DISCOUNTED CASH FLOW VALUATION OF TESLA INCORPORATED (TSLA)

Abstract

This thematic paper illustrates how to value the stock price of Tesla, Inc based on a discounted cash flow valuation model. The three-stage growth discount model was adapted to match with the Tesla situation in 2020. The value we demonstrate will reflect the expected growth of the firm and provide information to help address the risk. The forecast price from valuation was 418.09 which was 36% lower than the closing price of 571.4 on November 25, 2020. Therefore, the valuation is indicative of a recommendation to sell the stock. Tesla had three consecutive profitable quarters for the first time. The firm expanded its factory to supply the demand of its cars and increase its capability for development. In summary, the model provides an intrinsic valuation of the firm, although it still has some limitations. Therefore, investors should look at the stock value carefully. This study will only provide guidance of the intrinsic valuation of the emerging electric vehicle industry in the internet of things era which differs from traditional automaker.