Tesla, what we'll then do is we'll do a more fundamental valuation, which is a discounted cashflow valuation.

So I'm going to get started and we are going to be using our platform, our Felix platform to do this.

So let me close out my little holding slide there and I'm just at our Felix platform and I'm going to jump to Tesla and we'll go to the valuation page and we'll start by taking a look at the trading comparables. Let me just zoom in a little bit just so you can see this a bit better.

So I've actually preset this up and you'll see that I've got a series of comparable companies for Tesla.

Now the real problem here is that there's not a clear comparable for Tesla.

It is a car company, but it also has some other divisions that has a solar division and a self-driving car division as well.

So it's really automotive energy, solar and self-driving.

So I've actually put a kind of mix of companies then they've just been ordered by market cap.

The other problem is Tesla is enormous.

If you look at the size of Tesla 916 billion market cap compared to the other companies, it is just absolutely enormous.

And that's another issue is that these companies are much, much smaller.

So I've put in some traditional car companies, I've put in some of the energy companies as well, like solar edge technologies and we've put in some of the automotive or the automated driving companies too.

And we've got a mix there.

But rather than look at it on this screen, I actually want a little bit more detail because in this screen we've only got enterprise value to CY1 revenue and enterprise value to CY1 EBITDA.

I'll explain what that means in just a moment.

So what I'm going to do is I'm going to going to download this table into Excel and that will pull up a much more detailed analysis of these companies.

And so it will go away and pull all the analysis together and we can take a look at it. There we go. So I've actually prepared something already so I'm going to jump to that.

So this is what it will have downloaded.

So each company's got its own sheet here with a equity to enterprise value bridge and consensus earnings numbers and share prices.

We've got all the companies there, but it's already the summary page that I want to look at here.

Now you can see we've got a series of multiples and the way, the best way of thinking about multiples is that a multiple is kind of like when you are valuing real estate. When you go and buy a property, you will typically look at the value of the property based on a dollar per square foot or pound per square foot or euro per square foot.

And that kind of gives you a metric with which you can compare the value of assets For corporations, we can't use square footage because that's not a driver of value.

What tends to be a driver value is mostly earnings.

And you can see the two key earnings metrics I've got are EBITDA and I've got price earnings ratios.

So the price earnings ratios is just share price divided by EPS, whereas EBITDA is enterprise value, like the unlevered value of the company or the operations value divided by EBITDA.

Now you may be thinking, well why, why do we use EBITDA? What is EBITDA? Without going to huge amounts of detail EBITDA. EBIT stands for earnings before interest and tax and that's before any of the financing costs.

And that means it kind of helps strip out the different capital structures comparable companies may have and that doesn't really drive the underlying value. Just like if you're buying a house, whether someone's got a mortgage on the house or not, really isn't to impact the price you would pay for that property.

EBITDA though, why are we adding out the DNA now? A lot of people would say, oh because it's closer to cash, that is just rubbish.

It's not closer to cash because it's before tax, before working capital, before CapEx.

The reason we use EBITDA is that if a company makes acquisitions under the accounting rules, it has to revalue the assets and those revalued assets typically create a lot more amortization and depreciation.

So if a company's been highly acquisitive, it means it's going to have a lot more depreciation and amortization than if a company's been grown organically.

So EBITDA as a metric will level the playing field between organically grown companies on the one hand versus companies grown by acquisition. So that's why it's such a widely used metric.

Now in the case of Tesla, I think EBITDA is a better metric because you can see that a lot of these companies have actually got negative net income earnings and you've got three types of EBITDA last 12 months, which is the historic EBITDA CY1, which is the current calendar year.

So that will be to December 31st, 2025 and CY2, which will be the year to December 31st, 2026.

Now we are already more than a quarter of the way through 2025.

So I think most investors are not going to look at the 2025 year also because we've got a lot of noise and volatility in the markets because of the current trade situation.

Instead, I think most investors are going to look to 2026 as the key earnings metric.

So I'm actually going to focus on the CY2 EBITDA multiple because I think that's going to be the main driver of value.

And I'll also take a look at revenue.

Now if you look at all these companies and we've gotta a range of companies that are in the classic automotive sector like Ford Motor Company we've also got some energy companies, solar edge energy and then we've got some of the automated driving companies.

But you can see in every single case Tesla's CY2 EBITDA multiple is trading on 38 times the 2026 EBITDA.

And that is way ahead of every single comparable that we have found for this company.

The only company even close is MobileEye and that's one of these kind of automated driving companies and that's trading at about 20, no, just under 22 times 2026 EBITDA.

And that's the closest. And if you look at the revenues, the revenues are a little bit flatter but it's still, Tesla is 6.8 times 2026 revenue and the closest to that is Mobileye at 4.4 times revenue.

Well, why are some of these companies trading at such higher multiples than others? The underlying driver tends to be growth.

And the reason growth is important is that the 2026 earnings are literally just kind of one year out.

But if you are growing very, very strongly, investors are essentially paying for all that future growth.

So they're going to price in all the future growth into the share price or the enterprise value number, but it won't be reflected yet in either the revenue or EBITDA in 2026.

So that's why you get that real disparity between the value number and the earnings number for fast growing companies because the value number is forward looking and will price in all the future growth.

But the earnings number kind of hasn't caught up yet.

And when the growth starts to slow, you'll see that multiple start to compress as well.

So let's take a look at the growth rates here.

So we've got the growth rates between the CY1 and CY2 and you can see that lot of the companies, companies we're seeing some negative growth rates but there's some standout high growth companies here.

Mobile I 48% growth in that year.

We've got REV group about 27% growth and we've got Tesla at 32% growth.

So interestingly Tesla's growth rate is not as high as the other comparable companies or certainly as high as Mobileye. Mobileye's got a significantly higher growth rate than Tesla.

Also the margins, the reason margins are important, they're kind of reflective of the competitive advantage of the company and its competitive moat because generally speaking, the stronger your competitive position, the higher margins you'll have.

And this also means that if you have higher margins, your growth rate is at your growth is more valuable.

So if you have one company growing at 10% or two comers growing at 10% and one of them has margins of let's say 30% and the other has margins of 20%, the company's mar the company with margins at 30% is going to be more valuable because that 20% growth is going to be a at 30% margins, higher margins.

So you do get an interplay between growth and margins.

So your sweet spot is highest growth and highest margins.

And you can see in this comp set Mobileye at a 48% growth between CY1 or 25 and 26 and margins of 20% are better than Tesla's growth rate of 32% and about 17% margins.

So on this basis it looks like mobile I is either undervalued because it's only trading at about 21 times EBITDA or Tesla is overvalued.

And I think given the multiples in all these companies sector and all these companies are significantly lower than Tesla number one.

Number two, because Tesla is enormous and it's actually harder to grow a really, really big company like Tesla compared to some of these smaller companies, I would say that this is suggesting that Tesla is relatively overvalued compared to this peer group because the company with higher margins at 20% higher growth between 25 and 2026 is trading on a lower multiple.

And that indicates to me that that is a better value stock Mobileye than Tesla.

So Tesla is relatively overvalued to Mobileye based on this relative value analysis.

Now of course it does depend on which companies you choose in the trading comps, but when you are looking at a set of comps like this, you do always want to put it within the filter of the company's growth rate and margins.

And generally speaking the higher margins means you've got a stronger competitive advantage.

So that means your growth will be more valuable, but growth absolutely is probably the most important driver of a company's valuation.

So in this case I would say that Tesla looks relatively overvalued.

The problem is that this is not an absolute measure.

So you can't necessarily say for sure that this means Tesla is overvalued, it just means it's relatively overvalued compared to someone like Mobileye. And it could be that Mobileye is relatively undervalued.

So how do we solve that problem of figuring out whether we think there's fundamentally we'd have to buying Tesla at a share price of 250 bucks is too expensive.

So the other approach we're going to take is we're gonna do a discounted cashflow valuation for Tesla.

And I'm got a few pieces of information here.

I've got a um, set of consensus estimates here and what I've done for the consensus estimates, I've actually taken two sets.

One is the old consensus estimates before the recent drop in the four forecast for Tesla's earnings.

And then I've got the updated consensus estimates here and you can see there's been a real decline in the consistent consensus projections for Tesla.

So I'm going to value it on both those bases.

I've also pulled in the financial statements for Tesla for the last three years.

So this is the historical financial statements for Tesla.

There are income statement, balance sheet and cashflow statement.

And then I've also pulled in the most recent quarterly balance sheet for Tesla and I picked that up from our Felix platform.

So if I go to my filings here and I'm just going to see if I can close that.

You can see at the top we have got, if I click on that, that will pull up the 10 K and I've downloaded all the tables and extracted that using the get data feature in Excel.

I'm not going to do that with you because it would just take way too much time, but I'm showing you where this information's come from.

So I've also done that from the Q1 filing as well. So let me just open the Q1 filing because I'm going to pop into these filings later on.

So I've got the Q1 filing and I've got the latest 10 K filing because I'm forecasting on a um, yearly basis I'm going to do the DCF on a yearly basis.

So let me just go to my DCF tab.

We will give you a copy of this first.

So um, I'm now going to come down and we're going to start the DCF.

And what I'm going to do is I'm going to pull in the key numbers here.

So if I go to the key data, what I want to do is I'm going to pull in these numbers from the other sheet.

So I'm going to start with 2022 here for the revenue line and I'm just going to go in and pull it in from the consensus.

Actually I'm going to get it from the financial statements first for the 22 so I'll make sure I get the total revenue line.

There we go. So that's 81.

So that's the first three years of revenue there.

Then for the next three years I'm going to take that from my consensus estimates and what I want to do is I think I've actually got a little scenario choice for the consensus estimates, which is driving this number here.

So I'm going to take the estimate for 2025 and then 26 27.

So I've got three years of estimates here and I've got three years of historical information there too.

Then what I'm going to do is I'm gonna pull in the EBITDA and I'm just going to get EBITDA from the consensus estimates.

So I'm going to take it from the 24 year going forward.

Now there is a bit of an issue with the EBITDA for Tesla.

There's a massive difference between what the consensus estimates are calling EBITDA versus what Tesla are putting EBITDA in their press release.

So I just want to show that because this is a current issue when you're looking at that, if I go to Tesla's press release for their 10 K and I open this, what they will often do in these reports is that they will give an EBITDA number and that's on a quarterly basis.

But if I go right to the very end of the press release, normally what they'll do is they'll give you a what we call a non-GAAP number and I want that for the full year.

So I think these are quarters and I want to try and get to the full year. There we go.

And it here it gives you an adjusted non-GAAP EBITDA number, okay? And they're going from net income to adding back interest expense, no problem adding back tax, no problem adding back depreciation amortization more later because there's some issues with that number and then they're adding back stock-based compensation.

That is an absolute no-no, you should never add stock based compensation back.

That is a real cost to the business.

And some people say well hold on, when you're doing the conversion from enterprise value to equity value, don't you adjust for options there you do.

But those are pre-existing options.

This number reflects the future dilution from future options that you're going to get.

So it's really bad news to do this adding back stock-based compensation because it's a real cost to the business, right? These employees are expecting that value.

So we would never in a discounted cash evaluation add back stock based compensation and really kind of shockingly that also adding it back to the EPS number, which is kind of crazy.

The reason you may see this in an EBITDA calculation is from a credit perspective, if you're looking at the leverage multiple like debt to EBITDA, then it's much more reasonable to add back stock-based compensation because for debt holders you don't care about the stockholders, right? So you just want the priority claim against the business.

But from a valuation perspective that's just garbage.

So I'm going to ignore that EBITDA number because it's just not good, a good thing to add back stock based compensation, it's a real cost to the business.

So that's why I'm taking the consensus estimates for EBITDA.

Then for my depreciation, I'm going to pull in the depreciation number now for depreciation in the financial statements.

This is a a bit of an issue on the cashflow statement you can see that they've got a depreciation number here, which is 3,474 4,667 and then 5,368.

Let's just take a look at the latest year. That's a 2024 depreciation.

Now that number is enormous and if I go to the filings and I go to the 10 K and I go down and I look at the property plant and equipment for Tesla, so the this number you can see the depreciation expense was 4.2 billion in 24, 3.3 billion and 2.4 billion.

So that 4.12 billion for depreciation expense is significantly more than is being added back on the cash flow statement.

Now you're probably thinking well surely isn't that amortization? It could well be amortization.

So let's have a look at the goodwill and intangible assets.

Well the amortization they're saying is 178 million, which is nothing like the difference between their depreciation expense and the full add back.

I think I'm guessing a little bit here, I suspect that number is so much larger because there's been an impairment charge.

So an impairment charge is an unexpectedly large decrease in an asset.

It could be net ppp could be other things as well.

But I suspect that's why that number is so larger because it just doesn't tie to any of the numbers that Tesla have got.

And there was an article in the FT about this a few weeks ago trying to reconcile these numbers and having, they're having problems with it.

There also could be some FX adjustments as well with the balance sheet number.

But what I'm going to do because of that difference, I'm actually going to stick by taking these numbers here.

So I've got in 2022, I'm going to take that 2.42 number.

So let me just go back to my DCF here, I'm going to paste that in And that's 2.4.

And then I'll go and take the 3.3, paste that in and then I'm going to go and take the 4.2 and I'll paste that in as well.

Now the thing is this is in billion so I just need to convert that to millions so I can just do that quickly by taking that and I'm just going to multiply through, I get my right, I've got a bit of a funny keyboard today, so I'll just copy that and then select these three.

I'm going to multiply that and also actually I do want this to be negative so let me just change that to make that minus 1,000.

There we go. Just copy that and then multiply that through and you can see it just changes it to millions which we're working in.

So I've got there. And then for CapEx I'm going to go and pick up the CapEx from the cash flow statement.

So I'm going to come down to the investing section and I'm going to pull in the purchases of property plants and equipment.

So we've got the that I'm not going to make that positive.

Okay, so I'm pull those numbers in.

And then for my working capital I'm going to calculate that from the financial statements.

Now the working capital is really, I should probably rename that and just call that operating working capital.

So this is all the operational items here and I'm going to take the operating current assets and minus the operating current liabilities.

But there's one additional item in Tesla's case where you have a defer long-term deferred revenue.

So these are probably things like customer deposits, which I'm also going to bake into this calculation.

So I'm just going to sum up this and I'm going to go to my financial statements and I'll go up to the balance sheet.

In fact I can only do it for the The 2023 year because I've only got two years worth of the balance sheets.

Let me go to that and I'm going to come to accounts receivable inventory, prepaid expenses and other assets.

And then I'm going to subtract on the liability side, I'm going to pick up accounts payable, accrued liabilities and deferred revenue.

Then I'm just going to hold down the control key and I'm going to pick up the long term deferred revenue as well.

So that's my balance of operating working capital, which is negative, which means they're cash cycle, they are getting cash from customers before they're paying it out probably because they're getting a lot of deposits from companies as well.

Now I've got in my key numbers and now I need to pull in, calculate the key ratios and I need to speed this up a bit so you can see we've got the um, sales growth in there and I'm going to pull in the EBITDA margin.

So let me go and get the EBITDA margin and we've got that from multiple years because we've got those consensus estimates.

Then I'm going to calculate the depreciation as a percentage of CapEx.

Let me go and get that divided by my CapEx number.

So I'm just going to do this for all the historical ratios.

There we go. And then I'll do CapEx as a percent of revenues do that and I'm going to pull that in and I can't do that for more than those years because I don't have numbers there.

And then working capital as a percent of revenues I can do in the last two years.

And there we go. So we've got all the historical ratios in and then I'm going to do some forecasting going forward.

And you can see on the right here I've taken the consensus numbers.

These are hard, these are just fullness from the consensus numbers.

But from 27 through to my end of my forecast, which is 20 20, 20 33, I want to trend down that growth rate.

So I want to trend down the growth rate of 22.5% down to 3%.

Some of you may be, if you are a massive Tesla fan, you may think, oh my gosh we can grow at 20% for eight years.

That's unlikely. You just find it's too difficult. There's limits to the industry size.

And so I just don't think it's realistic, certainly from the investor community. And what we're trying to do is here is understand how the investor comm community thinks of Tesla.

The investor community won't be baking in eight years of 20% growth.

It's just super unlikely they will expect growth to decline.

And I'm going to assume because we're gonna do a steady state calculation in 2033, that that steady state calculation is at 3%.

And all this does is calculate the linear, it takes the difference between 22 and a half and 3% and then calculates how many periods there are between those two years and then calculates where we are within the period.

And if you are halfway through the period, it will take 50% of that difference between 22.5 and 3%.

And so you can see you get a nice linear trend.

And the nice thing about doing it this way is that if you change your assumptions for your consensus estimates, this will automatically change in the model.

That's why I've put that in.

You could do that as hard numbers but it's kind of funded to do to something automated like that.

You can make it more complex by using a geometric calculation, but I'm not going to do that here.

I want it to stay simple.

So we need to make some assumptions here and you often start to see some margin compression as the industry gets more competitive.

So we're seeing growth slowing and normally what I'd expect to see is some margin compression. So I'm going to make this 16, 16.3 here and then I'm going to dip it down.

I'm not going to be too rough to 15% and I'm going to keep it at 15% for the rest of the forecast. So I'd expect to see a little bit of margin compression.

And then we've got some assumptions about the CapEx spend.

So this is a depreciation of CapEx.

Now let me do CapEx as a percent of revenues first.

So that's 11.6 and I want to, I'm going to make it 11% to 25 because I'm assuming there's still quite a lot of investment.

But again, as the business starts to grow, you kind of want to start right as the business starts to see its growth slow down, you would expect to see a a, a relatively less aggressive CapEx spend.

So I'm just going to trend this down a bit.

I'm assuming most of the growth has gone through this could be a little bit too low here but I'm really trying to reduce it down to a steady state here.

So let me just calculate, I think I may have got too many.

Yeah, I'm actually going to keep that at 11.6 for a number of years because if you think the growth doesn't really slow until I'm going to keep that to 27, 11 0.6, 11.6, 11.6, there we go.

And then after 27 in 28 I'm going to reduce it to 11% and then after then you can see when the growth starts to slow, I'm going to make that 8% and then I'm gonna drop it down to 5% and then I'm going to keep it at 3% for the last three years.

So that just is, so you want to really think about the CapEx and the growth rate.

Often you see you have to invest in CapEx first before you get growth.

So usually you see a little bit of disconnect between the sales growth and the CapEx in terms of timing.

CapEx first followed by growth and that means your CapEx is likely to start to slow down before your growth rates because it takes time for that to factor in.

So that's why I've reduced CapEx as percent of revenues and then depreciation is percent of CapEx.

Now normally as a company reaches a steady state, you'll find that depreciation as percent of CapEx will go to a a bigger and bigger percentage.

So what I've done here, I'm going to keep in a minus 36% because we've still got pretty good growth there certainly for those three years.

And then I'm going to start to increase it.

So I'm going to make it minus 40% because, and when you reach a steady state, it means that you're not increasing your fixed assets very much.

So your depreciation as percent of CapEx should rise because you don't want your net PP&E to grow by more than your sales growth when you hit your steady state.

So I'm going to increase that percentage up to a, a high point of 90% in 2033

In fact I've just slightly off, let me just recheck this.

So I've got, yeah, I've got one more 36% and then I've got minus 40 and minus 50, minus 60, minus 70 I made made that a little bit 50, 60, 80.

There we go. 50, 60 minus 80 and then minus 90, there we go.

So this means what will happens by net PP&E growth will slow down and that will also reflect sales growing, sales declining, the sales growth decline.

And then for working capital as percent of revenues, I'm just going to make this 8.1%.

I'm assuming that that dynamic doesn't change.

And then for my effective tax rate, I'm just going to calculate what it was in the 2024 year. If I go to the financial statements and I'll go to the income statement, I'll take the tax expense in that last year and I'll divide it by the profit for tax.

And you can see that it was about 21 point, 20.4%.

I'm going to make that 21% going forward. So I'm just make the tax rate, um, 21%.

So I'm just going to make that 21% there. There we go.

And I'll just copy that, right? So that's 21% and that's what we'll calculate when we do our free cash flows.

So we've got all our assumptions in and we're expecting tests to grow strongly for about the next three to four years and then steadily decline to about a um, a 3% growth rate.

By the way, if people have any questions then please don't hesitate to put any questions in.

I will answer them as I go along.

I'm in a bit of a time pressure to get this done in half an hour.

So then I'm going to come up and I'll just do my revenue forecast, I'll take my revenue growth and then I'll multiply that by last year and then I'll take my EBITDA margin, take the assumption times the new sales number and then I'll copy that to the end of the forecast 2033.

And then I'll do the same.

My CapEx, I'll do first's a percent of revenues, so I'll just take the forecast revenues in that year and then depreciation is a percent of CapEx, let me do that.

And then the operating working capital I'll take as a percentage of revenue.

So I'm just going to forecast out these Q numbers, you don't need a full balance sheet here.

And then the final thing, I do want a little bit of a metric for net PP&E.

So I'm just going to put the base net PP&E in 2024.

So let me go and get net PP&E in 2024 and I get 38,836 or 35,836, sorry.

And then I'm going to assume no sales of assets.

So this means my net PP&E will grow by CapEx and then fall by depreciation.

And the reason I'm doing this, I don't need this for my DCF all, I'm going to do this as a checking ratio and you can see we've got some checking ratios down here.

So we've done our key numbers and you can see you don't need a whole set of financial statements, you just need the key items that the operational business needs to operate.

So I'm going to pull in some of the key ratios here.

I'm going to pull revenue growth in.

I'm just going to get that from the assumptions, my EBITDA margin, I'll get that from the assumptions two then operating working capital is a percent of sales.

That's going to be from the assumptions.

And then net PP&E divided by revenues.

And this is going to be just some checking ratios here.

You can see as we go towards 2033, which is our steady state, we are seeing revenue growth declining.

We're starting to see a little bit of multiple compression.

We're assuming there's going to be more competition.

The opening working capital cash cycle doesn't really change but you can see net pini is percent of sales.

You can see it is decreasing.

But what we're trying to do here is keep that trend relatively flat at the end and we are seeing it as kind of a lower percentage of sales towards the end.

So now we can actually do our free cash flows.

So I want to calculate the maximum amount of cash that can be extracted from Tesla.

And what we do is we start with, and this is done on an enterprise basis, so this is before any costs of financing.

So we're kind of assuming that the business has no debt or any financial assets.

So what this means is that our EBIT would equal the profit before tax.

So my EBIT here and I've simplified this a little bit, I'm going to take as my EBITDA less the depreciation.

So I'll just subtract that and you can see that's my EBIT number and let me just put my formula out there.

And then I've got my unlevered net income.

So if that is the profitable tax, if the company has no financial assets and no debt, then the notepad number is going to be the 9,943 times 1 minus the tax rate.

And the tax rate I'm going to use is just that effective tax rate because you're taxing all income, you're not taxing marginal income, you're taxing all income.

So notepad stands for net operating profit off tax.

It's sometimes known as EBI at earnings before interest after tax.

Or my preference is the unlevered net income. It's what net income would have been if the company has no financial assets and no financial liabilities.

It does have those, but we'll deal with that when we cross from enterprise value to equity value.

So that gives us our unlimited net income.

And then I'm going to add back the depreciation I've forecast up above.

And then I'm going to subtract my CapEx that I've got above nuclear to change the signs of these.

And then for the operating working capital, you always take the prior year minus the current year. And because it's negative, this is actually a source of cash for Tesla.

And the reason it's a source of cash for Tesla is because people are making deposits on buying their cars, make a deposit, then Tesla manufactures the car and then it delivers the car to the customer and then the free cash flows. If I just do a quick sum there, oh, I didn't mean to do that. That was if I come out of my, I just hit my magnifier there.

There we go, there we go.

That's it's a keyboard shortcut that I did not want to do.

So I'm going to sum up the items there to get my free cash flow there. So I've got my free cash flow 653.

That's quite low because you've got a massive slug of CapEx coming out.

And then I'm going to copy this across to the end of the forecast and you can see it does dramatically start to increase partly because the EBIT's increasing as well there too.

Then if I come down to my terminal value, so I've got my forecast free cash flows here from 25 to 33. So that's our forecast of the free cash flows.

But test is not going to stop being valuable after 2033.

So then what we're going to do is we're going to use a terminal value calculation that will estimate Tesla's value from beyond 2033.

And we are going to assume that the long-term growth rate for Tesla is going to be that 3%.

So I'm going to pick it up from that 3% in our assumptions above.

And then for my WACC calculation, I've actually taken this from Felix, there's a little WACC calculator.

So let me just show you where this comes from.

So if I go to Felix and the valuation, there's a little WACC calculator, we've got a 10 year US government bond, I've made an estimated risk of about 5%.

You can do like a 30 year average, but you get some pretty high numbers, particularly in the current markets.

So I'm actually going to keep it at 5% suddenly that's what a, around what a lot of banks are using.

And if I take a company's beta and the beta is the regression of the returns on the stock versus the returns on the market above the risk rate, you can see you've got a really high number and that's because of the gyrations in the recent stock price.

So instead of taking the company's beta, I'm going to take the industry better and that gives you a more reasonable estimate and we've got a WACC of about just over 9%.

So if I come back to my numbers, my cost of equity and I'll show you the calculations, I'll take the base, the risk rate, which is the government bond and I'm going to add the risk premium to that and then multiply it by the beta. And that gives me the cost of equity.

Then for my cost of debt, I'm just going to take that benchmark 10 year government bond rate, which is the risk free rate and I'll add the credit spread for the credit rating of the company and I get a cost of debt 5.3%.

And then for my WACC I'm going to take my um, cost of debt and I'll times that by one month's tax rate.

The reason I'm doing this is that I haven't taken the tax yield on interest in my free cash flows.

So I need to do it in a discount rate, that's why I'm doing it here.

And I'll multiply that by the amount of debt financing in the capital structure, which is about a quarter.

But then I'll add that to the cost of equity financing and I'll multiply that by the rest of the financing, which is 1 minus the debt financing and that will give me my weighted average cost of capital, which is about 9.1%.

And I've named that sell WACC.

So that's how I've calculated my WACC number and I'm kind of back to my DCF and if I just do equals whack, that should pull in that number from the other sheet and it has done so 19 minutes to get this finished and now I'm going to calculate my terminal value.

So the terminal value is like literally it's kind of everything after 2033.

So I'm going to take my free cash flows in that year and I'm going to use the golden growth model.

So I've gotta actually project it out to 2034.

So I'm going to multiply that by 1 plus the long-term growth rate of 3% and then I'll divide that by the cost of capital WACC minus the long-term growth rate.

And what this does is that this is just a simplification mathematically of valuing that cash flow of 27 billion to infinity and beyond.

So that's kind of what's going on there.

It's just valuing that cash flow all the way to infinity and beyond.

So then what I'm going to do is I'm going to come down and calculate the implied multiple.

Now the problem is that that number there is a mid-year number, so I'm going to take that and push it out to the end of 2033 because it's a cashier number and you do that when you're moving value numbers.

You don't use the growth rate, you use WACC because investors expecting a 9.1% return.

So I'm going to move that out by half a year, take it to the PowerPoint five and then I'm going to divide it by EBITDA in that final year. So I'm going to go and get my EBITDA number at the top and I get about 11.4 times.

Let me just change the color for that.

So that's about 11.4 times multiple in the final year there.

Okay, so we've got our little forecast here of our EBIT and our NOPAT.

So let me just double check these numbers here and this all looks pretty good.

Let me just double check. I have done everything.

So that is yeah, terminate five.

Yeah, that's all good.

Okay, so once we've got the free cash flows and we've got this value of Tesla beyond 2033, I now want to discount this back to today and I'm going to value it as at the 25th of April.

And this means I need to do some fairly detailed discounting.

So the free cash flow date here in the first year, I'm not going to get a whole of 2025 because if we're valuing it in April 25, we're only going to get from April 25 to December 31st.

So I'm actually going to use the average function to take the average of the year end date and the valuation date.

And that means that first cash flow is going to fall in the middle of those two days April 28th.

Then I'm going to do the average of the year end because beyond that time I'll just take the average of the two year end dates.

So we kind of get back to normal.

So it's just that first year, which is a bit tricky.

So then I've copied that to the end.

Then the next thing is we need to calculate what percentage of the year's cashflow we get.

And in most years it's going to be 100%, but in the first year, if we're valuing it to April 25th, we are not going to include any pre-existing cash flows to date because we're assuming that they're in the cash balance and we'll deal with that later on.

So the percentage of the year, I'm going to take my year end date minus my valuation date and that will count the number of days between those two dates.

And I'll divide that by the number of days in the year 365.

So in the first year we're only going to take 68.5% of the cash flows, but everything every year after that will take a hundred percent. So I'm just going to make that a hard number a hundred percent for the rest of the forecast period.

And then I'll calculate the free cash flow received by taking the free cash flow multiplied by the 68.5 and then I'll copy that right ready for discounting.

So now I'm ready for discounting and we're going to build a little discounted model here.

So the days that we need to discount, we're going to calculate based on just a day count here.

So we're going to take the date of the cashflow and then we're going to subtract the valuation date and I'll absolutely reference that.

So it's 125 days and then if I copy that right, you'll see the days that we've got a discount go up significantly.

Then the discount factor.

So the discount factor, you can think of curve as being equal to if you want to get your present value is equal to the future value divided by one plus the WACC to the power of the year number.

Well another way of showing that is that your present value is equal to the future value times one divided by one plus the WACC to the power of the year number.

And that last little bit of the formula is what I'm going to be using my discount factor and people like to do this because it means on a paper printout you can re reverse engineer the discounting.

So I'll take one plus the whack there and I'll take it to the power of the days we want to discount divided by the days in the year and that will be my discount factor.

So you can see in the first year we're going to just take a dollar and we'll only get 97.10 cents, but if I forecast that out you'll see that that dramatically lowers over time.

So a dollar received in 2033 is only worth 49.10 cents today.

So we've got that. Then I want to just quickly do the sum of the free cash flows here.

Sorry, I need to do my present value of my cash flows first.

I'm a bit right about time.

So I'm going to take my free cash received, I'll multiply it by the discount factor and that will give me the value of the cashflow in today's money.

And then I'll sum up the free cash flows and then I'll take the present value of the terminal value as well and I'll multiply that by the discount factor in the last year.

So that gives me the value of the cash flows during the period.

This gives me the value of the company in the terminal year and added together these give me my implied enterprise values.

So you can see that's a significant drop to what we were looking at in terms of the current market capitalization.

Then I'm going to do the bridge.

And for the bridge I want to take the most recent balance sheet and we've had a quarterly balance sheet that's been published.

So I'm going to go to the balance sheet here and I'll go to the quarterly accounts to the right and I'm going to in the most recent one, which is the left hand column.

And I'm going to take the cash and cash equivalence. So I'm going to add the value of the cash and cash equivalence add the value of the short term investments. But they've also got some digital assets on the balance sheet and the digital assets, that 951, they've recently changed the accounting.

So historically corporations digital assets on the balance sheet were treated as intangible assets.

So if the value went up, you didn't revalue them.

But that's changed because now in Tesla's case, if I go to digital assets, let me go to the 10 K, I think it will be in there because they do have a section on the digital assets.

Let me just find out here.

You can see this is, yeah it doesn't actually.

Yeah, there we go. New standard of crypto assets and this means they're marked to market.

So that's been quite a big change in the accounting.

So now mark to market and then we need to deduct the financial liabilities.

So I'm going to go and pick up my current portion of debt there and then I'll take the long-term portion of debt as well.

So I'll go to the debt and finance leases. There we go, the long-term portion.

And once I've got the long-term portion, I've also got some redeemable non-con controlling interests. This is where they've got to buy out the minority interest.

So I'll go to the redeemable non-controlling interest, 6 to 2 million.

And they also have regular non-con controlling interests, which is just a minority stake in one of the subsidiaries.

That's why I'm removing that.

And then I've got my equity value and the equity value is going to be the implied enterprise value.

I'm going to add the assets and then I'm going to track the liabilities and that will give me my implied equity value.

Then I've got to quickly do a dilution calculation.

I'm going to go and get the shares outstanding, the most recent shares outstanding.

So let me go to the 10 Q and I'll go to the front page and I want to get to the shares outstanding, which I'll copy paste that in and I'll divide by a million.

There we go. And I'm going to pull in the RSUs.

Now the RSUs, they often won't give you the RSUs in the 10 Q you have to go to the 10 K and I know for a lot of people that makes people really upset but unfortunately that's just life.

These are in thousands.

So when I paste them in, don't forget this is really easy to do that you've got to divide by a thousand to make them millions to make them consistent with the number above.

And then the pre-op option share price is just the implied equity value divided by the shares outstanding plus the RSUs.

So RSUs just stand for restricted stock options.

So they're just like straight share awards, usually time-based, but they do have some options.

And these options are largely Mr Musk's options.

So I'm going to go again to that 10 K filing and I've got this huge option number and that again is in thousands. So I'm going to divide that by a thousand to make it into millions.

And then I've got a strike price of 40.41 and I'm going to put that in. Then I'm going to do a little net new share calculation and we're using the eng, the treasury stock method.

So we'll take the implied share price 102 minus the strike price. So this means these options and the money because if you buy stock of 40, you could immediately sell it for 102 and as the percentage of the capital value that gives you that ratio can be multiplied by the number of options.

So it will calculate the dilutive effect of the options, assuming any cash received from the options exercising is used to buy back stock.

So that's new share net new share some options.

So then I've got the diluted shares outstanding, which are going to be the shares outstanding plus the RSUs plus the net new share some options.

And I get 3,448.

And the implied share price is going to be the implied equity value divided by the diluted share outstanding.

And I get a tiny 96 number there.

And that compares to the current share price, which yesterday was about 259.5.

So that suggests it's overvalued really significantly based on this forecast. And you've gotta remember this is based on this forecast.

If you don't believe this forecast, you won't necessarily think that's overvalued.

And you can see that the share price has come off from its highs already dramatically from about just under 500 down to around 250 here. And it has been as low as 100 not that long ago.

Now I have got two sets of consensus estimates here and I'm currently taking the new consensus estimates. So these are using the new consensus consensus estimates there.

And I could always do a little scenario here.

I've got done a little scenario where I can take the numbers, but I'm just in conscious of time.

Well, let me just try this. I'm going to take the 2033 revenue.

Let me go and do that. So I'll take the 2033 revenue and then I'll take the 2028 revenue growth.

So this is just 2028 revenue growth, there we go.

And then the 2027 free cash flows. That's that first we go free cash flows in 2027.

So I'm just taking metrics in different years.

And then the terminal value I'm going to take at the end of the terminal value.

So this is the undiscounted terminal value and then the implied enterprise value, which I'll take up above here.

And then the implied share price, I'll take from the 96.4.

Then I can just do a quick data table here and the Rome at cell is the scenario choice and then I'll choose, okay, so you can see that these two different scenarios you can see that in the forecast scenario, actually the check price has gone upwardly.

And the reason I think is because the actual forecast revenues, and this is something you've got to be really careful about, you can see that this is the old forecast, but the new consensus estimates is actually, although the first three years are lower, actually year five is higher.

Now be a bit careful here because often what you see is three years out.

The number of research analysts who will be covering the stock were giving three years estimates will be much lower than the number giving one and two year estimates. So the quality of the consensus estimates will deteriorate typically over time as less and less research analysts cover the stock.

But it's pretty clear to me that just on a fundamental level, if you think that we'll take the consensus estimates for the first three years and then we'll see the growth in Tesla declining, it really looks overvalued.

Now what we could do is we could say, okay, let's say we increase this long-term growth rate to say 4%. That's going to change a number of things.

The decline in the revenue growth is going to change, number one.

Number two, the terminal value will increase.

That's quite a big change. That 1% increase, that 1% increase in the terminal of value.

You can see that that's grown. The implied share price 213.

But if you kind of look at this, it has to be pretty radical.

You need to be a bit careful making this too high because it can't be higher than the WACC and my WACC is 9.1%, and I'm just looking at this 137.

So it becomes quite challenging to make it say 6%.

Now you're going to get some really huge sum of values.

It's really starting to be hard to justify even the $259 share price.

If I make it 7%, we're getting quite close to the WACC.

So that would, you're going to start to see some really crazy results if you're not careful.

So in order for us to be comfortable for Tesla to be valued at 259 bucks, it kind of means that it still needs to be growing by 7% in 2033.

And I suspect some of the really pro Tesla owners will actually agree with that. They would say, yeah, this is, this guy's changing the world, this company's going to grow really strongly.

But I do think that that's aggressive.

I think that in a terminal value situation, valuing company growing at 7%, that is aggressive.

So I do think relatively Tesla looks expensive, but absolutely even to justify the current share price after this fall, it's really hard to justify these numbers.

So I, there's also this issue of the EBITDA number and the EBITDA number that they're, they're using, I think that that's a big issue because they're adding back stock-based consum, stock based, stock-based awards.

And that's about another 1.8 billion of earnings. And that of course would make a massive difference to these numbers.

I mean, if you changed your, your consensus estimates up by another 1.8 billion, it would make a massive difference to the valuation.

So I do think there is some kind of uncertainty with the Tessa valuations. Certainly the current valuations, I think it's, it's really hard to justify and I think if you're using that EBITDA, they've got in their forecasts or in their press release, it's going to be really challenging.

Now if you want a copy of my model, that should be in the link to the page number one.

And I'm actually going to update it.

So for my team, I have actually seen in the answer, there's one thing I'd like to change.

So we are going to update that model.

Secondly, I think there's a discount code, you get a 50% discount to Felix.

So you can do this all yourself and make your own decisions using our data tools and you can get all the learning access as well.

But I hope you've enjoyed this little webinar on Tesla and remember that the blog and the discount codes are in the comments.

Okay? So you will be able to get the Excel file in the blog. There will be a link to it in the blog, it will be on our website.

So I'm just going to make sure that that's updated though.

And thank you very much for watching.

I hope you have a fantastic weekend.