Hogfighter
Professional Lurker
VIN #1799x assigned. It's on like Donkey Kong
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stef
Member
VIN #182xx from the other tread
ValueAnalyst
Closed
The fee rate went up to 85% leading up to the 2013 short squeeze. Starting to get interesting indeed...
ValueAnalyst
Closed
This post reminded me the time I thought the saying was Donkey Dong.
pz1975
Active Member
That's something else entirely.
I would like to share a method I use to value current share price of tsla. One of the standard methods is DFC and that is the basis of my method. The problem with DFC is that it is very hard to predict (with high probability) cash flow many years in the future so I simplified it to a few basic assumptions.
(R*2,500,000 + 12,000,000,000)*3 (market cap/revenue ratio)/50,000,000,000 (current market cap)*300 (current price)/1.1^1.75 (discount rate of 10% for 1.75 years) = (R*2,500,000 + 12,000,000,000)*3/50,000,000,000*300/1.1^1.75 = 487.
We are currently at $300 instead of $487 so that reflects the fact that tsla has not been able to convince the market about 8k rate yet. If we replace the assumption with “4K by end of June”, then the formula predicts today’s price as:
4000*2,500,000 + 12,000,000,000)*3/50,000,000,000*300/1.1^1.25 = 351
You can plug in various assumptions (about what you believe and what you think the market would believe) about R (and average sale price), timeframe, and discount rate to get a feel of what you should (or the market would) value tsla.
My personal believe is that the market will soon (within a month) take “4k by June” as a sure thing and consequently the price will get to 350 range. By July the market should have a good idea whether “8k by end of year” is likely or not and the price could go to 500+ if tsla can convince the market about 8k.
Obvious this is a very crude attempt to link production rate belief with current share price. Not an advice
- If R is the weekly M3 production rate then forward looking 12 months revenue would be no less than: R*50 (weeks) *50k (price per car) + 12,000,000,000 (for model S and X) = R*2,500,000 + 12,000,000,000.
- The Market cap/lagging 12 months revenue ratio should be no less than 3. AMZN market cap/revenue was mostly above 3 for its history. During 2008 crash it went down to about 1 but 2008 was quite unique and AMZN growth rate was about 30% vs. tsla 50%.
(R*2,500,000 + 12,000,000,000)*3 (market cap/revenue ratio)/50,000,000,000 (current market cap)*300 (current price)/1.1^1.75 (discount rate of 10% for 1.75 years) = (R*2,500,000 + 12,000,000,000)*3/50,000,000,000*300/1.1^1.75 = 487.
We are currently at $300 instead of $487 so that reflects the fact that tsla has not been able to convince the market about 8k rate yet. If we replace the assumption with “4K by end of June”, then the formula predicts today’s price as:
4000*2,500,000 + 12,000,000,000)*3/50,000,000,000*300/1.1^1.25 = 351
You can plug in various assumptions (about what you believe and what you think the market would believe) about R (and average sale price), timeframe, and discount rate to get a feel of what you should (or the market would) value tsla.
My personal believe is that the market will soon (within a month) take “4k by June” as a sure thing and consequently the price will get to 350 range. By July the market should have a good idea whether “8k by end of year” is likely or not and the price could go to 500+ if tsla can convince the market about 8k.
Obvious this is a very crude attempt to link production rate belief with current share price. Not an advice
ValueAnalyst
Closed
The main problem with DFC is that it's not spelled right...
Suppose it become obvious that tsla will be able to produce R=8k/week by end of 2018. How would that affect today’s price? Here is the discount formula I use:
- If R is the weekly M3 production rate then forward looking 12 months revenue would be no less than: R*50 (weeks) *50k (price per car) + 12,000,000,000 (for model S and X) = R*2,500,000 + 12,000,000,000.
- The Market cap/lagging 12 months revenue ratio should be no less than 3. AMZN market cap/revenue was mostly above 3 for its history. During 2008 crash it went down to about 1 but 2008 was quite unique and AMZN growth rate was about 30% vs. tsla 50%.
(R*2,500,000 + 12,000,000,000)*3 (market cap/revenue ratio)/50,000,000,000 (current market cap)*300 (current price)/1.1^1.75 (discount rate of 10% for 1.75 years) = (R*2,500,000 + 12,000,000,000)*3/50,000,000,000*300/1.1^1.75 = 487.
We are currently at $300 instead of $487 so that reflects the fact that tsla has not been able to convince the market about 8k rate yet. If we replace the assumption with “4K by end of June”, then the formula predicts today’s price as:
4000*2,500,000 + 12,000,000,000)*3/50,000,000,000*300/1.1^1.25 = 351
You can plug in various assumptions (about what you believe and what you think the market would believe) about R (and average sale price), timeframe, and discount rate to get a feel of what you should (or the market would) value tsla.
My personal believe is that the market will soon (within a month) take “4k by June” as a sure thing and consequently the price will get to 350 range. By July the market should have a good idea whether “8k by end of year” is likely or not and the price could go to 500+ if tsla can convince the market about 8k.
Obvious this is a very crude attempt to link production rate belief with current share price. Not an advice
I would agree with this method as a crude back-of-the-envelope calculation, if Tesla Energy wasn't crossing critical milestones.
Also, your Model 3 ASP and valuation multiple assumptions are, in my opinion, too conservative. ASP will likely exceed $55,000 (incl. EAP/FSD) until SR comes to market (likely 1Q19), and Tesla has never AFAIK traded at 3x LTM revenue multiple, and I wouldn't expect it to do so when it's about to enter one of the quickest growth periods of its existence: triple-digit YoY growth from 3Q18 through 2Q19, if not for longer. I expect a significant valuation multiple expansion starting about now continuing in the coming quarters, if macro/political environment allows it.
I agree with you, however, that the current price is nowhere near where intrinsic value will be if Tesla achieves higher weekly production rates later this year, along with bottom-line "sustainable" profitability, per management guidance.
Last edited:
So this method gives the same answer whaether the cost to produce an M3 is $30k or $60k?I would like to share a method I use to value current share price of tsla. One of the standard methods is DFC and that is the basis of my method. The problem with DFC is that it is very hard to predict (with high probability) cash flow many years in the future so I simplified it to a few basic assumptions.
Suppose it become obvious that tsla will be able to produce R=8k/week by end of 2018. How would that affect today’s price? Here is the discount formula I use:
- If R is the weekly M3 production rate then forward looking 12 months revenue would be no less than: R*50 (weeks) *50k (price per car) + 12,000,000,000 (for model S and X) = R*2,500,000 + 12,000,000,000.
- The Market cap/lagging 12 months revenue ratio should be no less than 3. AMZN market cap/revenue was mostly above 3 for its history. During 2008 crash it went down to about 1 but 2008 was quite unique and AMZN growth rate was about 30% vs. tsla 50%.
(R*2,500,000 + 12,000,000,000)*3 (market cap/revenue ratio)/50,000,000,000 (current market cap)*300 (current price)/1.1^1.75 (discount rate of 10% for 1.75 years) = (R*2,500,000 + 12,000,000,000)*3/50,000,000,000*300/1.1^1.75 = 487.
We are currently at $300 instead of $487 so that reflects the fact that tsla has not been able to convince the market about 8k rate yet. If we replace the assumption with “4K by end of June”, then the formula predicts today’s price as:
4000*2,500,000 + 12,000,000,000)*3/50,000,000,000*300/1.1^1.25 = 351
You can plug in various assumptions (about what you believe and what you think the market would believe) about R (and average sale price), timeframe, and discount rate to get a feel of what you should (or the market would) value tsla.
My personal believe is that the market will soon (within a month) take “4k by June” as a sure thing and consequently the price will get to 350 range. By July the market should have a good idea whether “8k by end of year” is likely or not and the price could go to 500+ if tsla can convince the market about 8k.
Obvious this is a very crude attempt to link production rate belief with current share price. Not an advice
Reciprocity
Active Member
I agree with the ASP notes here. There is no such thing as a $35,000 Model 3. Not that people wont be able to get one eventually because they will be able to. But because there is software on every car that is worth $9000 post sale. $5000 For EAP and $4000 for FSD. There is almost 100% chance that every car will eventually have these features activated. This is only because Tesla is a leader in Consumer accessible self driving. Literally no one else has anything even remotely close in the consumer market. No consumer can buy a Waymo or a Chevy Bolt with Cruze included for example. Even if they could, these vehicles would be $100k minimum. Certainly there is a chance that Tesla cannot get FSD working on Hardware 2.5, but even if they cant, there is still a huge value there. EAP is still badass enough to be enabled at a very high rate. If not the first owner, then the second or third. Tesla might as well book it as a receivable (probably not legal and im not an accountant so sue me.)
Reciprocity
Active Member
Normalized or just Model 3?
Edit: I often use the wrong words for stuff, dont hold it against me.
Just for m3. If Elon doesn't think he can make good margin on M3 then why would he ever try to build M3, or sleep on the floor to ramp up as fast as he can? Only haters can come up with ridiculous theory of Elon trying to run tsla to bankruptcy as fast as he can and in the process make billions from suckers like us.
Building cars are not difficult but building them with good GM is, and that is probably why M3 is designed with automation in mind, and why tsla has difficulty ramping up - but once they get here, they will be miles ahead of everyone else.
I may agree with this one.i should probably modify my formula as:
if gross margin ~= 20% then
price = (R*2,500,000 + 12,000,000,000)*3/50,000,000,000*300/1.1^1.75
else if gross margin < -20%
price = bankwupt
else ...
sundaymorning
Active Member
Reciprocity
Active Member
18000 VINs where registered with the nhtsa on or about March 23rd: Model 3 VINs on Twitter
Two weeks from registration to assignment to an order. Given that we should expect to see 28000 VINs being assigned in two weeks. That would be crazy and I don't expect that. But we will see.
MacRocket
Faster than Falcon 9
I have been thinking lately that in the coming decades Tesla will dominate in many areas, not just Auto.
Here is a quick attempt to look at these opportunities that Tesla will enjoy.
1) Solar City,- solar roof should be a success as there are major cost and aesthetic advantages, also patent protection?
Solar panels, Tesla will be it’s own best customer supplying billions of dollars worth of panels to super and mega chargers.
2) Batteries for cars, utility & home storage and at supercharger stations. Also any excess production to other Auto companies. Utility scale storage and grid stabilisation services will be big business.
3) What happens to any left over power at mega & supercharger stations? Tesla could become one of the worlds largest utilities by selling any excess power back into the grid.
4)Food, while I charge I’ll have a hamburger and a coffee, plus some Tesla Merchandise. Tesla could become a mini McDonalds. In 20 years there will be 20 million Tesla’s (captive customers) one the road who may use this service.
5)cars, the opposition will never catch up, Tesla is 5 years ahead and will stay there.
6)Charging, Tesla will make some money from Mega and supercharger’s, especially if solar and batteries are used.
7) Car Parts, Tesla has the opportunity to be a major parts supplier to the Auto industry. Tesla’s motors, chargers and other tech items will be highly sought after.
8)Tesla network, autonomous taxi service, big market here.
9)Tesla entertainment, imagine in the future 20 million subscribing Tesla owners getting hooked up via one of the 12,000 Space X low earth orbit communication satellites
Have I missed anything?
Would some on this forum like to put a value on these businesses? I don’t have the financial skills.
Here is a quick attempt to look at these opportunities that Tesla will enjoy.
1) Solar City,- solar roof should be a success as there are major cost and aesthetic advantages, also patent protection?
Solar panels, Tesla will be it’s own best customer supplying billions of dollars worth of panels to super and mega chargers.
2) Batteries for cars, utility & home storage and at supercharger stations. Also any excess production to other Auto companies. Utility scale storage and grid stabilisation services will be big business.
3) What happens to any left over power at mega & supercharger stations? Tesla could become one of the worlds largest utilities by selling any excess power back into the grid.
4)Food, while I charge I’ll have a hamburger and a coffee, plus some Tesla Merchandise. Tesla could become a mini McDonalds. In 20 years there will be 20 million Tesla’s (captive customers) one the road who may use this service.
5)cars, the opposition will never catch up, Tesla is 5 years ahead and will stay there.
6)Charging, Tesla will make some money from Mega and supercharger’s, especially if solar and batteries are used.
7) Car Parts, Tesla has the opportunity to be a major parts supplier to the Auto industry. Tesla’s motors, chargers and other tech items will be highly sought after.
8)Tesla network, autonomous taxi service, big market here.
9)Tesla entertainment, imagine in the future 20 million subscribing Tesla owners getting hooked up via one of the 12,000 Space X low earth orbit communication satellites
Have I missed anything?
Would some on this forum like to put a value on these businesses? I don’t have the financial skills.
Internet service displacing Verizon and AT&T (courtesy iCringely).
I agree there are many money making opportunities. Amazon started selling books, Apple computers (not phones!) and Netflix shipping DVD’s via US postal service.
We are in the Tesla car era now. Energy storage, solar, sales of batteries and many others will take off shortly and Tesla will be operating on many profitable and diverse fronts.
It’s a very exciting time. Also a challenging time as the status quo is being challanged.
Add stock during dips. Hold stock as long as you can afford to do so.
Congratulations on having identified and invested in a unique co. at a unique time in its history. Good luck to us all holding and defending the company as we go through challenging times. Forging new ground is never easy.
We are in the Tesla car era now. Energy storage, solar, sales of batteries and many others will take off shortly and Tesla will be operating on many profitable and diverse fronts.
It’s a very exciting time. Also a challenging time as the status quo is being challanged.
Add stock during dips. Hold stock as long as you can afford to do so.
Congratulations on having identified and invested in a unique co. at a unique time in its history. Good luck to us all holding and defending the company as we go through challenging times. Forging new ground is never easy.
Aside from leadership and AI, one of the biggest competitive advantage that Tesla will have is efficient production.
Elon said a few times that the biggest advantage Tesla will have is the Dreadnought. Elon absolutely understands what's important. Lower production cost is a highly desirable competitive advantage. Charlie Munger talked about this in his book.
Watch the next few years, it's going to surprise a lot of people. Elon said he sees the path how this company becomes a trillion dollar company, he is not joking.
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