaw in your assumptions. The future car is not merely a car. Less parts more software and thus lower marginal cost

[@AswathDamodaranonValuation]

And you can build this into your story and come up with a value. Remember that your story will work only if Tesla is the only one who has this advantage, If this happens for all manufacturers, you will also have lower prices, in which case your revenue assumptions will be off.

[@KLm912]

Aswath Damodaran sure, your iteration is perfectly logic and rational, which the stock market often times is not. If it were then we wouldn't have slumps and surges I guess. There are so much expectations going into Tesla as a revolutionary company. At this point they have rendered the automobile industry completely disrupted to the point that we need the establishment of new metrics and parameters. With that said I would still go with your derivations. You are awesome!

[@M.-.D]

Ziggi Mon if you rebuild all of Coca-Cola factories, the logistic networks, the distribution system, the supplies to make the beverages... you would have no way of selling as many servings of coke. That method is a very limited approach of valuation.

[@fordaysafterxmas]

Professor, did you give some thought to the solar side of the business at Tesla which Elon aspire to grow to the same scale as the auto business one day?

[@MyDreamside]

interesting story, i am not a Tesla fan or not. I think if you are going to assume they are tech like company not only auto and mix the 2 industries to find an operating margin then you should put their tech revenue too, the fallacy i think is that you dont consider extra revenue that is associated with technology.

[@heltok]

Imo the biggest problem with your model is that you assume a 5x growth in 10years, when many retrail investors think this will take only 3-5years. Some quick math, in 4 years a reasonable assumption is that Freemont will be producing 600k 3+Y+S+X, Shanghai 500k 3+Y, Berlin 400k 3+Y and GF Texas 300k Cybertrucks. That is 1.8M vehicles, which is ~5x what they are producing now. Imo if you think this will take 10years you have not been paying attention to what has happened in the last year in Shanghai or in the last 10 years of Tesla’s history.

[@seb8483]

Great Video, thank you!

[@wayne6qf7]

How is it in anyway a tach company, they don't sell tech? They sell cars?

[@blackorangey]

Prof, what do you think of the 2019 n-Cov developments in Wuhan and Shanghai impacting Tesla's auto supply chain?

[@JiuJitsuislife]

Makes you wonder about Ark Invest's bullish 22k call on Tesla (10 times higher than your highest number). I know they provide their financial model on their website so i'm going to take a look to try and understand just what kind of story they are banking on.

[@udayhomeful]

ARK investment published $6000 valuation model in their website and sold nearly 40% of their Tsla holding at around $930/sh. Source: sec filing.

[@simon_k4551]

Wise words indeed.

[@Oro-Blanco]

Thank you for your great insight!

[@theloniusmonkey5138]

Great insights Prof!

[@probablyonthemoon]

To all comments pointing out his "flaws" in the valuation, the entire point of this video is for you to make your own valuation using the attached DIY Valuation spreadsheet. Once you've arrived at your own valuation, please upload it to: www.reddit.com/r/wallstreetbets/comments/f05hsi/tesla_value_dr_damodaran/ so we can create a collective valuation (and know in which direction to YOLO our options)

[@anoop5883]

Thank You!

[@pearlrumdrum]

GOAT

[@eugeneloo1994]

Hello everyone! Can someone explain to me why Microsoft is not part of the FAANG classification?

[@AswathDamodaranonValuation]

Because the stocks in this group grew from small to immense this century, but Microsoft was already the largest market cap company in the world coming into this century. It is only in the last five years that MSFT has discovered its mojo, with the Cloud business.

[@eugeneloo1994]

Aswath Damodaran Thank you sir for your explanation! Appreciate it!!

[@udayhomeful]

@@AswathDamodaranonValuation can you make a video on FAANG vs Nifty Fifty?

[@artfinance8765]

Saudi Arabia sovereign fund sold about 8 millions Tesla stocks in 2019, so....$640 for tesla was good enough...)))

[@rrurban]

Where did you get Cost of Capital for all companies (the bell curve)? Very interesting presentation.

[@RakanXYZ]

I did think of your Valuation Prof, after the surge in price. If there was only a way to factor in, Behavioural patterns into valuations or i.e. momentum, I would be interested in seeing a model like this. As a burgeoning question i've always had, is suppose i've valued a company at $100 and the stock price is $10, means im getting great value with low risk? but, if no one else, see's it this way, or behaves in the way I expect then, I suppose my valuation may just keep gathering dust.

[@SportsIncorporated]

That was fun.

[@stamatarsenikos9708]

Also can you incorporate battery, solar, autonomous driving, into the DCF...??

[@necromancer7712]

Please enough with these famous stocks, please focus on undervalued stocks, micro, mid stocks, from various indutires such as energy, industrials, healthcare. We want to learn more from you how you value different dtocks

[@mikewang5322]

Tesla gross profit margin is 22%-24%. This is in their report.

[@AswathDamodaranonValuation]

And Apple’s gross margin is 60%. It is a half baked measure of profitability used primarily by money losing companies to make themselves feel better.

[@mikewang5322]

the other cost will drive down when volume goes up. Apple doesn't have 60% gross margin 10 years ago, when it is 100B market cap.

[@62anweshroy]

No matter what story I pick, as long as I look at it realistically, its clear that Tesla is overvalued.

[@Chainsley]

This stock is the tulip mania madness all over again

[@round12tko]

these valuations are stupid. you cannot value a growth company like TSLA

[@terrapininvestments5878]

You can value any company!

[@harrychu650]

This is a tradition Automaker valuation. It lacks any recognition of revenues and ZEV credits. How about growth in solar. Doesn't CA now require new homes to have solar? The reason this valuation failed is because Tesla isn't a Auto company, it isn't a tech company. It is something different. This is why traditional analyst don't get it. Look at the ARKK analyst report. It is like valuing Uber as a taxi company. Which they are, but wall street has decided to call it a "tech" company.

[@niravsheth4917]

Where i get confused is that less than a year ago, I believe that you valued Tesla at less than $250 which was the reason why you bought at $180. But now you are valuing it around $500, which is double your initial valuation. We can do these calculations, but at the end of the day, you are trying to value a company is not traditional by any metric but using metrics for traditional companies. Shouldn't the valuation that you do for innovative companies be different than how you value traditional companies? Because by capturing the historical performance of a company that is rapidly evolving was not a good indicator of the future for your previous valuation, so how can you prove that your new valuation is a good indicator of the future of Tesla? Or what metrics do you think you are missing that could better represent Tesla's ambitious goals for the future?

[@Apollo2112x1]

Hahaha seeing Tesla hit $1700 a share after watching this video, there's no way it's a serious valuation of it. But hey, Castle in the sky theory

[@platoscavealum902]

🔮 If you’re not good at timing the market - buy and hold for as long as the moat of competitive advantages is in place.

[@sbkpilot1]

great video! however, I think your estimates are indeed way too rosy... Tesla will not survive the next recession, that is my thought. Recessions are not kind to the auto sector especially one with only luxury products and sell only EVs which is only 2% of the entire auto market. Tesla is barely profitable when the economy is one of the most robust it's ever been... so the thoughts are that it's going to grow to the moon when the economy starts slowing down? That is just fantasy.

[@tonyto2009]

they did!

[@shelleygould4236]

wrong on valuation.. - .you better start listening and watching Cathie Woods.

[@kedar_ghimire]

i think your forgot to mention competition. Diamler, Ford, Toyota etc will catch up within few years if not now. Once there are different companies in the mix, not everyone will go for tesla

[@kinnuarmy]

Lol celebretory Touchdown dance coz you lost money shorting TESLA LOL this guy is funny I c

[@stamatarsenikos9708]

If you had discussed ARK investments thesis about wrights law of declining cost curve potential margin I would feel complete. 😁

[@JamesKelley1]

TSLA gross margins are around 18%.

[@AswathDamodaranonValuation]

And its operating margin is close to zero and its net margin is negative. Gross margin is an incomplete and flawed profit measure that is used primarily by money-losing companies to make themselves look better. Claiming to have a solid gross margin is equivalent to saying that you don't eat that many calories a day, if you don't count half of every meal and the desserts you have every day. You are still going to get fat!

[@fahardguy01]

this aged well in 2021. Tesla’s operating margins were 14.6% in Q3 2021. @Aswath are you willing to revise your estimates now?

[@naomikay1324]

👻💐🤙🏽

[@Starhopper-xr2ds]

Tesla revenue in 10 years will be in the range of 800 billion to a 1 trillion!

[@Petrovich2049]

Yeah his 25 percent growth is very low

[@udishomer5852]

Would you like to make a real bet on this? With real money?

[@Starhopper-xr2ds]

@@udishomer5852Yes!!!

[@udishomer5852]

@@Starhopper-xr2ds So lets make a bet. I'm willing to bet $10K against that.

[@Starhopper-xr2ds]

​@@udishomer5852 I'm not stupid to bet against your 10K offer, not because I'm afraid that my assumption from above is wrong, but because the risk to reward potential is very limited. I'm not willing to wait 10 years to figure out that I was right just to gain 100% on my money, or to feel sorry that you have passed away do to old age. I would rather buy Tesla stocks and see 20x to 30x fold increase.

[@MonsieurDee]

I don't think you will completely understand the valuable insights you have given me and how you have impacted my life. I always wish you all the best professor.