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 on our screens, Tesla Inc. (TSLA).
 

Profile

Founded in 2003 and based in Palo Alto, California, Tesla is a vertically integrated sustainable energy company that also aims to transition the world to electric mobility by making electric vehicles. The company sells solar panels and solar roofs for energy generation plus batteries for stationary storage for residential and commercial properties including utilities. Tesla has multiple vehicles in its fleet, which include luxury and midsize sedans and crossover SUVs. The company also plans to begin selling more affordable sedans and small SUVs, a light truck, a semi truck, and a sports car. Global deliveries in 2022 were a little over 1.3 million vehicles.
 

Recent Performance

Over the past twelve months, the share price is down 12.04%.

TSLA data by YCharts

Inputs

• Discount Rate: 15%
• Terminal Growth Rate: 2%
• WACC: 15%

Forecasted Free Cash Flows (FCFs)

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 = -11.74 billion

Equity Value

Equity Value = Enterprise Value – Net Debt = 218.70 billion

Per-Share DCF Value

Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $68.67
 

Conclusion

Based on the DCF valuation, the stock is overvalued. The DCF value of $68.67 per share is lower than the current market price of $171.32. The Margin of Safety is -149.50%

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