04-15-2021, 10:42 PM
My attempt at EBITDA forecast valuation for Tesla (TSLA)
<!-- SC_OFF --><div class="md"><p>So I've tried to estimate the 10-year return for holding TSLA shares by projecting growth, margins and EBITDA forward in three scenarios and coming up with an estimated enterprise value and market cap for TSLA in 2030. Hoping to hear some helpful feedback.</p> <p>Quick disclaimer: I am not a CFA, I don't have a degree in finance (degree in engineering) and this is my first time trying to do this. Obviously don't take this as investment advice.</p> <p>For the base case scenario, I used analyst estimates for revenue growth in 2021-2023 and then grew it at the rate closer to the projected EV market growth between now and 2027 (22%). I then grew it at 20% for the last 3 years to be conservative. So this is a scenario in which Tesla captures more market share for a few years and then maintains that market share. For EBITDA Margin, I maintained it at 20% until 2026 at which point I let it decline by 1 percentage point a year as I'd expect there to be more competition and Tesla to be selling less luxury cars (higher margin) as a percentage of their sales. </p> <p>My base case EBITDA projection for 2030 was then 48.45 Billion USD. For a company that is still growing revenues at 20% albeit without high margins, I gave it a EV/EBITDA multiple of 25, resulting in an enterprise value and market cap of 1.2 Trillion dollars. This represents a 1.66x multiple over 10 years on the original investment.</p> <p>For the bull/optimistic case, I kept the margin at 20% for the next 10 years and kept the growth rate above the 22% market rate for the next 10 years, meaning Tesla is able to maintain their higher than industry margins, perhaps through leasing autopilot software and continues to gain market share. This gave me an 2030 EBITDA of 77.26 Billion USD. With it's continued higher growth rate, I gave it an EV/EBITDA multiple of 30, resulting in an enterprise value and market cap of 2.3 Trillion dollars. This represents a 3.18 multiple over 10 years on the original investment.</p> <p>For the more pessimistic case, I reduced the growth rate slightly below analyst projections for 2021-2023 and brought down the growth rate to 18% by 2030. I also brought the EBITDA margin down to 15% by 2030. This gave me an 2030 EBITDA of 44.11 Billion USD. With it's lower growth rate, I gave it a lower EV/EBITDA multiple of 20 giving Tesla an enterprise value of 882 Billion USD. This represents a 1.21x multiple on the original investment.</p> <p>I gave each of the scenarios a weight--base case: 50%, bull case 30%, and bear case 20%. I'm optimistic on the EV market overall so I wanted to give the bull case a slight advantage. This resulted in a weighted multiple on investment of 2.03x, which represents an 8% annualized rate of return. I found this to be surprising/more bullish than I was expecting, but I would still not invest in Tesla as it does not fit my desired risk/reward profile.</p> <p>What do you all think? How can I improve my analysis? Is there something about Tesla that would make one of these cases more or less likely?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/1-1-1-1-1-1-1-1-1-2"> /u/1-1-1-1-1-1-1-1-1-2 </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/mr23nw/my_attempt_at_ebitda_forecast_valuation_for_tesla/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/mr23nw/my_attempt_at_ebitda_forecast_valuation_for_tesla/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>So I've tried to estimate the 10-year return for holding TSLA shares by projecting growth, margins and EBITDA forward in three scenarios and coming up with an estimated enterprise value and market cap for TSLA in 2030. Hoping to hear some helpful feedback.</p> <p>Quick disclaimer: I am not a CFA, I don't have a degree in finance (degree in engineering) and this is my first time trying to do this. Obviously don't take this as investment advice.</p> <p>For the base case scenario, I used analyst estimates for revenue growth in 2021-2023 and then grew it at the rate closer to the projected EV market growth between now and 2027 (22%). I then grew it at 20% for the last 3 years to be conservative. So this is a scenario in which Tesla captures more market share for a few years and then maintains that market share. For EBITDA Margin, I maintained it at 20% until 2026 at which point I let it decline by 1 percentage point a year as I'd expect there to be more competition and Tesla to be selling less luxury cars (higher margin) as a percentage of their sales. </p> <p>My base case EBITDA projection for 2030 was then 48.45 Billion USD. For a company that is still growing revenues at 20% albeit without high margins, I gave it a EV/EBITDA multiple of 25, resulting in an enterprise value and market cap of 1.2 Trillion dollars. This represents a 1.66x multiple over 10 years on the original investment.</p> <p>For the bull/optimistic case, I kept the margin at 20% for the next 10 years and kept the growth rate above the 22% market rate for the next 10 years, meaning Tesla is able to maintain their higher than industry margins, perhaps through leasing autopilot software and continues to gain market share. This gave me an 2030 EBITDA of 77.26 Billion USD. With it's continued higher growth rate, I gave it an EV/EBITDA multiple of 30, resulting in an enterprise value and market cap of 2.3 Trillion dollars. This represents a 3.18 multiple over 10 years on the original investment.</p> <p>For the more pessimistic case, I reduced the growth rate slightly below analyst projections for 2021-2023 and brought down the growth rate to 18% by 2030. I also brought the EBITDA margin down to 15% by 2030. This gave me an 2030 EBITDA of 44.11 Billion USD. With it's lower growth rate, I gave it a lower EV/EBITDA multiple of 20 giving Tesla an enterprise value of 882 Billion USD. This represents a 1.21x multiple on the original investment.</p> <p>I gave each of the scenarios a weight--base case: 50%, bull case 30%, and bear case 20%. I'm optimistic on the EV market overall so I wanted to give the bull case a slight advantage. This resulted in a weighted multiple on investment of 2.03x, which represents an 8% annualized rate of return. I found this to be surprising/more bullish than I was expecting, but I would still not invest in Tesla as it does not fit my desired risk/reward profile.</p> <p>What do you all think? How can I improve my analysis? Is there something about Tesla that would make one of these cases more or less likely?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/1-1-1-1-1-1-1-1-1-2"> /u/1-1-1-1-1-1-1-1-1-2 </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/mr23nw/my_attempt_at_ebitda_forecast_valuation_for_tesla/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/mr23nw/my_attempt_at_ebitda_forecast_valuation_for_tesla/">[comments]</a></span>Kind Regards R