In this week’s video blog post, I look at Tesla’s business model, all the risk factors, and contingent liabilities outlined in the company’s annual report. I also look at Tesla’s key ratios and financial statements, perform a Discounted Cash Flow (DCF) analysis, and an expected rate of return calculation.
In the recent months, Tesla’s stock has gained a lot of traction. As value investors, it is important to review the company’s fundamentals before deciding to invest in any company. Hope you all find this 45 minute video blog interesting. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
In the video, using DCF analysis, I find that the intrinsic value of Tesla (10% discount rate and 14% annual growth rate) is $112 per share. The intrinsic value is far below the current TSLA stock price of $2050/share (as of 08/21/2020). I also performed the expected rate of return calculation and discovered that if I were to invest in Tesla at these elevated price levels, I would be getting a -5% return on my investment. This means that Tesla neither has the margin of safety nor a satisfactory expected rate of return. While Tesla’s future may look bright with its advancements in Electric Vehicles and Energy Generation & Storage, a value investor would certainly stay away from Tesla at its current stock price.
0:58 Business Overview (10K – Annual Report)
2:53 Risk Factors (10K – Annual Report)
19:40 Risks For The Shareholders (10K – Annual Report )
21:55 Contingent Liabilities (10K – Annual Report)
27:56 Financial Statement Analysis (Morningstar)
30:40 Key Ratio Analysis (Morningstar)
34:29 Comparing Tesla Valuations to S&P 500
35:20 Discounted Cash Flow (DCF) Analysis
38:36 Expected Rate of Return Analysis
10K Annual Report: here
Morningstar Key Ratios Link: here.
Company overview: Tesla, Inc. is an American electric vehicle and clean energy company based in Palo Alto, California. The company specializes in electric vehicle manufacturing, battery energy storage from home to grid scale and, through its acquisition of SolarCity, solar panel and solar roof tile manufacturing.
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