What's Tesla Really Worth? Now's the Time to Find Out. - 7investing 7investing
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What’s Tesla Really Worth? Now’s the Time to Find Out.

How much is Tesla's stock really worth? 7investing CEO Simon Erickson will be answering one of investing's biggest questions this week.

May 6, 2024

Tesla (Nasdaq: TSLA) is one of those unique “battleground stocks”. People either love it or hate it…and quite passionately!

The financial media is also manic depressive when it comes to coverage. One week, they’re excited about how AI and electric vehicles will be trillion-dollar markets and that Tesla is well-primed to accelerate into both of them. The next, they’re reporting on Elon Musk’s recreational drug use, failures at Twitter, and quarterly deliveries coming in far short of expectations.

Investors are understandably confused on what they should be paying for Tesla’s stock. Shares have traded hands for a low of $138, a  high of $300, and all points in between during this past year. If you ask investors what they think the stock is actually worth, the results are similarly all over the map.

So it seems like now is the right time to address Tesla’s valuation. To sort through all of the uncertainties, the optimistic highs, the pessimistic lows, the politics, and the personalities to come up with a objective opinion of what Tesla’s stock is worth.

Determining that intrinsic price per share will once again include a discounted cash flow valuation model. I’ve previously built DCFs to support my claims that the small satellite launcher Rocket Lab (Nasdaq: RKLB) is a significantly undervalued and is worth $22 per share, that the South Korean online marketplace Coupang (NYSE: CPNG) is fairly valued and is worth $19 per share, and that the digital advertising platform The Trade Desk (Nasdaq: TTD) is moderately overvalued and is worth $62 per share.

(Note: We include conviction ratings for all of our former 7investing recommendations, ranging from “Strong Buy” to “Potential Sell”. You can our full list of conviction ratings and get your first week of 7investing for just $1 by clicking right here.)

Yet Tesla’s an entirely different animal. This is one of the most complex companies in the market, led by one of the most innovative people on the planet. Tesla is not only a world-class supplier of electric vehicles, but is quickly becoming a leader in AI, solar power production, battery storage, and a half dozen other businesses as well (which includes flamethrowers and tequila).

It would be nearly impossible to nail down Tesla’s valuation to two decimal points without admitting its limitations. There are a large number of moving parts and an ever larger number of uncertainties.

Some of these uncertainties are financial or operational and are largely within Tesla’s control. Such as how it will raise capital to fund its Gigafactory expansion or how quickly it can introduce new models and ramp their production.

Others are market-driven and can’t be directly controlled, though they can certainly be influenced. Such as how many Teslas will sell in China or how much people will pay for the Cybertruck.

And other uncertainties lie outside of Tesla’s control. Such as government subsidies to stimulate the demand for electric vehicles. Or Elon being forced to step down as Chairman due to “funding secured” comments on social media.

But even with the known-knowns, known-unknowns, and unknown-unknowns, it’s still worth the effort to put a stake in the ground and take a best-guess at Tesla’s intrinsic valuation. It will us help to calibrate expectations, and how those might currently be influencing its extremely-volatile stock price.

I’ve just begun my Tesla valuation adventure this morning. As before, I’ll share the initial DCF and price target as a free 7investing article. Though the real fun is taking place in our Community Forum, where I’m sharing all of my inputs and assumptions and will be updating everything several times per year.

Here’s a link to join our 7investing Community Forum. I really enjoy the opportunity to dive deep into several of the market’s most innovative companies, and to share my insights and conclusions that will help to guide your investment journey.

Looking forward this week to seeing what’s under the hood for Tesla.