If you have researched this subject you have found articles written by analysts who believe Tesla will appreciate nicely in the next few years. But I took a step back and wondered about the bigger picture. Tesla wants to have a full lineup of cars such as trucks, smaller cars, roadsters, etc. So I did a projection out to 2020 and estimated fairly conservative sales numbers for each model. I estimated various costs based off of their latest 10k filing. Then I calculated expected earnings and divided by the # of outstanding shares to arrive at an eps. I applied a p/e of 40 as this is a growth stock and I expect it still will be in 2020. The final result was a stock price right under $1,000. Below is my math. Keep in mind that the Model S is the number 1 selling Luxury sedan in the U.S. and this has happened with no advertising or marketing. In 8 years there will be a LOT more awareness and confidence in Tesla.
Introduction Model Class Annual sales Avg Price Margin Profit
2012 Model S Luxury Sedan 30,000 $80,000 25% $600,000,000
2014 Model X Crossover SUV 20,000 $85,000 25% $425,000,000
2016 Model M Mid-size Sedan 100,000 $40,000 20% $800,000,000
2018 Model T Pick-up Truck 100,000 $40,000 20% $800,000,000
2020 Model R Roadster 50,000 $50,000 25% $625,000,000
2020 Model E Economy 200,000 $25,000 20% $1,000,000,000
Total profit - $4.25B. R&D costs of $400m. S,G&A costs of $350m. 26% tax rate makes net earnings of $2.59B.
Divided into 114.5m shares gives EPS of $22.62 and P/E of 40 gives us a $905 stock price.
Tesla earned $50,000,000 last year selling ZEV credits. I have not forecasted any revenue for that because I do not have any info to help me understand how much they make off of each car nor do I know if they will still be able to sell those in 2020.
Also, I have not estimated revenue for selling their batteries and motors to other manufacturers. They are on a path to delivering LOTS of these to fleet delivery vans and possibly taxi cabs in the future but I cannot forecast that. Also licensing their patented batteries to other manufacturers could be huge. This piece of business alone could be a huge multiplier on their earnings. So that puts us over $1,000.
Now, call me crazy but I think Tesla will sell more than what I have forecasted. If they already out-sell BMW and MB w/ their 1st car what if we assume they could at least match those guys w/ their Gen III car? BMW sells 350,000 3 series worldwide each year. And what if they can match Prius sales with an economical model? Another 360,000 sales per year. So I had some fun and re-ran the model with the following sales numbers in 2020: S - 100,000, X - 100,000, M - 400,000, T - 200,000, R - 100,000, E - 400,000. I lowered the P/E to 30 to account for all of the growth they have already achieved in this scenario. Stock price - $2,205!!! With no revenue from selling drivetrains to other makers.
I actually think they will outsell BMW and MB in the future so I'm hoping for even more earnings. Afterall, they are outselling them already just out of the gate.
Now this only works under a few assumptions:
1) That Tesla will continue to improve range/price on batteries every 5 years or so as Elon has hinted at.
2) That there isn't a major setback in battery safety forcing a recall/redesign which would yield bad publicity and hurt sales.
3) That the other carmakers will not be able to emulate the same battery performance w/o licensing it from Tesla.
So go buy the stock and thank me later :))))
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