As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently in our screens, Tesla, Inc. (TSLA).
Profile
Tesla is a vertically integrated battery electric vehicle automaker and developer of autonomous driving software. The company has multiple vehicles in its fleet, which include luxury and midsize sedans, crossover SUVs, a light truck, and a semi-truck. Tesla also plans to begin selling more affordable vehicles, and a sports car. Global deliveries in 2023 were a little over 1.8 million vehicles. The company also sells batteries for stationary storage for residential and commercial properties including utilities and solar panels and solar roofs for energy generation. Tesla also owns a fast-charging network.
Recent Performance
Over the past twelve months the share price is down 3.05%.
Source: Google Finance
Inputs
- Discount Rate: 15%
- Terminal Growth Rate: 2%
- WACC: 15%
Forecasted Free Cash Flows (FCFs)
| Year | FCF (billions) | PV(billions) |
| 2024 | 9.02 | 7.84 |
| 2025 | 12.83 | 9.70 |
| 2026 | 18.26 | 12.01 |
| 2027 | 25.98 | 14.85 |
| 2028 | 36.96 | 18.38 |
Terminal Value
Terminal Value = FCF * (1 + g) / (r – g) = 289.99 billion
Present Value of Terminal Value
PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 144.18 billion
Present Value of Free Cash Flows
Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 62.78 billion
Enterprise Value
Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 206.96 billion
Net Debt
Net Debt = Total Debt – Total Cash = -16.95 billion
Equity Value
Equity Value = Enterprise Value – Net Debt = 223.91 billion
Per-Share DCF Value
Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $70.41
Conclusion
| DCF Value | Current Price | Margin of Safety |
|---|---|---|
| $70.41 | $173.74 | -146.75% |
Based on the DCF valuation, the stock is overvalued. The DCF value of $70.41 share is lower than the current market price of $173.74. The Margin of Safety is -146.75%%
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