Tesla Intrinsic Value Drivers

Dear Reader,

Tesla, the electric vehicle manufacturer, is currently valued at 700.12 bln. USD by public markets.

I estimate Tesla is worth  around 140 billion USD in the long run and this is assuming that Tesla achieves a net profit margin of more than 7 %.

Basically there are two value scenarios for Tesla:

1) Tesla starts reporting net profit and achieves an yearly net profit margin of more than 5 % which is typical for other luxury sedan manufacturers. In that case Tesla remains a viable company and will be worth around 140 billion USD in the long run. If Tesla achieves a net profit margin of more than 10 % the intrinsic value of the company could surpass 200 billion USD.

2) Tesla remains unprofitable and continues regularly loosing money. In the case of buoyant capital markets  Tesla would be able to raise money via stock issues or even bonds. And temporarily would remain afloat. If Tesla chronically goes on loosing money, however, the company would struggle to remain a going concern and can go out of business.

Actually, the prices of base metals, the main input in Tesla's cars have risen a lot recently, which makes it much harder for Tesla to keep the current fragile around 2 % net profit margin it sustains. And this net profit margin is achieved only after Tesla receives the government subsidies for its electric vehicles.

So the main value drivers of Tesla are consumers' perception of the value of electric vehicles and the prices of ferrous metals. Self-driving technology could also add value, but fully autonomous vehicles are quite far away from being fully developed. So far consumers and investors' psychology is what drives Tesla's high valuation. If Tesla does not start making real money soon, however, consumer and investors' preferences might abruptly change.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich