Tesla Motors long term valuation multiples are declining fast
Updated
Tesla is difficult to value and the opinions are very strong on both sides of the argument of how TSLA is valued.
The valuation is dropping fast, that is for sure. Given how sales have skyrocketed from nearly zero to $3 billion has dropped the PSR from over 20 on a few occasions to under 10 for this year 2015.
Tesla is losing money as they invest in their business, grow infrastructure, build supercharger stations and provide unparalleled customer service, and build capacity to keep driving down the cost of building a Tesla.
If you look at the long term, in this case 57+ months (since that's how much data we have on Tesla so far), and if we assume sales can keep growing at the rate they are growing, then TSLA will be very cheap in 4.6 years. We could give Tesla a PSR of 2 after 4.6 years, then the stock would easily be a double from it's current levels, which is a 15%+ return per year.
I added the "half-speed" trend line for TSLA to now because it encompasses when TSLA first started selling the Model S up to the peak price for TSLA shares over $290 last summer. If we look at the pace of the trend from the mid-point of that advance, then TSLA is still on track and that level was tested in the recent pullback earlier this year.
The current news about guiding down production from 55,000 units per year to 50,000 together with the recent "hacking success" into Tesla cars, should provide another buying opportunity over the next weeks and months.
Cheers.
The valuation is dropping fast, that is for sure. Given how sales have skyrocketed from nearly zero to $3 billion has dropped the PSR from over 20 on a few occasions to under 10 for this year 2015.
Tesla is losing money as they invest in their business, grow infrastructure, build supercharger stations and provide unparalleled customer service, and build capacity to keep driving down the cost of building a Tesla.
If you look at the long term, in this case 57+ months (since that's how much data we have on Tesla so far), and if we assume sales can keep growing at the rate they are growing, then TSLA will be very cheap in 4.6 years. We could give Tesla a PSR of 2 after 4.6 years, then the stock would easily be a double from it's current levels, which is a 15%+ return per year.
I added the "half-speed" trend line for TSLA to now because it encompasses when TSLA first started selling the Model S up to the peak price for TSLA shares over $290 last summer. If we look at the pace of the trend from the mid-point of that advance, then TSLA is still on track and that level was tested in the recent pullback earlier this year.
The current news about guiding down production from 55,000 units per year to 50,000 together with the recent "hacking success" into Tesla cars, should provide another buying opportunity over the next weeks and months.
Cheers.
Note
Here's the view of the updated valuation:
Sales are dramatically higher.
Margins are still negative: Going from -11% to -15%.
Valuation is way down: From 9x's sales to 5x's sales.
Another year and TSLA will be down to 3x's sales or less if it holds this price.
Funding shouldn't be a problem given the product quality, the market acceptance and the gradual build towards an electric car future. It will take 10-20 years or more to get to a meaningful dent in the marketshare. If marketshare goes up, then so will the dominance of Tesla's battery production business.
Stay posted -
Tim 12/23/2016 12:18PM EST
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