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

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 9.66%.

Source: Google Finance

Inputs

• Discount Rate: 14%
• Terminal Growth Rate: 3.5%
• WACC: 14%

Forecasted Free Cash Flows (FCFs)

Terminal Value

Terminal Value = FCF * (1 + g) / (r – g) = 314.16 billion

Present Value of Terminal Value

PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 163.16 billion

Present Value of Free Cash Flows

Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 64.69 billion

Enterprise Value

Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 227.85 billion

Net Debt

Net Debt = Total Debt – Total Cash = -18.20 billion

Equity Value

Equity Value = Enterprise Value – Net Debt = 246.05 billion

Per-Share DCF Value

Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $77.13
 

Conclusion

Based on the DCF valuation, the stock is overvalued. The DCF value of $77.13 share is lower than the current market price of $210.66. The Margin of Safety is -173.11%.

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