My Model of Tesla through 2020

[farzyness]

Hello all.

Semi-long time lurker, first time poster. Love all the input from everyone on this forum. I believe Tesla has us investors on a pretty good road forward.

I did a quick model of Tesla sales for their Model S, X and GenIII cars through 2013, and was wondering if I can get some input from the rest of the board on some of the assumptions I've made. Perhaps someone much smarter than I can extrapolate the figures into a forward looking EPS or P/E through 2020 given the values I listed, or maybe reconfigure some of the assumptions I've made as far as Model S growth, Model X adoption, etc.

Thank you very much all, and I hope this thread can deliver some good discussion.

EDIT:

I've updated my figures to be much more conservative and added a Price Target calculator of sorts. I'm coming up with a price target of $436 based on 2018 earnings at a 15% earnings to revenue ratio (which Goldman Sachs uses, so I went conservative on purpose) with a P/E ratio of 25. If you download the file you should be able to access all the fields.

TSLA v2.0.xlsx - Google Drive

 

[sleepyhead]

First of all no way they sell 67,500 Model S in 2014. They might get half of that.

 

[TSLAopt]

Hello all.

Semi-long time lurker, first time poster. Love all the input from everyone on this forum. I believe Tesla has us investors on a pretty good road forward.

I did a quick model of Tesla sales for their Model S, X and GenIII cars through 2013, and was wondering if I can get some input from the rest of the board on some of the assumptions I've made. Perhaps someone much smarter than I can extrapolate the figures into a forward looking EPS or P/E through 2020 given the values I listed, or maybe reconfigure some of the assumptions I've made as far as Model S growth, Model X adoption, etc.

Thank you very much all, and I hope this thread can deliver some good discussion.

https://docs.google.com/file/d/0B3A3-cUX1oy6ZDQ3Vy1xSnhhbm8/edit

i think this is a very practical model for any of us believers. We have been right up to now so if we continue to be right I think it is a very fair estimate...maybe lowballng Model X just a little bit in my view.

 

[farzyness]

sleepyhead, you are currently legendary status on the board so I dare not second guess your opinion .... but even with supply chain restrictions, don't you think worldwide deliveries could hit that #?

 

[Goldfishes]

sleepyhead, you are currently legendary status on the board so I dare not second guess your opinion .... but even with supply chain restrictions, don't you think worldwide deliveries could hit that #?

They hope to sell 40,000 Model S in 2014, according to Elon and the shareholder note from yesterday. Estimating 45,000 might be fair considering that they have been beating targets so far, but I don't think it is reasonable to forecast any more than that. They will be entering new markets that are not yet tested. For all we know, demand in APAC could end up being very low.

Model X deliveries will begin in late 2014. Your model assumes 0 Model X sold in 2014. While it will be a small number (maybe 250 or so?) I think it is important to include the fact that Model X deliveries will take place in 2014.

Where are you getting 33% gross margin from for Model X? 33% would be very high for any point in Model X production. It seems that you are also assuming that gm% to come from the beginning. They will have to work their way into that (or whatever % they will ultimately obtain).

Is it confirmed that Model X will be $90,000? I thought it was lower but I could be wrong. Model S ASP is currently higher than the $85,000 you cite. With essentially all 40 kWh models sold, and prices just recently being increased on continuing models, ASP should be somewhere in the mid 90s.

 

[farzyness]

They hope to sell 40,000 Model S in 2014, according to Elon and the shareholder note from yesterday. Estimating 45,000 might be fair considering that they have been beating targets so far, but I don't think it is reasonable to forecast any more than that. They will be entering new markets that are not yet tested. For all we know, demand in APAC could end up being very low.

Model X deliveries will begin in late 2014. Your model assumes 0 Model X sold in 2014. While it will be a small number (maybe 250 or so?) I think it is important to include the fact that Model X deliveries will take place in 2014.

Where are you getting 33% gross margin from for Model X?

Since the Model X will be using the Model S platform, and I believe due to the niche-y market for electric SUVs, I'm assuming a 33% GM for Model X is safe. That and luxury SUVs tend to usually be "maxed out", as in someone who is in the market for a luxury SUV probably doesn't skimp on options, which are always higher margin items. In addition, I think Model X will unlock the true potential for the SUV market. SUVs in general tend to cost more to maintain, in addition to being absolute gas hogs. The consumer should see much bigger savings driving a Tesla SUV vs. say an X6, Cayanne, etc. Tesla will use this to their advantage and further boost their margins.

Honestly, I think I'm low balling the hell out of the X. I really think that car is going to blow up quite a bit more than people think. The inherited savings for that format vs. conventional SUV ICEs is massive.

 

[farzyness]

They hope to sell 40,000 Model S in 2014, according to Elon and the shareholder note from yesterday. Estimating 45,000 might be fair considering that they have been beating targets so far, but I don't think it is reasonable to forecast any more than that. They will be entering new markets that are not yet tested. For all we know, demand in APAC could end up being very low.

Model X deliveries will begin in late 2014. Your model assumes 0 Model X sold in 2014. While it will be a small number (maybe 250 or so?) I think it is important to include the fact that Model X deliveries will take place in 2014.

Where are you getting 33% gross margin from for Model X? 33% would be very high for any point in Model X production. It seems that you are also assuming that gm% to come from the beginning. They will have to work their way into that (or whatever % they will ultimately obtain).

Is it confirmed that Model X will be $90,000? I thought it was lower but I could be wrong. Model S ASP is currently higher than the $85,000 you cite. With essentially all 40 kWh models sold, and prices just recently being increased on continuing models, ASP should be somewhere in the mid 90s.

Model X I believe will be priced similarly to Model S, but I'm assuming that it'll be higher. I low-balled Model S ASP on purpose due to the fact that Model S has such visibility in other markets than the luxury sedan (i.e. in the call he said people were coming to the Model S from the Prius, S class, highlander, etc), and these buyers will probably opt for the lower end models, driving the ASP lower.

I believe I posted response on 33% GM for MX but it's currently under admin review.

 

[Goldfishes]

I'd be happy to do a full model including DCF, maybe this weekend. I would of course adjust to be in line with my assumptions.

 

[farzyness]

I'd be happy to do a full model including DCF, maybe this weekend. I would of course adjust to be in line with my assumptions.

Would love to see it.

 

[sleepyhead]

sleepyhead, you are currently legendary status on the board so I dare not second guess your opinion .... but even with supply chain restrictions, don't you think worldwide deliveries could hit that #?

Their max capacity right now is about 40,000 units per year. But Elon said yesterday that there are bottlenecks (on suppliers' side) limiting their production right now, hence only the 21,000 deliveries in 2013 guidance. He also said that these bottlenecks should get resolved sometime in Q1 or Q2, and only then will we see a 40,000/year run rate. Not saying that this can't happen sooner, but that is his guidance.

Elon also said a month or two ago that they can increase model S production to 50,000 annualized rate with very minimal capex of about $25m - $50m. Anything above that would require an additional assembly, which they will not start putting in until they max out current line at 50,000.

So in short, the absolute maximum in a perfect world scenario for Tesla to deliver in 2014 would still be under 50,000 units. Realistically, we can assume about 30k - 45k.

I have no doubt that the demand will be there, but supply is the issue right now and probably will be for many years to come as demand grows. Everyone is going to want a Tesla.

 

[Goldfishes]

Any civil engineers or architects here that might be able to say how long it could take them to build a second production facility? Not my department.

 

[farzyness]

Their max capacity right now is about 40,000 units per year. But Elon said yesterday that there are bottlenecks (on suppliers' side) limiting their production right now, hence only the 21,000 deliveries in 2013 guidance. He also said that these bottlenecks should get resolved sometime in Q1 or Q2, and only then will we see a 40,000/year run rate. Not saying that this can't happen sooner, but that is his guidance.

Elon also said a month or two ago that they can increase model S production to 50,000 annualized rate with very minimal capex of about $25m - $50m. Anything above that would require an additional assembly, which they will not start putting in until they max out current line at 50,000.

So in short, the absolute maximum in a perfect world scenario for Tesla to deliver in 2014 would still be under 50,000 units. Realistically, we can assume about 30k - 45k.

I have no doubt that the demand will be there, but supply is the issue right now and probably will be for many years to come as demand grows. Everyone is going to want a Tesla.

Gotcha. I guess the fact that Elon has a track record of over-delivering is influencing some numbers in the near term. However I feel pretty confident with 2017+. I'll try and adjust 2014 - 2016 accordingly.

 

[farzyness]

I've updated my figures to be much more conservative and added a Price Target calculator of sorts. I'm coming up with a price target of $436 based on 2018 earnings at a 15% earnings to revenue ratio (which Goldman Sachs uses, so I went conservative on purpose) with a P/E ratio of 25. If you download the file you should be able to access all the fields.

TSLA v2.0.xlsx - Google Drive

 

[StapleGun]

I love reading predictions like this so thanks for posting. My thoughts...

67,500 might be a reasonable guess for demand next year, but production is not going to be anywhere near that. 40k next year would be very successful, but unless they go to whatever level is past the $25-$50 mil sleepyhead mentioned (and very soon), they will not be producing that many.

Also, $85k ASP is a bit low for the Model S. So far this year it has been about $93-95k and I don't see it going too much lower. It won't hit 28% GM this year, but for the lifetime of the car that number seems reasonable.

Lastly, where is R&D and SG&A in all of this?

 

[farzyness]

I love reading predictions like this so thanks for posting. My thoughts...

67,500 might be a reasonable guess for demand next year, but production is not going to be anywhere near that. 40k next year would be very successful, but unless they go to whatever level is past the $25-$50 mil sleepyhead mentioned (and very soon), they will not be producing that many.

Also, $85k ASP is a bit low for the Model S. So far this year it has been about $93-95k and I don't see it going too much lower. It won't hit 28% GM this year, but for the lifetime of the car that number seems reasonable.

Lastly, where is R&D and SG&A in all of this?

Sorry, looks like I linked the wrong file. You can view the updated here. I think it'll answer your other questions. I've moved the numbers to a much more conservative base.

R&D and SG&A are built into the 15% EBITDA ratio to revenue.

TSLA v2.0.xlsx - Google Drive

- - - Updated - - -

Sorry fellas, all links should be updated now to the updated file.

 

[StapleGun]

Looks much more reasonable now. Whats even better is that if they are delivering 500k cars in 2020, they are in such a large industry that it will still be considered a growth stock.

 

[farzyness]

Looks much more reasonable now. Whats even better is that if they are delivering 500k cars in 2020, they are in such a large industry that it will still be considered a growth stock.

Agreed 1000%. I'm having a hard time not getting incredibly excited for the long term prospects of this stock. I think anything <$300 for a price target is way undervalued.

 

[Goldfishes]

Sorry, looks like I linked the wrong file. You can view the updated here. I think it'll answer your other questions. I've moved the numbers to a much more conservative base.

R&D and SG&A are built into the 15% EBITDA ratio to revenue.

TSLA v2.0.xlsx - Google Drive

- - - Updated - - -

Sorry fellas, all links should be updated now to the updated file.

I'm not sure I can agree with using a ratio like that across the board. There are a lot of factors in play for a high-growth operation like Tesla. CapEx will be extremely high in periods when they are transitioning into new vehicle production.

 

[farzyness]

I'm not sure I can agree with using a ratio like that across the board. There are a lot of factors in play for a high-growth operation like Tesla. CapEx will be extremely high in periods when they are transitioning into new vehicle production.

Agreed. I've actually made the spreadsheet model itself on inputs, so if you want to adjust some percentages/ratios, the spreadsheet should model itself accordingly. Just don't populate anything with formulas in them!

 

[Goldfishes]

Agreed. I've actually made the spreadsheet model itself on inputs, so if you want to adjust some percentages/ratios, the spreadsheet should model itself accordingly. Just don't populate anything with formulas in them!

Excel 101 :biggrin: