I mean, all valuation attempts use assumptions. At least I lay out some of mine. Most people here don't seem to have attempted a quantitative valuation, but love to criticize those who do - if those number don't say the stock is gonna moon.
You can modify the numbers as you see fit, and have a discussion on why you think yours are more reasonable.
Yes, and TSLA's free cash flow has plumetted almost 50% in 2023 from 2022. It is up 14% from 2021. TSLA free cash flow yield is 0.77%, that's extremely low.
Tesla annual/quarterly free cash flow history and growth rate from 2010 to 2023. Free cash flow can be defined as a measure of financial performance calculated as operating cash flow minus capital expenditures. <ul style='margin-top:10px;'> <li>Tesla free cash flow for the...
www.macrotrends.net
My attempts are mostly about trying to understand what the market is going to value TSLA at over the next year or two. In my opinion, that will be based on forecasts they make for maybe the next 5 years at most. People may claim that's "short term thinking", and that's okay, you are welcome to not engage. But I think it's mostly hypocritical because most people are checking the share price daily, making decisions like when to sell for a house downpayment, and are definitely thinking about things in the short term (along with the long).
If Tesla grows 20% annualized production for the next 5 years, then they will be producing 5 million cars annually then. Or if they grow closer to 30%, they will get there around 4 years. That's how I come up with 5 million.
Tesla TTM operating margin peaked between 16-17% I believe during the supply constrained boom in EV prices.
Current and historical operating margin for Tesla (TSLA) over the last 10 years. The current operating profit margin for Tesla as of December 31, 2023 is <strong>9.37%</strong>.
www.macrotrends.net
I think it will be hard to get back to those operating margins on automotive without another supply crunch x demand boom. So I estimate 10%. Let's says it goes up to 12%, that's a 50% increase for current levels. Optimistic but maybe possible.
On ASP, I believe I went too low, mistaking what they currently are. ASP is now allegedly $42500. Next gen vehicle will bring that down but not a full $10,000. Let's say $37,500 ASP.
5 million at $37,500 ASP and 12% operating margin = 22.5 billion in net income. At a PE ratio of 40, this supports a market cap of 900 billion, or ~ a $288 share price.
So, I think automotive + energy upside supports a $300 share price eventually. But I don't think it will happen untl Tesla can prove operating margins are trending up to where the market can make such assumptions like 12% operating margins.
