Tesla, Inc. (NASDAQ:TSLA) has been a notoriously expensive stock for most of its history. It has traded well above 100 times sales in the past, today it trades at nearly 100 times earnings. Nobody doubts that Tesla has succeeded in becoming profitable, but still, some investors think the stock is overpriced. Tesla does trade at high multiples, but its growth is also very strong. In this article, I try to settle the Tesla valuation question with a discounted cash flow (“DCF”) model. Ultimately I arrive at a $825 valuation, giving it slight upside to today’s price. However, I rate the stock a hold rather than a buy, due to concerns about its accounting.
Competitive Landscape
Before getting into my analysis of Tesla’s fair value, I have to take a look at the company’s competitive position. In a few paragraphs, I will make a revenue growth estimate for Tesla that is above EV industry averages. A company needs a solid competitive position in order to out-grow its industry, so we need to establish Tesla does have a superior market position.
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