Equity Valuation

Abstract

The purpose of this dissertation is to determine the value of one Tesla, Inc. share as of 31 December 2018. An analysis of the automotive and energy generation and storage industry is presented, together with a detailed analysis of Tesla’s business and financial performance. For Tesla’s valuation purposes, the financial items are forecasted for a period of 10 years, i.e. from 2018 to 2027. In order to determine Tesla’s value, it is used the DCF approach, with the WACC as the discount rate. Additionally, the multiples method is also prepared as a complementary valuation to DCF. Based on the DCF approach, the achieved Tesla’s price target is $229.95, with a downside of 27.62% when comparing to the actual market share price $317.69, on 31 December 2018. Therefore, it is considered that Tesla is overvalued. In addition, a sensitivity analysis was completed to variations on WACC, terminal growth rate and total operating costs. Finally, the estimated Tesla’s share price is compared to the valuation done by J.P.Morgan, which recommended price target is $216 on 31 December 2018. To conclude, both valuations yield