From Barron's, October 6:
The company makes electric vehicles, has an energy storage business, and invests in artificial intelligence. That makes figuring out what its stock is worth difficult.
Even some begrudging bears will admit Tesla is more than a car company.
It makes electric vehicles, has a fast-growing energy storage business, and invests in artificial intelligence for applications such as self-driving cars and humanoid robots.
The potential is huge—and makes figuring out what Tesla stock is worth difficult.
In a Tesla-like situation, investors can turn to a sum-of-the-parts, or SOTP, analysis, which tries to value each of the businesses separately and add them together to arrive at a valuation for the whole. Typically, SOTP valuations rely on valuation multiples from similar companies to help with the process.
There are many SOTP valuations for Tesla stock floating around the Street. Reading them all at once, frankly, is mind-bending. They still can help frame the Tesla valuation debate, though.
Starting with EVs, analyst valuations for Tesla’s auto business range from $40 billion, less than either Ford Motor or General Motors , to $660 billion, more than two times Toyota Motor . (Those two are from analysts who rate Tesla stock Buy.)
Part of the problem is how analysts slice and dice the car business—some include revenue from Tesla’s EV charging network and recurring sales of Tesla’s full self-driving software.
Wall Street doesn’t agree on how many cars Tesla will sell, either. Analysts project roughly four million to eight million by 2030. Tesla is expected to sell about 1.8 million in 2024.
Valuation multiples vary, too. Some analysts value the car business using Apple ’s multiple. Apple, like Tesla, sells hardware, software, and services to a loyal customer base—but car stocks typically don’t trade like Apple does. Apple shares trade for about 30 times estimated 2025 earnings. Ford stock trades for six times.
The number of variables and valuations is a reason why Future Fund Active ETF co-founder and Tesla shareholder Gary Black doesn’t like SOTP models.
He prefers to project earnings per share and used a valuation multiple based on how fast Tesla earnings are expected to grow. Stocks in the S&P 500 typically trade for about two times their EPS growth rate. With S&P 500 earnings expected to grow close to 10% in the coming years, the PE ratio is 20 times.
With that thinking, Tesla’s car business could be worth $100 a share. That is based on earning $5 a share from cars in 2030 by selling about five million EVs.
That is only one part of the problem for Tesla. There is still the rest of the company to value. Tesla’s energy storage business is booming. The company deployed 6.9 gigawatt hours of battery storage in the third quarter, enough to power some 700 U.S. homes for a year, up about 73% compared with the third quarter of 2023.
Street valuations for the energy storage business range from $50 billion to $150 billion. For context, power generation equipment supplier GE Vernova and renewable power generating giant NextEra Energy are valued at roughly $70 billion and $170 billion, respectively.
Then there are the nascent AI businesses. Everyone on the Street agrees robotaxis could be huge, but Tesla hasn’t completed a single driverless cab ride. Tesla is also using AI to train labor-saving humanoid robots.
Cathie Wood’s ARK Invest values self-driving technology at about $4 trillion and projects Tesla will be generating some $240 billion in robotaxi earnings before interest, taxes, depreciation, and amortization, or Ebitda, by 2029.
That is the highest estimate out there by a mile. “It’s a supply model,” Black says. “It doesn’t consider demand uptake.”....
....MUCH MORE
Our thoughts on the robotaxi, last seen in October 2's "Tesla sinks as Q3 deliveries fall short" (TSLA)":
...Deliveries will be in-line this month and the next few months and the robotaxi unveil will be written up as a bust. The people who write the headlines hate Elon Musk and nothing he does will ever, ever change that. The financial question is: will the self-driving taxis be contributing to sales and earnings in two years?....
For what it's worth the deliveries "miss" was
...Tesla reported 462,890 deliveries and 469,796 vehicles produced in Q3 2024. Analysts, based on FactSet StreetAccount estimates, had expected 463,310 deliveries for the quarter ending September 30.
Missed it by 420 vehicles.
