Tesla​

​

In short, why should you invest?

​

Expected annual return: 50%

 

Will cost 10 times or more up to: 2030

 

Relative volatility is expected: medium

​

Why would we buy the stock?: Tesla is the clear leader in the rapidly growing and still in its infancy electric vehicle and battery market as well as in the new field of autonomous driving with a potential market value of $10 trillion.

leadership: CEO Elon Musk founded Tesla almost 18 years ago, a company that disrupts industries in several areas, and he successfully founded other companies such as SpaceX and was one of the founders of PayPal, and he is still at the head of the company today.

 

product: Tesla's products are electric vehicles, batteries for vehicles and the electricity sector,Production of electrical energy from solar panels and roofs, Software such as autonomous driving and more.

​

Why we think this is a growth stock: Despite being the clear leader in several trillion-dollar markets, Tesla has only just begun its rapid growth in both its international market and its ability to monetize platforms like the robotaxis that uses driverless vehicles while running its autonomous driving system.

 

What does the company do?

​

Tesla is a company that develops and manufactures electric vehicles and energy products, such as batteries of various sizes and solar roofs. It is the only car company that sells to end consumers and not through "dealers". The company works to shorten the supply chain, for automatic and independent production. About 85% of the car parts are manufactured by Tesla, so the company saves itself the brokerage and adjustment costs.

​

According to the company's CEO, Elon Musk, the company sees value in promoting the issue of electric vehicles in particular and the use of sustainable and non-polluting green energy in general. In June 2014 he announcedElon MuskIn a surprising move, because the company authorizes "anyone who wants" in the world to usepatentsHer   and the company undertakes not to sue.

​

So, Tesla's vision is to move the world to use sustainable energy. All her actions stem from this vision. Tesla manufactures solar panels and solar roofs to produce sustainable energy from solar energy, batteries of various sizes to store this energy and various vehicles to use electric energy, as well as software to operate the various products and systems.

 

Until about 5 years ago, Tesla worked to realize a vision almost alone. Only in the last two years has the transition to electric vehicles become commonplace and it is already clear to most analysts and energy policy makers that within a few years most of the vehicles produced will be electric.

 

Tesla generates revenue from the sale of electric vehicles of various types, the sale and use of batteries for vehicles of various sizes, electric companies, private homes, from the sale of solar panels and solar roofs, as well as from the sale of software such as the autonomous driving software. 

​

Why should you invest?

 

We will try to estimate how much Tesla will be worth in 2025 and 2030 and whether by then it will increase by more than 10 times its value today. The main areas from which Tesla will generate revenue are the automotive sector, the energy sector and the autonomous driving sector. 

​

Tesla's automotive sector:

 

In the fourth quarter report of 2020, Tesla estimated in a letter to investors that it would be able to increase the amount of vehicles produced annually by at least 50% on average in the following years, while in the next two years, 2021 and 2022, the growth will be even higher due to the completion of the factories in Berlin and Texas and the expansions in factories in Shanghai and California. In 2020 it produced The company has 500,000 vehicles and today there is a fleet of over one million Tesla cars on the road.

 

Assuming that there is no demand problem for Tesla products, and because of the waiting times for those who order it is clear that there is no such problem in the foreseeable future, we can calculate the amount of cars that Tesla will sell in the coming years according to the rate of car production. For the sake of conservatism and for the purpose of our calculations, let's assume that Tesla will grow by 40% per year after the next two years, when in 2021 and 2022 it will grow by more than 50% as it stated in its latest reports. Hence we can estimate the quantities that will be produced until 2030 and we reach about 22 million vehicles.

​

These are the numbers that Tesla also estimates it will reach, as the company aims to reach a production rate of 20 million vehicles per year in 2030. Under these assumptions, the sales of the automobile sector alone will be around 200 billion dollars in 2025 and a trillion dollars in 2030.

​

If we take a sales multiplier of 10 (a very conservative sales multiplier for a company that grows by 40% per year) on Tesla's sales in the automotive sector in 2025 and 2030, then Tesla's value in 2025 will be a little less than 2 trillion dollars and in 2030, 10.6 trillion dollars. 15 times more than today.

 

Tesla's energy sector:

 

According to Musk, the energy sector at Tesla will generate revenues similar to the automotive sector and even higher in the future. The scope of the energy sector in the world today is larger than the automotive sector, but we expect it to be less profitable.

​

revenuesTesla's energy reached an all-time high: 750 million dollars in the fourth quarter of 2020, and it seems that the surge in the energy business has only just begun. With the installation of mega-pack batteries, rooftops and solar panels, and an ever-increasing supply of batteries, expect massive growth in Tesla's energy revenue.

 

Assuming that in the coming years the energy business will be on the order of magnitude of the automobile business, then Tesla's sales from these two sectors (automobile and energy) will be about 2 trillion dollars in 2030.

 

Assuming a company value with a sales multiple of 10, Tesla would be worth $21.2 trillion. 30 times more than today.

But the valuation does not end here at all...

 

The field of autonomous driving - the ROBOTAXI:

 

As mentioned, the big story of Tesla is the autonomous driving in which it is ahead of the competitors by at least 4-5 years. Using this AI software, Tesla will create an app for shared transportation, similar to Uber and Lyft, but without a human driver in the vehicle. The vehicle that will be used in this shuttle service is called the robotaxy. The artificial intelligence software used to operate the vehicle in autonomous driving is called Full Self Driving (FSD).

 

The price of a ride on this service, which does not use a human driver, will be much cheaper than a similar service with a human driver. According to Tesla's presentation on the day dedicated to autonomous driving, it estimated that the average cost of a mile of travel in this service would cost $1.30. This, compared to a cost of 2-2.5 dollars in Uber and Lyft today.

 

For several months, Tesla has been running a beta version of the FSD software with about 1000 users, who were selected by Tesla, and downloaded the software to their cars. The company is preparing to massively expand the beta version of the FSD.

​

Elon Musk says the beta program is expanding and they are about to double its size with a new software update (from 1,000 cars to 2,000). In a few weeks, Tesla will add a 'Download Beta' button to the vehicle's app, through which drivers can sign up to download the FSD software. That means Elon Musk and Tesla's autonomous driving team feel confident in the software's capabilities. See Musk's tweets on March 6.

​

Elan Musk estimates that Tesla will complete the software this year. But let's take safety factors and assume that they will complete this software next year and only in 2023 will they start using it commercially in selected areas that approve such driving. It should be remembered that all Tesla vehicles today are equipped with the necessary hardware for such a trip and the software can be remotely downloaded to the vehicle.

 

From this, it is possible to calculate Tesla's income from the fleet of robotaxis vehicles when it begins service in 2023: according to Tesla's presentation held on the day the autonomous vehicle technology was introduced, a vehicle that will participate in Tesla's robotaxis service will generate a gross profit of approximately $30,000 per year.

​

The data and assumptions presented in the presentation (and shown in the slide above) are extremely conservative:

1. The cost of each Tesla travel mile will be less than $0.18.

2. The gross profit the vehicle will make per mile will be $0.65 (assuming that 50% of the time the vehicle will drive empty, without passengers).

3. Each Robotaxis vehicle will travel approximately 90,000 miles per year.

4. The annual gross profit for each vehicle will be approximately 30,000 dollars.

5. The life of the vehicle is 11 years.

 

There are estimates that the cost per mile for Tesla will reach $0.04 in 2030, but probably the price of the trip will also have to decrease if competition begins in driverless transportation, so that the gross profit will be more or less preserved.

 

If we capitalize the income from one vehicle over its 11 years as a robotaxy, then this vehicle will bring us a gross profit of $330,000. If so, it would not be worthwhile for Tesla to sell vehicles for $48,000 on average, but it would be worthwhile for it to keep the vehicles for itself and operate them in the driverless shuttle service, or to sell them for approximately $300,000.

 

Also, owners of Tesla vehicles will be able to add their vehicle to the Robotaxis service whenever they want by choosing to do so in the Robotaxis transportation service application. In this case, Tesla will receive only 30% of the gross profit and 70% will go to the owner of the vehicle so that Tesla will receive approximately $9,000 per year as gross profit from each vehicle.

​

Already today 25% of Tesla's customers purchase the FSD package for $10,000, when the software package offers much less than perfect autonomous driving, so it can be assumed that upon its completion at least 40% of customers will purchase the software and activate it.

In addition, we estimate that by 2024 Tesla will take on at least 40% of the vehicles to be used as robotaxis.

 

Hence, according to a conservative calculation, based on the sales of the autonomous transportation service only, Tesla's value will be 6.6 trillion dollars in 2025 or a share value of 6,500 dollars, and in 2030 its value will be 31 trillion dollars or a share value of about 30,000 dollars. That is, 42 times more than today. This, without taking into account the entire field of vehicle sales and the energy field which, as mentioned, will add approximately 15 trillion dollars to Tesla's value in 2030 (it should be taken into account that Tesla will sell fewer vehicles if it uses them itself as robotaxis).

 

In total, Tesla could reach a value of 45 trillion dollars in 2030 if it completes the FSD software next year and begins to operate it extensively in 2023. We estimate that Tesla's chances of completing the FSD software are over 95% today. If we double the value of autonomous driving in 2030 with a 95% chance, we will get a company market value of over 40 trillion dollars.

​

Assuming that the multiples at which Tesla will trade will be lower because of its high value, and also if we take into account unexpected scenarios, we will drop 40-50% from the value we reached and reach a value of 20-25 trillion dollars, which is more than 30 times higher than the value at which Tesla is traded today._cc781905- 5cde-3194-bb3b-136bad5cf58d_

 

Note that we have not calculated the revenue that will be generated for Tesla when private individuals attach their vehicle to the autonomous transportation service and Tesla will collect 30% of the revenue of each such vehicle. Tesla will also be able to develop an app store and sell apps and games to car passengers who are actually free to do so. It will also be a major producer of batteries, which it can sell to other car companies.