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Tesla Motors Inc
Recommendation: Buy
Ticker: TSLA (NYSE)
Price: $153.00
Price Target: $200.00
Highlights

BUY recommendation based on financial strength and over-valued stock price: We recommend buying the company’s shares based on Tesla’s
expected exponential growth. The value of Tesla’s stocks have been driven up by investors who are confident in the direction the company is headed.
The company’s recent performance and our prediction of the company’s overall financial growth indicate that that value of the company will increase
over time and that the valuation of the stocks will be an accurate representation of the valuation of the company.

Weighted Average Cost of Capital: Tesla’s WACC was calculated to be 9.77%, a rate of return that investors have seen as favorable in valuing the
company. However, Tesla’s capital structure is lacking when compared to their optimal capital structure. The company is more risky because it is
heavily financed by debt, and they must work towards lowering their debt-to-equity ratio to achieve their optimal capital structure. A more accurate
representation of the firm’s value is the enterprise value. A value of $14.76B includes Tesla’s debt, and is an alternative method to simple market
capitalization.

Margin Drivers: With a 22% gross margin in the second quarter of 2013, Tesla is on track to reaching a 25% gross margin in the last quarter. The
addition of new vehicles, such as the Model X, will continue to increase the company’s sales and gross margin. Tesla’s cost reduction roadmap will
also positively impact its gross margin as economies of scale are achieved and an efficient supply chain is established.

Intensity of Competitive Rivalry: Although competition is high, as most automobile companies are expanding into the fully electric realm, Tesla
has the advantage of being the first company fully devoted to electric cars. They have the newest technology and this gives them an edge over their
competition. As of now, they are leading the way in developing affordable, fully electric cars that can travel further distances.
Business Description
Business Summary
Tesla Motors, Inc. (NYSE: TSLA) was founded in 2003 by a group of Silicon Valley engineers. Headquartered in Palo Alto, Tesla aims to mass
produce affordable electric cars that are “fun to drive and [are] environmentally responsible.” The company wants to lead the world’s transition to
electric mobility, and offer “the most efficient path to a sustainable energy future.” Tesla currently designs and manufactures its own electric cars, as
well as powertrains for other automakers.
Primary and Secondary Products and Markets
As of 2013, Tesla offers two models as its primary products: the Roadster and Model S. The Roadster is an electric 2-seat convertible sports car,
while the Model S is an electric sedan. The company is also taking reservations for Model X, which will be released in 2014. Tesla’s secondary
products are powertrains, which it produces for Toyota and Mercedes-Benz. Selling its cars in over 30 countries, Tesla’s primary market is the
consumer while its secondary market is comprised of other automakers. Tesla’s European headquarters is in Maidenhead, UK.
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Business Risks and Outstanding Litigations
As a relatively new auto manufacturer in a saturated industry, Tesla faces several business risks. Competing with numerous incumbents, the
company lacks brand loyalty and recognition. Without effective marketing, Tesla will not be able to acquire the same level of customers as other
industry giants. Tesla’s products are also higher priced than average, with the lowest standard of Model S at a starting price of $62,400 and runs to
100,000 with the largest battery. This product differentiation rather than low cost provision greatly reduces the available market in which Tesla can
sell to. The company’s production capacity is also subpar as demand has exceeded supply. Unable to deliver the demanded quantity of vehicles,
Tesla suffers from large profit losses. Fortunately, however, Tesla currently has no outstanding litigation.
Business Model
SWOT Analysis
Strengths
Tesla’s strengths include its vehicles and services, intellectual property, sales and marketing, and strategic relationships. The company’s Model S, an
electric 4-door, 5-adult passenger sedan, offers a range of approximately 265 miles on a single charge, making it a range leader. This particular
vehicle also achieved the best safety rating, a combined new record of 5.4 stars, by the National Highway Traffic Safety Administration overall and
in every subcategory. In addition, the Model S is the most awarded car of 2013, and outsells most large luxury vehicles in the U.S. with
approximately a 10% market share. Tesla’s other vehicles are the Tesla Roadster, an electric sports car, and the Model X which will be released in
2014.
With over 140 patents awarded and over 240 patents pending, Tesla’s intellectual property is formidable. The company’s issued patents will not start
expiring until 2026, allowing it to maintain a competitive edge over its peers.
Tesla’s sales and marketing methods also add strength to the company. By selling directly to consumers through an international network of
company-owned stores and galleries, Tesla can closely monitor and ensure great customer experiences and service. Tesla currently operates a
network of 32 stores and galleries in North America, Europe, and Asia. The company also relies heavily on mouth-to-mouth marketing by its
customers.
Aside from designing and manufacturing its own electric cars, Tesla also has strategic relationships with Daimler, Toyota, Mercedes, and Panasonic
Corporation. The company designs, develops, manufactures, and sells electric vehicle powertrain components to other automakers.
Weaknesses
Tesla has a major weakness in its production volume and capacity. As a relatively new automaker, the company has not yet achieved economies of
scale. Due to this lack of efficiency, and Tesla’s decision to manufacture everything in-house, the company cannot supply the amount of vehicles
demanded.
Although Tesla’s mouth-to-mouth marketing can be considered a strength since most people trust the words of their peers as opposed to an
advertisement, Tesla’s lack of investment in real marketing tactics is a weakness. Without effective marketing to raise brand awareness, Tesla cannot
compete against large auto manufacturers which have obtained customer loyalty and brand recognition.
Opportunities
As incumbent automobile manufacturers are facing industry challenges, Tesla has the opportunity to take the lead. These incumbents’ reliance on
gasoline-powered internal combustion engines is backfiring as environmental concerns rise and so do volatile fuel prices. Traditional automakers
must also depend on industrialized and developing countries for oil. The reliance on combustion engines, consequently requiring heavy investment
on old technology, has hindered innovation towards electric powertrains technology as well. These challenges, which current industry giants are
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facing, give innovative companies like Tesla an opportunity to lead the next technological era of the automotive industry.
Another opportunity is presented in the demand for Tesla’s vehicles. The company predicts that U.S. demand will be 20,000 vehicles per year, and
global demand will be more than 40,000 per year by late 2014. If Tesla can improve its production capabilities and meet both domestic and
international demand, the company’s revenues will significantly increase.
Tesla also has the opportunity to increase its development revenue. In addition to selling battery packs and motors to automakers like Toyota and
Mercedes, Tesla can provide for other big automakers as well. The company can also branch out into selling drivetrains to fleet vehicles, such as
delivery vans, freightliners, and taxi cabs.
Threats
As a manufacturer of electric vehicles, Tesla faces the threat of government regulations and competitors. Regulations such as the Clean Air Act
require Tesla to obtain a Certificate of Conformity issued by the EPA. This restricts Tesla’s innovative opportunities, and any requirements not met
will hurt the company. Tesla must also obtain a California Executive Order issued by the California Air Resources Board, further increasing the
hurdles the company must jump over to sell its vehicles. The Society of Automotive Engineers requires Tesla to run tests on its battery packs as
well. Should these government entities decide to increase regulations, Tesla may have to alter its business model and products.
Recent studies have also shown a decline in driving and car ownership, potentially hurting Tesla’s future profitability. As people drive less, the
demand to purchase new vehicles decreases. Electric cars like Tesla, in particular, become less attractive in a weak economy. Since electric vehicles
are usually at a premium price, the majority of the population will opt out of making such financial decisions. College graduates currently have
record high student loan debts as well, leaving no option to buy a higher-priced electric car like the Model S or the Tesla Roadster. In addition, the
urbanization movement of college graduates and other young professionals enables many to substitute owning a car with public
transportation. Telecommuting has increasingly become a viable alternative as well.
Revenue Drivers
Tesla’s primary revenue driver is its vehicle, Model S. There are currently more than 13,000 Model S customer vehicles in North America, and Tesla
plans to make 20,000 Model S deliveries in 2013. With a starting price of $62,400, the Model S is a lucrative revenue driver.
Expense Drivers
With such high demand for its products, Tesla must make infrastructure expansion investments. These targeted investments on stores, galleries,
service centers, and Superchargers are the company’s main expense drivers. Expansion also requires more personnel, increasing salary expenses as
well.
Gross Margin
As the company progresses on a cost reduction roadmap, Tesla aims to achieve a 25% gross margin in the last quarter of 2013. Tesla is on track to
achieve its goal with a total non-GAAP gross margin of 22% for 2013 Q2, up from 17% the previous quarter. By redesigning many elements of the
Model S for easier manufacturing, Tesla will reduce costs through economies of scale and supply chain improvements.
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Major Trends
2013 Q2
Tesla’s most recent quarter featured several accomplishments. The company’s net income (non-GAAP) increased 70% from the first quarter to
$26M. Tesla also hit record sales of 5,150 Model S vehicles in North America, showing an increase in demand and production capacity. Its strong
balance sheet is impressive as well, with almost $750M in cash and no government debt.
Year 2012
Before its recent profits, Tesla faced a challenging year in 2012. Despite more than doubling its sales from $204.2M to $413.3M, the company’s
excessive operating expenses of $424.4M caused Tesla to have a significant negative operating income of -$394.3M. An increase in the cost of
goods sold also heavily impacted the company’s net income, appropriating nearly 93% of sales to the COGS.
Past Five Years
Historically, Tesla has both benefited from rising revenues and suffered from increasing expenses. The expenses, however, have outweighed the
sales and caused net income to decline every year as well. As net income decreased, retained earnings have also grown negatively.
Regarding cash flows, Tesla’s net change in cash has been inconsistent with no real trend. The company’s cash from operations and investing have
both been negative, while its cash from financing has been positive throughout the past five years.
Peer Group Analysis
Comparative Data
Product Differentiation
Tesla Motors is a new company paving the way for a new future for electric cars. They are the first company dedicated to fully electric cars, so they
have unlimited growth opportunities. Their products are new inventions that will attract consumers and competitors.
Tesla has a couple models that they have produced, and they plan on growing and creating more models in the future. The Roadster is the first
completely electric car that can be used on the highway and that can travel more than 200 miles on one charge. Other companies such as General
Motors, Ford, and Honda have since come out with electric cars as well but they cannot travel as far as the Roadster. The Model S became the
highest selling electric car, higher than the Chevrolet Volt. It’s also received the highest safety rating from the National Highway Traffic Safety
Administration (NHTSA). They plan on expanding further into the mass market. In the future, they want to create completely electric vans, SUVs
and trucks. The BlueStar is a future model that they hope to mass-market with its affordability and long range of power. They hope it will attract a
wider base of customers and create more of a demand for fully electric cars.
Market Share
Compared to other companies in the automobile industry, Tesla has high share prices. On October 26, 2013, Tesla had a share price of
$169.99. Toyota, Honda, General Motors, and Ford also had share prices of $63.61, $39.30, $35.59, and $17.60 respectively. Tesla hasn’t sold has
many shares as the other companies though. They have 121 million shares outstanding, while its competitors have issued an amount of shares
ranging from 1,000-3,000 million shares outstanding.
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Since Tesla is a newer company, it is still growing at an exponential rate. As the company grows and earns more profits the stock price will continue
to rise. This is evident from the large jump in price from May 10, 2013 to Aug 9, 2013 when the company published its first profits. The higher
share prices reflect consumer optimism of this company. Please see Exhibit 5 for further details.
Porter’s Five Forces
Threat of New Entrants
Tesla’s main competitors that have joined electric car market are General Motors, Ford, Honda, and Toyota. These companies have already been
established in the automobile industry, but they still need to be on the front end of technology to stay in the automobile industry.
General Motor’s is the main competitor as of now. They started with the Chevrolet Volt that is a hybrid, but can go thirty-eight miles on a charge
before switching over to gas. The Chevy Spark is their first fully electric car, and it can go eighty-two miles in one charge. They are working on a
future car that can go two hundred miles on a single charge that can be sold at an affordable price of $30,000. They hope this car will rival Tesla’s
Model S that can travel farther but for a higher price.
Ford also joined the market by creating their first electric car, the Focus Electric, which goes seventy-six miles on one charge. It was ranked the most
fuel efficient car in the compact class.
Honda built the Fit EV in 2013. This car can go seventy-six miles on one charge. Honda limited production of this model though to 1100 cars only
available in specific US markets.
Toyota hasn’t entered the fully electric car market as of yet. The most important car that they are marketing is the Prius hybrid. Although it isn’t
fully electric, it has a wider market and is more affordable. The company’s chairman Takeshi Uchiyamada explained that Toyota won’t be pursuing
fully electric cars in the near future, because they don’t foresee a big enough market for them. Toyota will be mass-marketing hybrid cars unless
there is a breakthrough technology in batteries that changes the market for fully electric cars. In the future Toyota won’t be a direct competitor to
Tesla, unless the market for electric cars suddenly expands. They will be one of the later entrants to the electric car market. Their hybrid cars will
rival the electric cars since they can go farther without running out of a charge and that they have the ability to switch to gas.
Most of the cars created by Tesla’s competitors are not as efficient as Tesla’s cars. They cannot go as far on one charge and are still
expensive. Tesla still has an edge over competition since they have the technology to make their cars run great distances.
Threat of Substitute Products
The main reasons consumers are hesitant to buy fully electric cars are the affordability and range of the cars. The high prices of the electric cars right
now don’t give enough incentive to switch over from gas powered cars. The fear of running out of a charge while on a trip and having to plan trips
around how long the car battery has been charging also keeps consumers away from the fully electric cars. Until technology introduces a long lasting
battery for an inexpensive price, hybrids will continue to rival as a substitute product for fully electric cars. They still use gas, but they use much less
than non-hybrid vehicles. The combination of running on electricity and gas lets the car travel much farther in one trip.
Toyota plans on having a hydrogen fuel cell car in 2015. These cars are quick to refuel and don’t give off pollution. However, the technology is still
in development in order for it to be affordable for the average consumer.
Bargaining Power of Customers
In order for companies to earn a profit selling electric cars, there has to be a wide enough market for them. Customers have been hesitant to switch to
electric cars. Since the technology is still new and in development, electric cars have high costs and aren’t affordable for the average
consumer. People also worry over the short range of electric cars between each charge. It’s not safe and isn’t worth worrying over whether the car
will last for the rest of the trip or whether you will have enough time to charge the car back up. As of now the fully electric cars don’t provide
enough benefits and incentives to cover the costs of foregoing a gas powered car, or even a hybrid, for an electric one. Companies like Tesla and
General Motors are working on furthering the technology so that electric cars can travel farther and are more affordable.
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Bargaining Power of Suppliers
Tesla uses parts from suppliers from all over the world. Specifically, the carbon fiber body panels are made in France by Sotira. Lotis builds a
specific chassis in the UK, and the battery cells come from Japan. The main car part that would give a supplier large bargaining power is the battery
that allows for further traveling. Tesla manufactures their own powertrain components including lithium-ion battery packs in California.
Intensity of Competitive Rivalry
Although competition is high, as most automobile companies are expanding into the fully electric realm, Tesla has the advantage of being the first
company fully devoted to electric cars. They have the newest technology and this gives them an edge over their competition. As of now they are
leading the way in developing cars that can travel further distances in one charge.
Ratio Analysis
Since Tesla is still in the beginning growth stage, its return on assets and equity are very low. They have negative returns while their competitors
have positive returns. However, they are growing from year to year in revenue and profits. They had their first profits in 2013. Tesla has had low
asset turnover in previous years, but this year they had a ratio of one. They are becoming more efficient as they grow.
General Motors has high fixed asset turnovers. Toyota has an average fixed asset turnover. Again, Tesla is much lower but they have jumped from
0.9 to 2.3 in on year. Tesla has the highest receivables turnover, and Toyota has the lowest turnover ratios. Tesla seems to operate on cash more
heavily than other automobile companies. This makes sense since they need to reinvest their revenues into the company in order to grow. It would
hurt the company if they delayed the timing of receiving sales.
Tesla has a lower inventory turnover than other companies, because they haven’t started mass producing cars yet. They plan to produce a certain
amount of cars each year, and then that’s all that they make. They don’t have multiple cars for show at their dealerships like other companies.
Tesla’s current ratio shows that they are able to pay its short-term liabilities without extra financing. In the past, Tesla has been more heavily
financed by debt, but in 2013, their debt to equity ratio was less than 1.
General Motors has low revenue growth rates between 1-2%. Toyota experiences more growth between 10-18%, but Tesla has extremely high
growth rates of 100% and 760%. This is consistent with the part of the industry life cycle that they are in. Since they are a new company, it is normal
for them to be experiencing such high growth rates. Tesla has only recently published profits for the company, which explains their high profit
growth rate compared to other companies.
Assumptions
Tesla is in its growth stage. With sales up by more than 300% in 2013, we can assume growth rates will continue to be high in years to come. After
2013, we project revenues to grow 20-25% for the next four years based on the following assumptions:
Towards the end of the year, many people spoil themselves or their significant other and buy a new automobile. Last year’s fourth quarter revenue
was the biggest; we’re expecting this year’s quarter to be a success as well. We think it’ll be a 9% growth from the third quarter in 2013. Growth will
be 25% in 2014 because Tesla will begin to penetrate the Asian Market. Demand for the Model S continues to grow in both North America and
Europe. Tesla’s Model S was awarded a five star safety rating by NHTSA. This award not only gives Tesla more exposure, it shows that one of
Tesla’s priorities is safety. We believe Tesla’s marketing department will take advantage of this and utilize this award to attract new customers. Tesla
will also begin delivering their Model X in 2014 so sales are expected to increase next year. Tesla currently has 46 galleries/stores in North America,
46 in Europe, four in Asia, and one in Australia. We can assume that more galleries and stores will be built and that will increase sales for 20142018. In 2015, growth is expected to be 23%. Two percent less from 2014 because we expect competitors to feel threatened by Tesla and increase
marketing for their electric cars or hybrids. By 2016 Tesla will have a sales growth of 24% because they will introduce their driverless car. The car
will be capable of taking over 90 percent of the driving from someone behind the wheel. Tesla only provides company owned dealerships. Fortyeight states prohibit direct sales to customers. Tesla employees in Texas aren’t allowed to tell you how much their cars are, allow test drives, or give
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you their web address. Tesla is having a hard time with many of the states accepting their company owned dealerships. This will cause Tesla to
succumb and allow franchising in 2018. This will establish a growth rate of 25%.
Cost of Goods Sold will continue to be related to sales growth until economies of scale take place. Operating income remains negative because Tesla
will still be in its growth stage five years from now. They continue to spend a lot on research and development because they are a high tech auto
company. They are the first solely electric car company so a lot of money is invested to perfect their vehicles and develop new automobiles that are
appealing to potential customers and repeat purchasers. It’s important because through R&D they are able to reach differentiation. Selling General &
Administrative Expenses continues to increase because to have sales growth the company needs to spend to make the growth happen. They have
vertical integration, where they are their own supplier. This secures raw materials but results in cost and expenses associated with increase overhead
and capital expenditures. Expenses over the next two years will include Supercharger stations. By 2015, 98% of the US population and parts of
Canada will have Supercharger stations by most interstates. More galleries, stores, and service centers will be built in North America, Europe, and
Asia. The costs for these sites are included in the Selling General & Administrative Expenses. Please see Exhibits 1, 2, and 3 for further details.
Weighted Average Cost of Capital
Debt and Common Equity Weighting
In order to find the market rate used to calculate the weighted average of common equity, we used the base price of the market five years ago and the
market price today, which were 1647.40 and 3913.23, respectively. Using an industry beta of .39, a market rate of 18.89%, and a risk free rate of
2.75%, Tesla’s weighted return on common equity is equal to .090446. Combined with the weighted average of common debt, the company’s WACC
equals 9.77%. As the company’s beta and required return on equity increase, Tesla’s WACC will also increase. With that increase, the company’s
value will decrease and risk will increase.
Capital Structure and Enterprise Value
Tesla’s capital structure is represented by their debt-to-equity ratio of 3.74. The elements that went into the ratio were the company’s long-term debt,
short term debt, common stock, and preferred stock. The capital structure is a representation of Tesla finances its overall operations and growth
through the use of different funds. The ratio also gives insight as to how risky the company is. Tesla’s high debt-to-equity ratio means that the
company is highly leveraged and therefore more risky because it is more heavily financed by debt. Tesla’s optimal structure is the best debt-to-equity
ratio that maximizes the company’s value. Tesla’s optimal structure was based off of the leading competitor in the industry, General Motors, of
.8734. The optimal structure offers a balance between the ideal debt-to-equity ranges and minimizes Tesla’s cost of capital. On the other hand,
Tesla’s enterprise value of $14.76B is a measure of the company’s value. Used as an alternative to straightforward market capitalization, the
company’s enterprise value is more accurate in representing the firm’s value because it includes the company’s value of debt.
Valuation Framework
Discounted Cash Flow Analysis (DCF)
To create the Discounted Cash Flow Model, we created a free cash flow buildup in which we used unlevered free cash flows and the weighted
average cost of capital (9.77%) as the discount rate. The model encompasses the five forecasted years, from 2013 to 2017. Exhibit 4 displays the
present value of free cash flows for each forecasted year, as well as the sum of the present values.
To calculate the terminal value, we used the growth in perpetuity method. Assuming a long-term growth rate of 5.00% after 2017, the terminal value
per share is -$136.28.
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We also calculated the enterprise value to provide a more accurate valuation. By adding the sum of the present values of the free cash flows with the
present value of the terminal value, the enterprise value is approximately -$14.38M. Subtracting the net debt from the enterprise value, we derived
an equity value of -14.56M. With 122.59M shares outstanding, Tesla’s equity value per share is -$118.75.
Free Cash Flow to Equity
According to the following assumptions and calculations, Tesla’s FCFE is -$827,619,458.
FCFE = FCFF - interest expense(1 - T) - increase in net debt
FCFF was calculated using:
EBIT = -$394,280,000
tax rate = -0.01%
depreciation = 0
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Tables
Exhibit 1
Income S tatement
S ales Growth Rate
9%
352.13%
25%
23%
24%
25%
in thousands, USD
2008
Net Sales
14,742
2009
111,943
2010
16,744
2011
204,242
2012
413,256
Q1-13
561,792
Q2-13
405,139
COGS
(20,583) (102,408)
Operating Expenses
(72,663)
(61,432) (177,569) (313,083) (424,350) (101,904) (112,275)
Operating Income
(78,504)
(51,897) (246,838) (251,488) (394,283)
Interest Expense
(3,747)
(2,531)
(86,013) (142,647) (383,189) (465,472) (304,656)
(992)
(43)
(254)
Q3-13
431,346
(133,422) (160,106)
(507,707)
(634,634)
(780,600)
(967,944) (1,209,930)
(99,195)
(123,994)
(152,512)
(189,115)
(236,394)
(118)
(20,116)
(6,492)
(8,909)
(35,635)
(44,543)
(54,788)
(67,937)
(84,922)
258
255
288
10
39
-
-
-
-
6,399
1,668
Other Non-operating Inc. (Exp.)
(2,208)
(2,913)
(6,583)
(2,758)
(1,772)
10,692
-
-
-
-
112
(56)
-
-
-
1,245
1,468
-
-
-
-
-
-
(97)
(26)
(173)
(489)
(136)
(55,740) (254,328) (254,411) (396,213)
2017
4,452,736
(51,265)
159
(82,782)
2016
3,562,189
(30,554)
-
Net Income (NI)
2015
2,872,733
(11,792)
529
Income Tax Expense
2014
2,335,555
(5,584)
Currency Exchange Gains (Loss)
Other Unusual Items
2013
1,868,444
(328,478) (361,326) (1,459,932) (1,824,915) (2,244,645) (2,783,360) (3,479,200)
Interest and Investment Income
Gain (Loss) on Sale of Invest.
Q4-13
470,167
(151)
11,248
68
(740)
102
219
274
337
418
522
-
8,067
10,084
12,403
15,380
19,225
(1,110)
8,842
11,053
13,595
16,857
21,072
-
-
-
-
-
-
-
-
-
-
-
-
(301)
(778)
(1,789)
(3,019)
(3,774)
(4,642)
(5,756)
(7,196)
(30,502)
(38,496)
(62,971)
(120,721)
(150,901)
(185,609)
(230,155)
(287,694)
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Exhibit 2
Balance S heet
in thousands, USD
2008
Assets
Cash and Cash Equivalents
Accounts Rec
Inventories & Other
Total Current Assets
Fixed Assets, Net PPE
Other
Total Assets
Liabilities & SE
Accounts Pay
Accrued Exp.
Short Term Debt
Income Taxes Payable, Current
Unearned Revenue, Current
Other CL
Total Current Liab
Additional Funds Needed
Long-Term Debt
Capital Leases
Other Liabilities
Deferred Liability Charges
Total Liabilities
Pref. Stock, Convertible
Pref. Stock, Other
Common Stocks
Capital Surplus
Retained Earnings
Comprehensive Income & Other
Total Equity
Total Liabilities & Equity
2009
2010
2011
2012
Q1-13
Q2-13
Q3-13
Q4-13
9,277
3,320
18,830
31,427
18,793
1,479
51,699
69,627
3,488
27,444
100,559
23,535
6,330
130,424
99,558
6,710
129,618
235,886
122,599
27,597
386,082
280,327
9,539
82,972
372,838
310,171
30,439
713,448
201,890
26,842
296,036
524,768
562,300
27,122
1,114,190
214,417
46,139
265,437
525,993
591,057
26,728
1,143,778
746,057
113,544
269,941
1,129,542
727,047
31,255
1,887,844
795,116
47,580
376,070
1,218,766
923,306
24,137
2,166,209
14,184
5,935
341
1,803
4,073
61,599
87,935
15,086
12,112
290
452
1,377
28,172
57,489
28,951
16,534
279
2,686
4,635
32,480
85,565
56,141
29,098
8,983
967
2,345
93,805
191,339
303,382
27,032
55,206
9,710
1,905
141,873
539,108
304,204
21,470
56,293
14,658
3,701
135,297
535,623
262,227
29,943
5,695
16,080
29,781
142,819
486,545
302,439
38,658
588,473
18,645
63,739
157,505
1,169,459
866,676
51,862
409,916
1,328,455
1,006,404
26,309
2,361,168
329,659
42,137
588,473
18,645
63,739
157,505
1,200,158
54,528
888
4,810
148,161
800
3,459
1,240
62,988
71,828
496
18,362
2,783
179,034
268,335
2,830
23,753
3,146
489,403
401,495
9,965
35,862
3,060
989,490
388,785
10,460
5,323
35,004
975,195
578,740
9,249
68,293
115,591
1,258,418
77,498
10,931
131,298
212,858
1,602,044
77,498
10,931
131,298
212,858
1,632,743
2013
2014
2015
2016
2017
866,676
51,862
409,916
1,328,455
1,006,404
26,309
2,361,168
1,083,346
64,828
512,395
1,660,569
1,258,004
32,887
2,951,460
1,332,515
79,738
630,246
2,042,499
1,547,345
40,451
3,630,296
1,652,319
98,875
781,505
2,532,699
1,918,708
50,159
4,501,566
2,065,398
123,594
976,882
3,165,874
2,398,385
62,698
5,626,958
329,659
42,137
588,473
18,645
63,739
157,505
1,200,158
412,073
52,672
588,473
18,645
63,739
157,505
1,293,107
506,850
64,786
588,473
18,645
63,739
157,505
1,399,998
628,494
80,335
588,473
18,645
63,739
157,505
1,537,191
785,617
100,418
588,473
18,645
63,739
157,505
1,714,398
164,260
77,498
10,931
131,298
212,858
1,632,743
661,603
77,498
10,931
131,298
212,858
1,725,692
1,233,548
77,498
10,931
131,298
212,858
1,832,583
1,967,626
77,498
10,931
131,298
212,858
1,969,776
2,915,810
77,498
10,931
131,298
212,858
2,146,983
101,178
319,225
2,074
1,734
7
7
95
104
115
115
121
123
123
123
123
123
123
123
5,193
7,124
621,935
893,336
1,190,191
1,222,825
1,714,163
1,687,397
1,687,397
1,687,397
1,687,397
1,687,397
1,687,397
1,687,397
(204,941) (260,654) (414,982) (669,392) (1,065,606) (1,054,357) (1,084,858) (1,123,355) (1,123,355) (1,123,355) (1,123,355) (1,123,355) (1,123,355) (1,123,355)
(3)
(96,489)
67,436
207,048
224,045
124,700
168,583
629,426
564,165
564,165
564,165
564,165
564,165
564,165
564,165
51,699
130,424
386,082
713,448
1,114,190
1,143,778
1,887,844
2,166,209
2,196,908
2,196,908
2,289,857
2,396,748
2,533,941
2,711,148
Page 11
Exhibit 3
S tatement of Cash Flows
in thousands, USD
Net Income
Depreciation & Amort.
Depreciation & Amort., Total
2008
(82,782)
4,157
4,157
2009
(55,740)
6,940
6,940
2010
(154,328)
10,623
10,623
2011
(254,411)
16,919
16,919
2012
(396,213)
28,825
28,825
(Gain) Loss On Sale Of Invest.
Asset Writedown & Restructuring Costs
Stock-Based Compensation
Tax Benefit from Stock Options
Other Operating Activities
Change in Acc. Receivable
Change In Inventories
Change in Acc. Payable
Change in Unearned Rev.
Change in Other Net Operating Assets
Cash from Ops.
437
9,544
(3,261)
(18,839)
8,815
4,073
25,444
(52,412)
385
1,434
3,699
(168)
(7,925)
902
(1,456)
(28,896)
(80,825)
8
21,156
(74)
5,973
(3,222)
(28,513)
(212)
4,801
15,971
(127,817)
(112)
345
29,419
4,578
(2,829)
(13,638)
19,891
(1,927)
73,731
(128,034)
56
1,504
50,145
6,783
(17,303)
(194,726)
187,821
(526)
67,553
(266,081)
Capital Expenditure
Cash Acquisitions
Divestitures
Invest. in M arketable & Equity Securt.
Net (Inc.) Dec. in Loans Originated/Sold
Other Investing Activities
Cash from Investing
(10,630)
(960)
(11,590)
(11,884)
(2,360)
(14,244)
(40,203)
(65,210)
(74,884)
(180,297)
(184,226)
(24,952)
46,920
(162,258)
(239,228)
25,008
7,290
(206,930)
55,782
55,782
(191)
(191)
25,468
25,468
(322)
(322)
71,828
71,828
(315)
(315)
204,423
204,423
(416)
(416)
188,796
188,796
(15,542)
(15,542)
477
-
497
132,500
270,192
-
241,993
-
246,381
-
-
-
-
-
-
56,068
(2,724)
155,419
(3,660)
338,045
446,000
419,635
(7,934)
60,350
29,931
155,708
(53,376)
Short Term Debt Issued
Long-Term Debt Issued
Total Debt Issued
Short Term Debt Repaid
Long-Term Debt Repaid
Total Debt Repaid
Issuance of Common Stock
Issuance of Pref. Stock
Total Dividends Paid
Special Dividend Paid
Other Financing Activities
Cash from Financing
Net Change in Cash
Page 12
Continuation of Exhibit 3
S tatement of Cash Flows
in thousands, USD
Net Income
Depreciation
Change in A/R
Change in Inv.
Change in A/P
Change in Acc. Liab. Other
Change in Other Net Operating Assets
CF from Operations
Change in Fixed Assets, Net
CF from Investments
Change in Bank Loan
Change in Long-Term Debt
Change in Common Stock
Payment of Cash Dividends
CF from Financing
Net Cash Flow
Beginning Cash
Ending Cash Before Borrowing
Target Ending Cash
Additional Funds Needed (AFN)
2013
(120,721.13)
81,290.00
25,020.20
132,974.30
26,276.51
15,105.22
2014
(150,901.41)
101,612.50
12,965.55
102,479.08
82,414.63
10,534.31
2015
(185,608.73)
124,983.38
14,910.38
117,850.94
94,776.82
12,114.45
2016
(230,154.83)
154,979.39
19,137.15
151,259.11
121,643.99
15,548.63
2017
(287,693.53)
193,724.23
24,718.82
195,376.36
157,123.49
20,083.65
(156,043.90)
(71,784.60)
(86,495.40)
(108,379.09)
(136,857.34)
444,103.54
(444,103.54)
251,600.89
(251,600.89)
289,341.02
(289,341.02)
371,362.91
(371,362.91)
479,677.09
(479,677.09)
(600,147.44)
220,984.00
(379,163.44)
866,676.44
164,260.08
(323,385.49)
866,676.44
543,290.95
1,083,345.55
661,603.10
(375,836.42)
1,083,345.55
707,509.13
1,332,515.03
1,233,547.57
(479,741.99)
1,332,515.03
852,773.04
1,652,318.63
1,967,625.87
(616,534.43)
1,652,318.63
1,035,784.20
2,065,398.29
2,915,810.34
Page 13
Exhibit 4
Discounted Cash Flow
in thousands, USD
Free Cash Flow Buildup
2012
Period
Net Sales
EBIT
Tax Rate
NOPAT
Accounts Receivables
Inventory
Accounts Payable
Accrued Expenses
Capital Expenditures
Unlevered Free Cash Flows
Discount Rate (WACC)
PV of Free Cash Flows
S um of PV of FCFs
(3,894,365.04)
Terminal Value
Growth in Perpetuity M ethod
Long-Term Growth Rate
WACC
FCF (t + 1)
Terminal Value
PV of Terminal Value
Terminal Value per Share
5.00%
9.77%
(796,932.14)
(16,707,172.78)
(10,482,977.24)
(136.28)
Enterprise Value to Equity Value
Enterprise Value
Less: Net Debt
Equity Value
Diluted Shares Outstanding
Equity Value per Share
(14,377,342.28)
180,511.00
(14,557,853.28)
122,590.00
(118.75)
2013
1
1,868,444.14
(99,195.06)
(0.00)
(99,204.98)
(25,020.20)
(132,974.30)
26,276.51
15,105.22
(444,103.54)
(659,921.29)
9.77%
(724,395.60)
Projected Annual Forecast
2014
2015
2
3
2,335,555.18
2,872,732.87
(123,993.83)
(152,512.40)
(0.00)
(0.00)
(124,006.22)
(152,527.66)
(12,965.55)
(14,910.38)
(102,479.08)
(117,850.94)
82,414.63
94,776.82
10,534.31
12,114.45
(251,600.89)
(289,341.02)
(398,102.80)
(467,738.72)
9.77%
9.77%
(479,692.10)
(618,663.25)
2016
4
3,562,188.75
(189,115.38)
(0.00)
(189,134.29)
(19,137.15)
(151,259.11)
121,643.99
15,548.63
(371,362.91)
(593,700.84)
9.77%
(861,990.19)
2017
5
4,452,735.94
(236,394.23)
(0.00)
(236,417.87)
(24,718.82)
(195,376.36)
157,123.49
20,083.65
(479,677.09)
(758,982.99)
9.77%
(1,209,623.92)
Page 14
Exhibit 5
Tesla
Share Price
Shares Outstanding
$
10-May-12
32.96 $
105,200,000
2-Aug-12
26.10 $
105,200,000
Market Share
7-Nov-12
31.54 $
113,800,000
7-Mar-12
38.23 $
113,800,000
10-May-13
76.76 $
115,600,000
9-Aug-13
153.00
121,500,000
Page 15
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