Metric

Numbers

Narrative

CAP period 

10 years

For a young company (13-year-old) with a massive story – it is fairer to assume the market is taking a 10-year CAP.

Operating margin

(9%) for the next five years, then 5% until year 10 

Getting even a rough estimate of this was tricky. Tesla has yet to generate a single drop of profit. So we assume that TSLA continues to generate losses at (9%) for the next 5 years. Followed by a steady 5% EBIT margin – which is the average After-Tax Lease-adjusted margin of the Auto industry.

Growth rate (10 year CAGR)

33%

This was reverse derived after considering margins and reinvestments. A staggering CAGR of 33% growth implies that TSLA’s revenues will be $105bn in the year 2026. Today they are $6bn. (17.5x growth)

For a little context, GM, among the largest car manufacturers in the world today, generates $166bn in sales.

Reinvestments

$7bn total over the next 10 years

TSLA has spent $5bn in reinvestments in the past 10 years, most of which has been in the past five years. With Musk’s ambitious plans of building additional grids, power-generation facilities, R&D and recharging stations, we assume that the company pours another $7bn over the next 10 years.

Cash tax rate

(3%) until Year 5, followed by 35% until Year 10

For a loss-making company, TSLA has been receiving tax rebates for the past 10 years. We assume that while it continues to lose money over the next 5 years, it receives rebates at 3% per year.

Starting year 6, we assume TSLA’s statutory tax rate of 35%, which is what the tax rate would revert to over the long term.

WACC for Steady

5%

Industry WACC is 4.16%

WACC for CAP

7%

Assuming higher during CAP period, since TSLA will likely pile on more debt during this period

Inflation 

1.9%

Op Leases

$3.14bn