Tesla’s crazy valuation

Hard facts about Tesla in the most concise manner, fair valuation, and a small conclusion.

Elon and Doge on Mars :D

General

• #1 in Affordable and Luxury EV vehicles
• Leader in autonomous vehicles
• Top battery manufacturer
• Solar Technology
• Amazing CEO

Cars

• Model 3 / Model Y (delivered ~500,000 in 2020)
• Model S / Y (delivered ~60,000 in 2020)
• CyberTruck (first deliveries expected early 2022)
• Semi (first deliveries expected late 2021)
• Roadster (first deliveries expected in 2022)
• ~50,0000 total deliveries (2015)
• ~75,0000 total deliveries (2016)
• ~100,000 total deliveries (2017)
• ~250,000 total deliveries (2018)
• ~370,000 total deliveries (2019)
• ~500,000 total deliveries (2020)
• Average yearly Increase in deliveries from 2015–2020: ~63%
• Assuming a pessimistic 50% increase a year from now to 2025, they will deliver 3.8M cars in 2025
• Assuming an optimistic 70% increase a year from now to 2025, they will deliver 7M cars in 2025

Autonomy

• 8 cameras, 12 sensors, and 1 radar on each car
• Tesla is leading the game in autonomy with FSD (full self driving) Beta out to a group of Tesla customers
• With the FSD beta out, they are collecting millions of real-world miles and improving the software
• Tesla Beta FSD has seen weekly updates since its inception
• For this beta, Tesla had a fundamental rewrite for the FSD software. The main difference now is the input data. They now receive ‘video’ instead of ‘pictures’ from the cameras
• All Teslas being sold today have the hardware necessary for level 5 autonomy (this is very important because it allows for over the air update as the software improves)
• Level 5 autonomy is reachable by the end of 2021 (according to Elon Musk)
• Level 5 autonomy basically means 100% safer than an average human driver
• With level 5 autonomy and regulatory approval, Tesla will be able to launch RoboTaxi (more on this later)
• Margins on Tesla FSD are immensely high
• Tesla can profit through FSD in 3 main ways: Addition on Tesla cars, RoboTaxi, and Licensing their technology
• FSD subscription is being considered by Tesla

Battery

• Tesla has led the race in ‘range’ and this is due to the extremely efficient batteries
• The current battery technology on most Teslas is from Panasonic
• On battery day, Tesla announces their plans to start manufacturing batteries in house
• Tesla-made batteries will have 6 times the power, 5 times the energy, 56% less expensive, and 16% more range
• Tesla is rapidly vertically integrating their business and in-house batteries is a huge step towards this
• Tesla has a lot of potential and expansion in this sector of their business and can eventually start supplying and licensing battery technology

Solar

• Tesla acquired SolarCity in 2016 when Elon Musk was the largest shareholder at both companies
• Elon has faced a lot of criticism for this acquisition and has faced lawsuits from shareholders
• They guarantee lowest cost of Solar in America
• Solar purchase comes with a power wall which stores energy and makes it available on demand
• Tesla energy accounts for 7% of all revenue
• Elon Musk has said that he believes Tesla’s energy business will grow faster than the EV business in the coming years. This doesn’t mean more revenue than EV business; it simply means a greater rate of growth, which is interesting
• Musk said on the recent earnings call. “In the long term I expect Tesla Energy to be of the same or roughly the same size as Tesla’s automotive sector or business.”

RoboTaxi

• An Uber/Lyft type app which operates with autonomous vehicles. No driver
• No driver during pickup removes labor costs from the equation
• This means it will be impossible for Uber/Lyft to compare with RoboTaxi prices
• Uber/Lyft has shown the market-fit for this type of service already
• The supply will come from Tesla owners. You will be able to add your Tesla to fleet and have it work for you when you’re not using your car
• Tesla will take 30% of revenue generated per ride
• This can be an opportunity for generating passive income with the purchase of multiple Teslas to add to the fleet
• RoboTaxi will add billions in profits for Tesla and will drive Uber/Lyft out of business if they don’t adapt
• This can also increase the FSD price immensely

Revenue / Profits

• 2018, Revenue: ~$21B, Loss: ~$1B
• 2019, Revenue: ~$25B, Loss: ~$900M
• 2020, Revenue: $32B, Profit: ~$700M
• Average revenue increase in the last 5 years: 54%
• Assuming an increase in revenue of 30%/year up until 2025, Tesla will generate $120B (for context, Apple generated $275B in 2020)

Fair Valuation

• $32B Revenue 2020
• $700M profits 2020
• 500,000 deliveries (compared to 1.9M by Ford) in 2020
• Immense FSD potential
• immense growth potential
• Many different business sectors (all large TAMs)
• Fast growth in car deliveries but still has delivered way less than legacy car companies
• Ahead of competition but EV companies will eventually catch up and Tesla will eventually have less market share
• Multiplier: ~18X
• Fair valuation: $576B (2/26)

Future of Tesla

• Semi/CyberTruck/Roadster
• $25,000 Tesla
• RoboTaxi
• FSD
• Energy expansion
• Battery supplier
• Expansion to India
• Airplanes?
• Boats?

Conclusion

Tesla is certainly a promising company given their lead on the EV industry, autonomous driving, battery technology, solar, and energy storage. Tesla is far ahead of competition in all of those areas of business (especially EV and autonomous driving). Buying Tesla now is like buying apple many years ago. Although the EV industry has inflated P/E ratios and valuations, Tesla could still be an attractive buy at this price given the room for growth within the next 5–10 years.

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*This is not financial advice. For entertainment purposes only*