Real analyst supposedly uses discounted cash flows. As it turns out, the dividend discount model is incredibly flexible, if one relaxes some of the assumptions. It can be used to model even Tesla. The numbers aren’t pretty.
first some fanciful assumptions. I assume that Tesla can grow sales at a compounded 50% a year for the next 5 years. This Tesla would achieve just over $53 billion dollars in revenue in 2022.
What I have relaxed. That Tesla makes money in year 1 through the next 5 years at the promised 10% profit margin.,
I also relax that they, Telsa, payout of 45% of their earnings, which btw the way is the lower quartile of companies in the S&P 500. (yes i have the data for that but it is irrelevant) Telsa won’t make money for a couple of years, so they won;t make a payout. Even if they did, Musk has promised to reinvest.
What I also relax is that telsa will not dilute shares, which given its voracious cash needs is also being generous.
and the below is where it would get us.
in 2022 Telsa would be making $32 dollars a share and paying out $14.48 cents a share.
I make another assumption, this not flattering to Telsa, but wholly realistic since by then the market would be flooded with EVs. I do not assume that that would lead to tesla’s demise. but that its growth miraculously flattens to GDP (2%) forever.
What would those earnings be discounted to today in this make-believe world? $117 dollars. The growth value of Tesla would be worth just $25 dollars. Of course, though it is actually zero.
What noise investors and traders don’t seem to however realize is the further out into the future Elon Musk make believe earnings are, the less they are worth. We can play around with the discount rate, growth years, and investors risk acceptances. Some people though want a model. I happened to be working on this for another project and thought I would share.
Elon Musk is playing a waiting game of attrition. He’s blown away the shorts, but will the absurdity of this project not eventually reveal itself?
***Btw, how realistic are those earnings estimates.
The highest eps price target in yahoo is $2.85 cents on Yahoo for 2018. Next year.
Mine was $6.36 cents, though I fancifully assume again no dilution and that Musk pays $2.86 cents to investors for their patience.
But how about further out, say 2021. Evidently, there are three clairvoyant analysts that think Tesla could make $18.12 cents per share. On what share basis that is I have no idea. My numbers though on flat shares were even more optimistic, at $21 dollars and 45 cents. I even had the temerity to think he could pay out, through dividends or stock buybacks, $14.48 cents to investors.
Musk andTesla, with the help of Fidelity, Adam Jonas and a band of other supporters, has been able to continue his fraudulent masquerade of a company. Telling people that holds no currency. Providing models hold no currency either, but since it took me little effort to adapt my project to reveal this, i figured I might as well put this on the record.
One last thing, it is clear Musk probably violated securities law regarding his projections for Model 3 production. As the Wall Street Journal attests, Tesla is not near mass production but counting on the government to do its part has failed the integrity of the fair markets in the past and it will do so again. It did so with Solar city and Tesla.
I have no plans to post regularly , but this time i couldn’t help myself.
***correction, typo on my model. I did not go any further than 5 years out than the analyst consensus