$700B by 2025 according to this - I agree, let's track to this in this thread and then another thread can be set up if we want to alter parameters.
Elon Musk: Robot software will make Tesla worth as much as Apple
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Elon Musk: Robot software will make Tesla worth as much as Apple
Yes, we updated the targets last year. To push the target forward we kept the 50% revenue growth rate, 10% profit margin and 20 PE ratio all per Musk. What change was the most recent annual revenue as a base. What became contentious was a dilution factor. I originally used 8%, but others urged lower dilution rates. Musk never said anything about dilution. So we have tried to keep as much of Musk's original idea while keeping it current with revenue. Also pushing the LTPT out further need not contradict the original 2025 target as that target can be along the path.
There is a subtle issue with this model that as you approach the LTPT the volatility of price targets shrinks. So I like to keep the target about ten years out to keep volatility about the same.
Certainly for those that liked the original 2025 target, we could maintain that too. It still begs the question of what dilution to assume.
We may have a religious spit here between Classic Musk Blind Faith and Reformed Blind Faith. I guess it was bound to happen.
My understanding was that the revised price target and date last year ("Reformed Blind Faith") were a result of the Solar City merger and related statements by Elon about valuation. But I am a mere acolyte, not St. Peter.
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Elon made that comment before Model 3 production goals were pulled forward by two years.
10,000 units weekly run-rate S/X/3 by 2018, instead of 2020, could mean $700B market cap earlier than the original timeline of 2025.
In fact, my model projects this level by 2020.
10,000 units weekly run-rate S/X/3 by 2018, instead of 2020, could mean $700B market cap earlier than the original timeline of 2025.
In fact, my model projects this level by 2020.
Musk's valuation theory was basically about exoected growth in revenue. I suspect as an entrepreneur he has learned that if you keep growing revenue by 50% or more each year, you eventually become a billionaire, maybe trillionaire.
So he is always planning out ways to keep sustaining revenue growth. This is why he is constantly dreaming up new business ideas that have that high growth potential.
He is also quite opportunistic. If he sees a way to pull revenue ahead, he will pursue it. Model 3 may well give him that edge.
This is all a long-winded way of saying that the most basic thing we should be doing here is tracking long term revenue growth. The revenue target was $350B in 2025.
2013 $2.0B
2014 $3.2B
2015 $4.0B
2016 $7.0B
2017 $11.9 rough estimate
Tesla should be hitting $20.5B in 2018 to get back into a 50% growth path hitting $350B in 2025.
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Tesla Announces New Long-Term Performance Award for Elon Musk (NASDAQ:TSLA)
Oh, look at this. A new incentive plan for Elon Musk.
Oh, look at this. A new incentive plan for Elon Musk.
By 10 years, do you mean end of 2028, or some other target date? This would be a step down from $700B by end of 2025. So I think Musk is still on for hitting this early.
Musk himself would be picking of some 12% dilution of shares over roughly that time period. So at least 1% annual dilution is locked in (short of stock repurchase).
The beauty of an incentive plan like this is that it sends a very clear signal of strategic intent to the market. So the market really would be thinking about whether Tesla can hit $650B cap by 2030. This could have an anchoring effect for the stock which the BFPT methodology is designed to exploit. That is the method make the most sense if there is a clear LTPT out there for all to see.
Ok, I'll go back on what I wrote yesterday since it seems Tesla's board is reading this thread (way to go jhm)! It looks like we couldn't go wrong with a BFPT of $650B in 10 years. They have moved the goalposts for us, seems like we should play their game!
Lets go with that date.
Also, Musk threw this in NY Times interview, published this morning.
So looks like we need two models:
1) Compensation Plan Price Target (CPPT)
2) Blind Faith Price Target (BFPT)
In case link doesn't work, google search headline "Tesla’s Pay Deal to Keep Elon Musk: All or Nothing"
For the dilution conversation:
Chamath Palihapitiya, who is a silicon valley VC and with reach to Musk, said that- management told him that they will need 12 to 15Bil to execute the plan. Then he added that he thinks it's more like 20Bil (knowing that Musk is always optimistic with his projections).
This is in addition to the 1% dilution for Musk pay and maybe another 1% for the rest of Tesla employees.
Chamath Palihapitiya, who is a silicon valley VC and with reach to Musk, said that- management told him that they will need 12 to 15Bil to execute the plan. Then he added that he thinks it's more like 20Bil (knowing that Musk is always optimistic with his projections).
This is in addition to the 1% dilution for Musk pay and maybe another 1% for the rest of Tesla employees.
I think 4% is "reasonable" estimate. Given that you also need to account for some M&A. That can boost the market cap without boosting the share price.
As an example: what if Tesla takes over Panasonic through a merger? Market cap goes up but stock price won't.
As an example: what if Tesla takes over Panasonic through a merger? Market cap goes up but stock price won't.
So the plan seems to be to retain Elon through 2028. The nominal goal is $650B market cap by 2028, but I suspect this is sandbagging since Musk had that in sight for 2025. I believe Elon's personal goal is more like $1T by 2028.
How about we look at two goals?
Nominal: $650B mkt cap by 1/20/2028, 2% dilution, 206M shares, LTPT $3155/share
Insane: $1T mkt cap by 1/20/2028, 0% dilution, 169M shares, LTPT $5917/share
This pushes things out to 2028 to be conservative. Also the idea of 0% dilution in the insane goal is recognition that as Elon owns over a third of Tesla, he will want stock repurchases as soon as cash flow will support it.
Is this insane enough? Actually the Insane LTPT is in line with our $5455 end of 2027, 4% dilution LTPT. My guess is some of us will be looking for the ludicrous speed button soon.
Edit, fine tuning some dates.
How about we look at two goals?
Nominal: $650B mkt cap by 1/20/2028, 2% dilution, 206M shares, LTPT $3155/share
Insane: $1T mkt cap by 1/20/2028, 0% dilution, 169M shares, LTPT $5917/share
This pushes things out to 2028 to be conservative. Also the idea of 0% dilution in the insane goal is recognition that as Elon owns over a third of Tesla, he will want stock repurchases as soon as cash flow will support it.
Is this insane enough? Actually the Insane LTPT is in line with our $5455 end of 2027, 4% dilution LTPT. My guess is some of us will be looking for the ludicrous speed button soon.
Edit, fine tuning some dates.
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I like this, but might consider modeling both 2 and 4% dilution for "Nominal" and 0 and 2% for "Insane."
Rationale for adding higher dilution case includes: historical practice, high capital needs, 12% dilution for Elon's plan plus dilution for employee options/stock, M&A (especially since the incentive plan is based on market cap versus share price and therefore incentivizes M&A). Also, the EBITDA targets in the plan do not suggest a massive amount of $ available for stock repurchases at projected future share prices, especially given capital demands and likely M&A.
Here are some permutations:
Insane 0%, 169M shares => $5917
Insane 2%, 206M shares => $4858
Insane 4%, 250M shares => $4000
Nominal 0%, 206M shares => $3846
Nominal 2%, 206M shares => $3155
Nominal 4%, 250M shares => $2600
This shows the sensitivity and range. I'd like to keep this down just 2 or 3. It would also be nice to round this numbers a bit.
How about simply Nominal $3000 and Insane $6000?
Insane $1T mkt cap, -0.1% dilution, 167M shares => $6000
Nominal $650 mkt cap, 2.5% dilution, 216M shares => $3000
Here I'm just backing into the dilution that leads to nice round numbers. The insane target can be obtained without substantial share repurchases. For example, $1.1T mkt cap with 1% dilution leads to $6000/shr. In any case to get to Insane we are looking at Tesla going to $1T and beyond.
The $3000 Nominal is simply a reasonable share price should Musk hit all his compensation targets with modest dilution. I like calling it Nominal because that's what they say at SpaceX when a mission goes according to plan.
Market-Cap each day from history starting from Jan 2014 and computed implied return to 650Bil at 1/23/2028.
Note the chart is using market cap (not prices). So it is accounting for dilution as it happens, instead of theorizing it too much.
So as you see, despite all the noise in the media and social-media, the implied return (or discount rate) has been as steady as it can be. Rarely came anomalies like the Xramp and the SCTY bailout, where the discount shot up. But steady as she goes otherwise....
Note the chart is using market cap (not prices). So it is accounting for dilution as it happens, instead of theorizing it too much.
So as you see, despite all the noise in the media and social-media, the implied return (or discount rate) has been as steady as it can be. Rarely came anomalies like the Xramp and the SCTY bailout, where the discount shot up. But steady as she goes otherwise....
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Nice. It looks like it could be a stationary distribution.
Where are you getting the market cap data? I don't know of a good source.
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