Valuation of Tesla Motors, Inc.

Torbjørn Strand Husevåg & Helge Johan Rød Flinder

Student thesis: Master thesis


The purpose of this thesis is to find the value of the US premium electric automotive company Tesla Motors, Inc. based on a strategic and financial analysis.
Strategic analysis: Government support schemes play a key role in the electric vehicle (EV) market. However, due to declining battery costs, EVs are set to challenge gasoline vehicles in the near future. The premium vehicle segment is highly competitive, dominated by the major brands BMW, Mercedes and Audi. The competition in the EV market is expected to increase after Tesla’s Model 3 launch in 2017. We believe Tesla posits several sustainable competitive advantages, providing confidence in strong future earning capabilities. This includes their upcoming Gigafactory, Supercharger network, demand for Model 3 and CEO Elon Musk.
Financial analysis: Tesla has never been profitable, due to its low economies of scale and high investments aimed to fuel future growth. However, this is about to change, as we expect a continued strong revenue growth while operational margins improve. We expect Tesla to become highly profitable after the launch of Model 3. In the near future we define Tesla ́s main bottleneck to production capacity, not demand. Their guided annual production is 500.000 vehicles by 2020, representing a tenfold increase in just five years.
Valuation: Per 1st of May 2016, one Tesla share traded at $ 240 on the Nasdaq Stock Exchange. By using the Economic Value Added-model, we estimate a price per share of $ 350 per 1st of May 2016. This 45 percent upside potential indicates that Tesla ́s future earnings potential is not fully priced into the share.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final ThesisMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2016
Number of pages155