$Tesla Motors(TSLA)$ For DCF analysis, the discount rate generally refers to the interest rate used to determine the present value. 5% is a high number for interest rate alone. I don't agree with putting a risk factor on the discount rate. Is Tesla riskier? Sure. But there is also more upside. People should use a DCF model to understand potential long term value, and then separately look at upside and downside risks.
"SPY returns 9% historically, so Tesla deserves a risk premium to SPY."
TSLA, since inception, has returned 19,000% over 15 years.
"But by using an artificially low discount rate"
Assuming other assumptions turn out to be on target, using a 10% discount rate means your model would be off 5+% annualized.
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