What is TSLA's Intrinsic value?

Tesla Inc (TSLA) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Tesla Inc's estimated intrinsic value ranges from $21.76 to $302.61 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $302.61 -9.6%
Discounted Cash Flow (5Y) $172.80 -48.4%
Dividend Discount Model (Multi-Stage) $171.21 -48.8%
Dividend Discount Model (Stable) $98.80 -70.5%
Earnings Power Value $21.76 -93.5%

Is Tesla Inc (TSLA) undervalued or overvalued?

With the current market price at $334.62, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Tesla Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.47 0.7
Cost of equity 6.0% 8.8%
Cost of debt 4.0% 4.5%
Tax rate 16.7% 22.4%
Debt/Equity ratio 0.01 0.01
After-tax WACC 6.0% 8.8%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $97,690 (FY12-2024) to $267,168 (FY12-2034)
  • Net profit margin expansion from 7% to 25%
  • Capital expenditures maintained at approximately 11% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $173 $547,769M 87.7%
10-Year Growth $303 $965,862M 79.6%
5-Year EBITDA $117 $368,697M 81.7%
10-Year EBITDA $200 $634,821M 68.9%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.4%
  • Long-term growth rate: 4.0%
  • Fair value: $171.21 (-48.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.8% (Low) to 6.0% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $24 to $174
  • Selected fair value: $98.80 (-70.5% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $4,365M
Discount Rate (WACC) 8.8% - 6.0%
Enterprise Value $49,843M - $72,687M
Net Debt $(8,823)M
Equity Value $58,666M - $81,510M
Outstanding Shares 3,221M
Fair Value $18 - $25
Selected Fair Value $21.76

Key Financial Metrics

Metric Value
Market Capitalization $1077798M
Enterprise Value $1068975M
Trailing P/E 169.25
Forward P/E 114.78
Trailing EV/EBITDA 9.45
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.01

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $90.78
Discounted Cash Flow (5Y) 25% $43.20
Dividend Discount Model (Multi-Stage) 20% $34.24
Dividend Discount Model (Stable) 15% $14.82
Earnings Power Value 10% $2.18
Weighted Average 100% $185.22

Investment Conclusion

Based on our comprehensive valuation analysis, Tesla Inc's weighted average intrinsic value is $185.22, which is approximately 44.6% below the current market price of $334.62.

Key investment considerations:

  • Strong projected earnings growth (7% to 25% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.01)

Given these factors, we believe Tesla Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.