What goes up appears to come down faster. Thanks, apparently, to a well-timed Goldman Sachs suggestion that the heavily-shorted (28.4% of float) electric-car maker is over-priced (whocouldanode at 303% YTD gains), the shares are down 14.5% today on massive volume (-18% from yesterday's highs) but still notably above Patrick Archambault's $84 target.
Our previous scenario analysis here suggested [6] this was all getting a little 'frothy'...
[7]
Via Goldman Sachs,
[8]
We now value Tesla by taking the average of 3 scenarios.
- In the first scenario, we assume total sales of 105K (Model S: 50K units, Next Gen: 55K) and operating margins of 14.6% implying an EPS of $5.99. Layering on a 20x multiple given the growth prospects implies a value of $120 which discounted at 20% implies a stock price of $58.
- We then look at a bull case where we assume that TSLA will be able to get approximately 3.5% global market share in the entry lux and mid-lux category suggesting total volumes of 200K units. The 3.5% market share assumption is consistent with the typical 3-5 year share gains seen by the most successful industry players across multiple luxury sub-segments over the past decade. We assume an operating margin of 15.2% in this scenario, which is slightly better than the 15% guidance that TSLA has provided as we see TSLA benefitting from better operating leverage given higher volumes. The implied stock price in this scenario comes at $113.
- We also value Tesla in a mid-case where we assume volumes of 150K units and operating margins of 14.8% which is broadly the mid-point of the two scenarios. The implied price in this scenario is $83.
Finally, we take the average of these three scenarios to get our target price of $84.