Blind Faith Price Targets

[Dr. J]

You might want to consider the financials of Toyota. $277B annual revenue. 18% gross margin. 6.9% profit margin. Tesla has been aiming at 25% gross margin and 10% profit margin. Not quite there yet but gaining 3% on Toyota’s profit margin does not seem unrealistic to me.

Tesla has much more regulatory room to focus on high margin vehicles, instead of having to hit emissions fleet standard. Tesla is more vertically integrated than most automakers, increasing gross profit orofitability. Moreover, the BEV drive train is continuing to gain cost advantages. By mid-decade Tesla could enjoy a lower cost structure advantage over all ICE makers.

So I don't view getting to a 10% profit margin to be unrealistic. So the next question is simply how much revenue can grow. Getting to 20M vehicle at $50k per vehicle (note 2030 USD and inclusive of commercial vehicles) is $1T revenue, $100B net income. So this looks to me worth multiple trillions in market cap for a company that is still growing at a substantial clip.

I am not arguing that the whole industry will be worth $10T in 2030. Many legacy automakers will be unprofitable and declining, if they in fact survive that long.

I don't disagree with any of this, conjecturally. But if in 2030 Tesla owns 20% of the global automotive market, while they may have been growing at a substantial clip, that growth has to slow down or they will in a short time sell more cars than the market as a whole (meaning: it can't happen). Since the stock market is a discounting mechanism, it will figure out/will have figured out that Tesla's automotive growth rate has slowed/will slow and value the stock at an appropriately lower multiple.

At some point, the growth rate is bound to slow. It may not be because the legacy automakers get their stuff together; it may not be because new EV entrants compete effectively; it may not be because Tesla becomes battery-constrained, or service-inept, or Supercharger-exhausted. But if not any of those, it will be because there are limits to growth in the automotive industry.

 

[jhm]

I don't disagree with any of this, conjecturally. But if in 2030 Tesla owns 20% of the global automotive market, while they may have been growing at a substantial clip, that growth has to slow down or they will in a short time sell more cars than the market as a whole (meaning: it can't happen). Since the stock market is a discounting mechanism, it will figure out/will have figured out that Tesla's automotive growth rate has slowed/will slow and value the stock at an appropriately lower multiple.

At some point, the growth rate is bound to slow. It may not be because the legacy automakers get their stuff together; it may not be because new EV entrants compete effectively; it may not be because Tesla becomes battery-constrained, or service-inept, or Supercharger-exhausted. But if not any of those, it will be because there are limits to growth in the automotive industry.

If you look at my earlier post, I was developing a scenario where EVs are only about 70% of the auto maker. This leaves Tesla with an opportunity to keep growing roughly another 50%. This is slower than the 40% annual rate average for this decade, but still double digit growth is possible.

Additionally, the economics of AEVs are at this time expanding motorization rates in developing economies. As you drive down the total cost per mile, automotive mobility becomes affordable in many more parts of the world. Additionally, if Tesla succeeds in long life "million mile" vehicles, developing countries will be amassing large fleets of EVs. So globally the EV industry can grow in the 2030s than it did in the 2010s, much faster than the population.

 

[EinSV]

I still think 50% growth is aspirational, but not out of reach or beyond the potential for massive surprise to the upside. Recently Tesla has pivoted to ringing the cash register, giving priority to FCF and profitability over revenue growth. But this is like firing up a rockets second booster. The stock market has reacted strongly to this pivot. The market tends to value earnings more highly than revenue growth, which is kind of the opposite of the Blind Faith approach. Blind Faith says this stock is growing revenue so fast and will generated so much earning well in the future that losses for upcoming quarters really don't matter: You don't need to see earnings today to believe that massive earnings will be in hand many years out. But now that Tesla has made this pivot, perhaps Tesla can get back to solid 50% annual growth. Multi-continental Gigafactory expansion leads the way.

Through Q2 2020 Tesla's 5 and 7 year revenue growth rates are 47% and 53%. The 5 year growth rate was very close to 50% even though (1) the last two quarters have been hindered by a pandemic and (2) we are in a period where Gigafactories and production lines are sprouting like mushrooms and the rate of growth of theoretical capacity appears to be exceeding that of production itself. This should reverse over the next few years as it did in 2018 as the new Gigafactories and production lines ramp up and crank out Model Ys, 3s and Cybertrucks at volume.

Since Elon has consistently used 50% growth as a benchmark for Tesla, to me that seems like a good starting point for a "blind faith" benchmark through at least 2025. With multiple Terawatts as the end goal, an argument could be made for extending continued 50% growth beyond 2025. Until there is more specific post 2025 guidance (perhaps on Battery Day?), an argument could be made for a somewhat lower growth rate (say 40%) from 2026-2030 as a placeholder. This would result in ~$1T in revenues in 2030, which is consistent with projections from Ron Baron. While this is massive, it would be consistent with continued rapid growth in automotive as well as even faster growth in the energy business, which Elon has consistently said will ultimately be roughly the same magnitude as automotive.

Another option that doesn't require adopting a specific post-2025 growth rate just yet would be to just keep the original 2025 targets but use a more realistic P/E for a company growing revenues at ~50% and earnings at >50% that still has a huge growth runway into several enormous markets. We could debate what that is but a P/E of 100 or more would be lower than Amazon, which has a long term growth rate of a mere 25-30%. The conceptual difference between the earlier blind faith model is that the P/E of 20 assumes a mature company, while the multiple Terawatt hour goal Elon articulated last year implies either much faster than 50% growth or a much longer growth runway. Assuming the longer growth runway which justifies a much higher 2025 multiple. Since we may get a hint of Elon's thinking on long term growth on Battery Day, holding off on guessing about specific growth rates after 2025 seems like a decent approach.

The last piece is mobility. There are plenty of models out there to value it. Not sure of the best way to align any of those with guidance from Elon/Tesla consistent with the "blind faith" theme of this thread but will give it some thought.

 

[EinSV]

As a quick follow-up, Elon has recently reiterated the 50% growth target. Sometimes it is in the context of production (unit) growth, but in on the Q4 call he tied it to his earlier 50% growth target, which appears to be a reference to the 2015 50% revenue growth target that inspired this thread.

Elon Musk -- Co-Founder and Chief Executive Officer

Yeah. I think a few years ago, I said I -- yes, I think on our [Indecipherable] a few years ago, I said in my estimate, for us is that, Tesla would grow at an average compound annual rate -- average rate of in excess of 50%. I still hold to that belief.​

Tesla, Inc. (TSLA) Q4 2019 Earnings Call Transcript | The Motley Fool

On the Q1 2020 call, Elon reiterated the 50% growth target yet again. Note that he specifically rejected 40% as being "more realistic." He said 50% probably was "the likely number" and described 40% as a lower boundary -- basically a bearish blind faith case.

Speaker 1: (23:33)
Thank you. Now let’s go to questions from retail investors. Question number one, Elon has mentioned a 50% compound annual growth target for Tesla in the past. Is this still in line with Tesla’s ambitions for the next 5 to 10 years? This would 4 million vehicles in 2025 and more than 20 million vehicles in 2030. Is 40% a more realistic target?

Elon Musk: (23:57)
Well, it’s always difficult to predict what the macro situation is going to be. I think very few people would have predicted the unexpected sort of roundhouse that Covid came up with that sort of came out of nowhere. I think in the absence of some massive force majeure event, like quite massive, I think probably 50% is the likely number. It’s possible that it’s 40%. I would be very shocked if it’s less than 40%, even with a force majeure, short of World War Three. Tesla (TSLA) Q1 2020 Earnings Call Transcript - Rev
​

These comments suggest to me that a 50% growth rate should continue to be the base case for a "blind faith" valuation, with 40% perhaps a bear case.

PS As a side note, the Motley Fool transcript badly butchers the last quote above from Elon, and reads as though he is suggesting a 40% growth rate going forward. The transcript quoted above is much clearer.

 

[jhm]

While we are trying to spot our North Star for 2030, I thought it would be good to apply the BFPT methodology to ARK Innovation Fund (ARKK).

Here we don't some authority figure to point us to a specific LTPT. I've noted that the long-term growth rate is near 30%. We do know that ARK seeks out innovative companies with a solid 10 to 15 year growth opportunity. ARK develops a 5-year target for each candidate for the fund and uses this as a guide for allocation. My hunch is that they attempt to have a well diversified portfolio that has an expected 5-year rate of return near some target like 30%. This is tricky because many of their stocks can meander in the doldrums for years as Tesla had prior to this year. So they have a large portfolio with 35 to 55 names, IIRC. We also know that when one of their stocks rocks past a 10% share of the portfolio, they no longer buy into it, but will tend to trim back the position.

Whatever the details of their methodology, we can only hope that they will be able to replicate similar growth rates over the next decade as they had over the last 6 years. So the basic touch point that I use for constructing a 2030 LTPT for ARK is that I want median sentiment to have an implied discount rate of nearly 30%. The LTPT of $1000 is a nice round number that gets us into the ballpark. Those who have read and understood this thread will know that the price level of the the LTPT is not all that critical.

Under Standard 2030 LTPT of $1000, the BFPT methodology back tests nicely. First, we look at 1-year returns as predicted by Implied Discounts.

Here we see that near 30% implied discount, the average return is close to 40%. Keep in mind that the implied discount is a long-term rate stretching out to 2030 while 1-year return is clearly short term. Below a 28% IP, the first year could be a disappointment, but beyond the first year the average rate of return should be quite healthy. We do see strong correlations here (R-squared 0.70), which confirms that IP has predictive power and may be useful for identifying times when ARKK is underpriced for near-term gains.

Next, we look at sentiment which is calibrated on a 36-month lookback period.

It is nice to see that sentiment is well spread out and bearish disbelief correlates with high near-term returns. When sentiment is below 60% near-term results may tend to be above average.

The back testing looks good. Indeed it looks better than the back testing for Tesla. In particular, Tesla seems prone to huge mood swings in sentiment so that Tesla can be substantially underpriced for long stretches of time and potentially overpriced too though we don't have much experience with that. By contrast, ARKK does not seem so driven by sentiment. That is both sentiment and IP have similar predictive power for 1-year returns. This is not so with Tesla as the sentiment tends to anticipate performance better than IP. Perhaps an advantage of ARKK is that as it is a fund, shorts can't attack it the way they can an individual named stock. Surely shorts are do doing their thing on any number of stocks held by ARKK, but the diversification of the fund may provide some insulation from this.

Without further ado, here are the BFPT for ARKK. Enjoy!

Standard LTPT $1,000​	Lookback 36 months​
Percentile​	Implied Discount​	2020-07-31​	2020-12-31​	2021-07-31​	2021-12-31​	2022-12-31​	2023-12-31​	2024-12-31​	2025-12-31​
98.3%​	27.4%​	$80​	$89​	$102​	$113​	$144​	$184​	$234​	$298​
2%​	33.7%​	$48​	$55​	$65​	$73​	$98​	$131​	$175​	$234​
10%​	31.8%​	$56​	$63​	$74​	$83​	$110​	$145​	$191​	$252​
20%​	31.2%​	$59​	$66​	$77​	$87​	$114​	$149​	$196​	$257​
30%​	30.6%​	$62​	$69​	$81​	$90​	$118​	$154​	$201​	$263​
50%​	29.6%​	$67​	$74​	$87​	$97​	$125​	$162​	$211​	$273​
70%​	28.8%​	$71​	$79​	$92​	$102​	$132​	$170​	$219​	$282​
80%​	28.3%​	$75​	$83​	$96​	$106​	$136​	$175​	$224​	$288​
90%​	28.0%​	$77​	$85​	$98​	$109​	$139​	$178​	$228​	$291​
98%​	27.4%​	$80​	$89​	$102​	$113​	$144​	$183​	$234​	$298​

 

[hershey101]

@jhm How have you defined "Sentiment" in this analysis?
Also, I'd be curious to see what this distribution looks like if pre-2020 (eg. only using values to Dec. 31st 2019), and also what it would look like if we only used values to the end of Q3 2019.

 

[hershey101]

One small issue with using BFPT on $ARKK:
Their current AUM is just under $5B... tiny in the grand scheme of things. Given their popularity I suspect this will grow rapidly. If we assume they double AUM to $10B, and then stop taking outside investments, even then: a sustained 30% YoY growth-rate would result in that AUM ballooning to $100B+ in 2030.

A key component of their strategy is to take sizable positions in small/mid-size businesses that are disruptors, and trade around controversy to deliver growth. In the past 5 years since inception, their two biggest holdings, $TSLA and $SQ have 10x'd.
This model assumes they continue to find a 10x company at an average pace of one every 2.5 years, and also, that they are somehow able to move $50B+ in assets in and out of the system as easily as they can $5B without moving the underlying price with their buying/selling.

Those are two very big assumptions you've baked into this price target.

 

[Dr. J]

This model assumes they continue to find a 10x company at an average pace of one every 2.5 years, and also, that they are somehow able to move $50B+ in assets in and out of the system as easily as they can $5B without moving the underlying price with their buying/selling.

To your point, finding one or more small cap firms that can deliver 10x SP increase is one thing; finding one or more mid-cap firms that can do that is maybe 10x rarer. Increased AUM is definitely problematic. OTOH, these days the giants are the ones growing exponentially, and small cap stocks (especially value) are getting crushed.

 

[jhm]

@jhm How have you defined "Sentiment" in this analysis?
Also, I'd be curious to see what this distribution looks like if pre-2020 (eg. only using values to Dec. 31st 2019), and also what it would look like if we only used values to the end of Q3 2019.

You need to read this thread from the beginning to understand the concepts we are using here.

 

[jhm]

One small issue with using BFPT on $ARKK:
Their current AUM is just under $5B... tiny in the grand scheme of things. Given their popularity I suspect this will grow rapidly. If we assume they double AUM to $10B, and then stop taking outside investments, even then: a sustained 30% YoY growth-rate would result in that AUM ballooning to $100B+ in 2030.

A key component of their strategy is to take sizable positions in small/mid-size businesses that are disruptors, and trade around controversy to deliver growth. In the past 5 years since inception, their two biggest holdings, $TSLA and $SQ have 10x'd.
This model assumes they continue to find a 10x company at an average pace of one every 2.5 years, and also, that they are somehow able to move $50B+ in assets in and out of the system as easily as they can $5B without moving the underlying price with their buying/selling.

Those are two very big assumptions you've baked into this price target.

I don't see how AUM has anything to do with share price. AUM has to donwith how much investors want to invest with this fund, but the share price is driven by the return on investment on their underlying portfolio. Basically their share price can grow 30% per year without AUM growing one dollar, which would be the case if shareholders sold off their shares as the grew.

 

[hershey101]

I don't see how AUM has anything to do with share price. AUM has to donwith how much investors want to invest with this fund, but the share price is driven by the return on investment on their underlying portfolio. Basically their share price can grow 30% per year without AUM growing one dollar, which would be the case if shareholders sold off their shares as the grew.

Here's what I mean:
If they invest $100M in some company $X, and the company 10xs, their investment has gone from $100m to $1B. Great. Now let's assume that this company hit ARK's price target, so they pull out their money. Well, they now have $1B in cash. If they do nothing with $1B, then $ARKK's portfolio is 100% bonds and $ARKK essentially tracks bonds.
If they want to continue to produce 30%+ YoY growth, they now need to grow $1B at 30%+ instead of $100M. IF they choose small companies where they cannot infuze $1B without moving the markets, then instead of 1 company $Y to replace $X, they now need to find 10 different companies to replace $X $Z_1, ..., $Z_10 each with $100M investments. Otherwise, they'll end up with $100m of $1B invested, and the change in their investment will only result in 10% change in $ARKK.

Obviously this is an oversimplification, but does that explain what I mean?

 

[Dr. J]

Now let's assume that this company hit ARK's price target, so they pull out their money.

I could be wrong, but I don't think that's how ARK does it. Instead, they sell a few shares as the individual stock exceeds their percent of portfolio maximum. So they still have the reinvestment problem, but on a much smaller scale than in your example.

 

[Zhelko Dimic]

How much battery storage do you think will be required here? Is there any feasable way for us to get batteries for all of this? Or are you expecting some breakthrough during battery day that "solves" the supply constraint problem?

I feel you are thinking of this too narrow. It's all about adjacent markets that you or me don't see yet, and are ripe for change. One I can see Tesla is already moving on (they got U.K. permit to provide these services), you haven't mentioned. In short, I expect Tesla to become largest utility in the world by providing services of stabilizing grid (for many countries): frequency and voltage regulation, peak power regulation, arbitrage on electricity prices at different times of day, microgrids etc, so that existing grids in industrialized nations can cope with increased electricity usage*, and much of the power is produced and distributed locally. Hence solar roofs and panels, electronics, but moreover SERVICES of managing all that for you (the customer) and the grid, and taking the cut. All of these are valuable and expensive services, and I heard somewhere that updating grid just in USA would cost $3T (Jack?)

I don't expect all of this to play out by 2030, but I expect enough of it plays out, and Tesla to have enough momentum, that it's obvious what's going on and to excite investors. This whole area is almost as obvious to me now, as it was 5 years ago that Tesla will slaughter existing auto-industry. This is where I expect $1.5T valuation.

...All this, If they continue executing. Every large system has a point at which it's hard adding resources and scaling up. I'm not sure at which point Tesla hits it, and when system becomes larger than Elon+culture+mission... But if Chinese can run such a big country as a partially planned economy, I guess there is hope for Tesla to achieve all this and more.

Also, Tesla is somewhat limited with availability of the talent. Everything Tesla does requires lots of brains (otherwise it would've been done already), lots of pure E.E. and lots of software. Great Sw. Eng. are hard to find, but at least lots of people study for it, but other areas of E.E. and industrial E.E. may be much harder to fill. And grid and regulations are different everywhere (I heard somewhere, that US has 80 types), so it will require somewhat localized approach.

 

[dc_h]

I thi

Through Q2 2020 Tesla's 5 and 7 year revenue growth rates are 47% and 53%. The 5 year growth rate was very close to 50% even though (1) the last two quarters have been hindered by a pandemic and (2) we are in a period where Gigafactories and production lines are sprouting like mushrooms and the rate of growth of theoretical capacity appears to be exceeding that of production itself. This should reverse over the next few years as it did in 2018 as the new Gigafactories and production lines ramp up and crank out Model Ys, 3s and Cybertrucks at volume.

Since Elon has consistently used 50% growth as a benchmark for Tesla, to me that seems like a good starting point for a "blind faith" benchmark through at least 2025. With multiple Terawatts as the end goal, an argument could be made for extending continued 50% growth beyond 2025. Until there is more specific post 2025 guidance (perhaps on Battery Day?), an argument could be made for a somewhat lower growth rate (say 40%) from 2026-2030 as a placeholder. This would result in ~$1T in revenues in 2030, which is consistent with projections from Ron Baron. While this is massive, it would be consistent with continued rapid growth in automotive as well as even faster growth in the energy business, which Elon has consistently said will ultimately be roughly the same magnitude as automotive.

Another option that doesn't require adopting a specific post-2025 growth rate just yet would be to just keep the original 2025 targets but use a more realistic P/E for a company growing revenues at ~50% and earnings at >50% that still has a huge growth runway into several enormous markets. We could debate what that is but a P/E of 100 or more would be lower than Amazon, which has a long term growth rate of a mere 25-30%. The conceptual difference between the earlier blind faith model is that the P/E of 20 assumes a mature company, while the multiple Terawatt hour goal Elon articulated last year implies either much faster than 50% growth or a much longer growth runway. Assuming the longer growth runway which justifies a much higher 2025 multiple. Since we may get a hint of Elon's thinking on long term growth on Battery Day, holding off on guessing about specific growth rates after 2025 seems like a decent approach.

The last piece is mobility. There are plenty of models out there to value it. Not sure of the best way to align any of those with guidance from Elon/Tesla consistent with the "blind faith" theme of this thread but will give it some thought.

i think 50% after 2025 may be reasonable. Hardware growth in cars and batteries is likely to remain at 50% through 2025, but auto sales at around 5,000,000 may be hard to grow at 50% going forward. Commercial trucking however should grow over 50% through 2027 to 2030, depending on the early ramp. I assume the Semi trucks will be joined by some commercial van products. Tesla energy should be able to grow close to 100% for the next 5 years.
I think the second leg of 50% growth will be like Apple. After 10 years of iPhone growth, the services (Apple store) become more significant to growth and has maintained growth, while phone sales have stayed strong, but not the same sell them as fast as they can make them period from 2007-2012. For Tesla software in the car will matter once FSD is functional. That’s not likely before 2023, at least not solid enough to allow gaming and movies on the Tesla screen. The Tesla Uber service may begin in 2021, but not likely a robot vehicle product until 2023, so not a huge profit driver until FSD is live. Insurance will start driving revenue, but will take years to take off. As hardware cash flow takes off the second half of this year and next, insurance will become a great investment and lower the cost of ownership. I think the most interesting software opportunity will be for Tesla Energy. A software grid on top of the existing grid is critical to a digital economy and a secure reliable grid. The software grid will be a potential trillion dollar market, selling peak demand, buying peak production all based on grid demand and a backend AI. The potential of Tesla AI as a product of its own, is also another possibility. AI productivity is like inception, Moore’s law inside of Moore’s law, accelerating far faster then CPU advances at the height of the microchip revolution.
I would expect, depending on politics of the day, that Tesla, Apple and Amazon will all be broken up. AWS from the rest of Amazon, Apple Market from hardware and Tesla Energy and autos. It will probably increase the value of each of these components, which may be more cash cows then disrupters of the 2030’s. We all have to survive 2020 first.

 

[jhm]

Gather around. It is a new day. The dark yoke of Tesla shorts has been broken. Now we see Tesla trading in whole new way. Tesla soars with eagles. If Google, Amazon, Apple and Microsoft can be trillion dollar cap companies, why not Tesla. The market seems to believe this is so. We've seen Tesla's market cap breach $465B, so hitting $1T seems inevitable. Will the likes of Google, Amazon, and the others breach $10T by the end of the decade? This seems entirely likely, and there is no compelling reason why Tesla cannot be among the names that reach $10T.

So it it time to do a reset of BFPT. First, because trading ranges have shifted so much, prices from before the second half of 2020 no longer seem relevant for calibrating BFPT. So calibration will only go back to July 1, 2020 for a year or so, while the market gets used to the new Tesla reality. Specifically, Q2 2020 marked the first time Tesla has had four profitable quartiers in a row. I believe most of the dramatic change in Tesla's market valuation has do with becoming reliably profitable and generating positive FCF. Eventually, Tesla's valuation can track with earnings growth. The P/E ratio could moderate a bit in coming years, but strong earnings growth will drive share appreciation. But contrast trading before July 1, 2020 did not have reliably positive earnings as a basis of valuation. The advent of four quarters of profitability also opens the way to inclusion in the S&P 500. Much of recent trading has anticipated this inclusion, but as yet we have no experience with post-inclusion trading. So going into this new era, it is useful to use a short bit of history for calibration.

The second reset is that I will use a LTPT of $10k/share, roughly $10T market cap, at the end of the decade, 12/31/2030. In the past we have had lots of health debate about how to set the long-term target. Indeed the precise level does not matter so much as long as it is high enough and far enough out. The near-term calibration is what makes it relevant to trading. So unless there is serious objection, I'd like to just focus on the $10k target. My hope is this is high enough to satisfy our most faithful blind. The price has hit $500/share, so this LTPT is simply assuming that the stock has the potential for 20X growth over the decade from this peak. In recent discussion we were contemplating targets base on $2T, $4T and $8T, but the market has been telling us that it sees Tesla in the same light as FAANG stocks. Alphabet, if you combine both classes of share, and Apple both have market caps over $2T. In the span of 10 years, it would be an uninspiring showing if Alphabet or Apple merely reached $10T by 2030. Can Tesla become a giga-cap stock too? This goes beyond just the EV business. So a $10T target for Tesla means one must believe that Tesla will develop significant business lines beyond automotive. Rather than trying to elaborate all the lines of innovation we can envision at this point, we take it on blind faith that Tesla will continue to innovation broadly and seize upon yet to be imagined opportunities. Recently, we heard from Our Elon that even eVTOL aircraft could be Tesla's future. AI that is capable of safely taking the steering wheel can also be deployed to innumerable other applications. There is simply not enough time within this decade to realize all the potential of advanced batteries and AI. In 1999, investors though Amazon was mostly just an online seller of books. Clearly the book seller's market is limited, but Amazon has continued to find ways to grow reliably for the last twenty years. Twenty years ago it was largely unimaginable where all of that growth would come from. Musk has said that in the long-run the only thing that matters is the pace of innovation. So today we do not need to know where all of Tesla's 2030 revenue will come from. The faith of the blind is simply that we believe that Tesla will keep innovating and entering new markets along the way. So with this trajectory in mind, $10k/share by decade end does not appear too lofty.

Finally, with these two resets, I present our new BFPTs.

$10T LTPT $10,000​	Lookback 2.1 months​
Percentile​	Implied Discount​	2020-09-04​	2020-12-31​	2021-09-04​	2021-12-31​	2022-12-31​	2023-12-31​	2024-12-31​	2025-12-31​
86.0%​	36.0%​	$417​	$461​	$568​	$627​	$853​	$1,160​	$1,579​	$2,147​
1%​	41.2%​	$284​	$317​	$400​	$448​	$632​	$892​	$1,261​	$1,780​
10%​	40.7%​	$294​	$328​	$413​	$461​	$649​	$913​	$1,287​	$1,811​
20%​	40.2%​	$305​	$340​	$427​	$477​	$668​	$937​	$1,315​	$1,844​
30%​	40.1%​	$306​	$342​	$429​	$479​	$671​	$940​	$1,319​	$1,848​
50%​	39.6%​	$318​	$355​	$444​	$495​	$691​	$965​	$1,349​	$1,883​
70%​	37.4%​	$375​	$416​	$516​	$572​	$785​	$1,079​	$1,484​	$2,039​
80%​	36.4%​	$406​	$449​	$554​	$612​	$835​	$1,139​	$1,554​	$2,119​
90%​	35.3%​	$442​	$487​	$598​	$659​	$892​	$1,206​	$1,632​	$2,208​
99%​	33.9%​	$489​	$537​	$655​	$720​	$964​	$1,291​	$1,731​	$2,318​

We see that even with this brief lookback period (looking back to July 1, 2020), the current price is still very much at the upper end of the sentiment spectrum. The median BFPT for end of 2021 is just $495. This could be a disappointment given that we saw the price over $500 just a few days ago. But this is where we are so near to the latest ATH. If prices continue to stay close to $500, we could see the sentiment scale shift upwards. This is what I expect since I believe that the market valuation of Tesla has gone through a major reset. So the thing to watch is what happens to this median end of 2021 BFPT in the coming months. If it rises, then we know the sentiment scale as calibrated is rising.

Because we are so close to the ATH, it is hard to make any recommendations for investing based on BFPT. It simply needs more time to recalibrate. In the meantime, we could see an extension of the bull run or we could see its end. Personally, I was selling off excess shares at $500/share, but have started accumulating shares below $425. This trade was not based on BFPT. Rather I am simply rebalancing my portfolio. My portfolio was balance when Tesla was at $500, but when the share price pulled back 20% this left my portfolio a bit light on Tesla. At some point in the future, we may see Tesla fall to bearish sentiment. At that point, I may want to increase my allocation to Tesla, and I will have non-Tesla assets to liquidate for that purpose. But in the current climate of bullish sentiment, I am simply trying to maintain a reasonable allocation through some marginal buying and selling.

All the best, James

 

[dc_h]

Great post, as always, jhm. You've probably seen, but ARK has an even more bullish price target than the original blind faith price target. In Ark's methodology the percentiles are based on specific deliverables\events. I think Tesla is hitting on most of the bull case scenarios regarding production and building new capacity. It's early to tell, but looks promising. FSD is the the wildcard and if they deliver in the leadership role, the stock could triple in a short period of time.

Tesla Price Target: Tesla's Potential Trajectory During the Next Five Years

 

[adiggs]

Great post, as always, jhm. You've probably seen, but ARK has an even more bullish price target than the original blind faith price target. In Ark's methodology the percentiles are based on specific deliverables\events. I think Tesla is hitting on most of the bull case scenarios regarding production and building new capacity. It's early to tell, but looks promising. FSD is the the wildcard and if they deliver in the leadership role, the stock could triple in a short period of time.

Tesla Price Target: Tesla's Potential Trajectory During the Next Five Years

Unless I'm missing something, this is from Jan 2020 and is an old article covering the well known ARK case for TSLA valuation. It's numbers are also in pre split dollars ($7000 / share in post split dollars sure sounds good tome ).

 

[jhm]

We'll look at this. Tesla has been rejected for inclusion in the S&P 500. Tesla is an outsider stock once again. It is uncertain where the most blessed prices are, but when you strip away the vanity of imminent inclusion we see more clearly what the market really thinks Tesla is worth. The price has fallen back to good acquisition prices.

 

[hershey101]

@jhm Given how successful this method has been, and now that $ARKK has publicly released their $SQ price-targets for 2025 (~$200B market cap), I'd love to see how the market discounts this over the past few years.

If you have some time, I'd love a BFPT thread on $SQ

 

[jhm]

@jhm Given how successful this method has been, and now that $ARKK has publicly released their $SQ price-targets for 2025 (~$200B market cap), I'd love to see how the market discounts this over the past few years.

If you have some time, I'd love a BFPT thread on $SQ

Sure I can try that out. Is this a 2025 target?

Tell us what you see in SQ. I've looked at a bit, but don't get what makes it compelling. It's possible that my vantage point as someone who works in banking makes it hard for me to see what is disruptive. I respect that people in incumbent industries often are the last to understand disruption.