Tesla, Inc. (TSLA): Our Calculation of Intrinsic Value
Thursday, May 29, 2025 · Johnny Hopkins
As part of our ongoing series, each week we typically conduct a DCF on one of the companies in our screens. This week we’re turning our attention to one of the most disruptive and polarizing names in the market: Tesla, Inc. (TSLA).
Profile
Tesla, Inc. (TSLA) is a global leader in electric vehicles, clean energy storage, and artificial intelligence-driven automation. It has redefined transportation with its EV lineup and is pushing boundaries with innovations in full self-driving (FSD), robotics (Optimus), and scalable battery storage. The company’s vertical integration, software-led approach, and ambitious long-term vision give it a unique position in multiple trillion-dollar markets — though its valuation and execution risks remain points of debate.
DCF Analysis
Inputs:
Discount rate: 8.5%
Terminal growth rate: 2.5%
WACC: 8.0%
Forecasted Free Cash Flows (FCFs):
Based on Tesla’s scaling production capacity, maturing margins, and growing energy/software segments, we project the following free cash flows (in billions):
- 2025: $16.0 → Present Value: $14.74
- 2026: $19.0 → Present Value: $16.15
- 2027: $23.0 → Present Value: $17.94
- 2028: $27.0 → Present Value: $19.33
- 2029: $32.0 → Present Value: $20.69
Total Present Value of FCFs = $88.85 billion
Terminal Value Calculation:
Using the perpetuity growth model, the terminal value in 2029 is calculated as:
(32 × 1.025) / (0.085 – 0.025) = 32.8 / 0.06 = $546.67 billion
Discounted to present value: 546.67 / (1.085^5) = $363.85 billion
Enterprise Value Calculation:
Adding the present value of projected cash flows and terminal value, the total enterprise value is:
88.85 + 363.85 = $452.70 billion
Net Cash Calculation:
Tesla currently holds cash of $36.563 billion and total debt of $13.623 billion, resulting in net cash of:
36.563 – 13.623 = $22.94 billion
Equity Value Calculation:
Adjusting enterprise value for net cash gives us:
452.70 + 22.94 = $475.64 billion
Per-Share DCF Value:
With 3.218 billion shares outstanding, the intrinsic per-share value is:
475.64 / 3.218 = $147.76
Conclusion:
DCF Value: $147.76
Current Price: $356.90
Margin of Safety: -58.4%
Based on our DCF valuation, Tesla appears significantly overvalued. The estimated intrinsic value of $147.76 is well below the current market price of $356.90, implying a negative margin of safety of 58.4%. While Tesla’s innovation engine and long-term vision remain impressive, this valuation suggests the market is pricing in near-perfect execution and enduring leadership. Investors should carefully consider the upside from autonomous driving and energy transformation against the growing risks of competitive pressure, regulatory scrutiny, and broader economic uncertainty.