Tesla, Inc.TSLANASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $195.72 per share(market-calibrated)

-51.8%

Upside to Fair Value

Current

$406.27

Pure Model

$125.54

Fair Value

$195.72

Bull Case

$207.12

Bear Case

$71.14

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

Unreachable

Calibrated Growth

75/25 blend

Market price implies assumptions beyond model range. Fair value blends 75% model / 25% market price.

What's Driving This Ratingfor TSLA

↓

CapEx normalizing toward maintenance

Historical CapEx is 9.27% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$29.1B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 11.10% — below the sector mature average of 12.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $64.6B (11.71% margin).

→

Moderate revenue growth

Analyst consensus projects 9.61% revenue growth, fading to 3.00% by Year 10. Revenue reaches $551.7B (vs $94.8B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $65.82/share (10.2x terminal FCF) while exit multiple gives $185.27/share (37.3x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

⚠

Market price exceeds model's maximum

Even with the most optimistic terminal growth the model allows, it can't reach $406.27. The market is pricing in factors beyond the DCF framework — possibly optionality, brand premium, or expectations of margin/growth inflection not yet in analyst estimates.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 53.56% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.93

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)13.17%

Cost of Debt

Pre-tax Cost of Debt3.36%

Tax Rate26.96%

After-tax Cost of Debt2.45%

Equity Weight (E/V)99.37%

Debt Weight (D/V)0.63%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (99.37% × 13.17%) + (0.63% × 2.45%)

= 13.10%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$103.9B	$142.9B	$282.3B	$429.4B	$551.7B
EBIT	$11.5B	$15.9B	$31.3B	$49.1B	$64.6B
Tax	$3.1B	$4.3B	$8.4B	$13.2B	$17.4B
NOPAT	$8.4B	$11.6B	$22.9B	$35.8B	$47.2B
+ Depreciation	$5.0B	$6.8B	$13.5B	$20.5B	$26.3B
- Capex	$9.6B	$11.6B	$19.6B	$24.7B	$22.1B
- Δ NWC	$1.6B	$3.8B	$11.7B	$12.4B	$2.7B
Free Cash Flow	$2.2B	$3.1B	$5.1B	$19.2B	$48.7B
Discount Factor	0.884	0.691	0.540	0.422	0.292
Present Value	$1.9B	$2.1B	$2.8B	$8.1B	$14.2B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$48.7B

Terminal Growth Rate3.00%

WACC13.10%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$496.7B

PV of Terminal Value$145.0B

Exit Multiple Method

Year 10 EBITDA$90.9B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$1.8T

PV of Terminal Value$531.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$59.5B

PV of Terminal Value$145.0B

Enterprise Value$204.5B

(-) Net Debt-$8.1B

Equity Value$212.7B

Shares Outstanding3.2B

Price per Share$65.82

Exit Multiple Method

PV of Projected FCFs$59.5B

PV of Terminal Value$531.0B

Enterprise Value$590.5B

(-) Net Debt-$8.1B

Equity Value$598.6B

Shares Outstanding3.2B

Price per Share$185.27

Pure Model Fair Value

$125.54

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
11.10%	$151.36	$153.23	$155.32	$157.70	$160.41
12.10%	$136.32	$137.71	$139.26	$140.98	$142.92
13.10%	$123.32	$124.38	$125.54	$126.82	$128.25
14.10%	$111.96	$112.78	$113.67	$114.65	$115.72
15.10%	$101.96	$102.60	$103.30	$104.06	$104.88

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$71.14

-82.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 2.41

Base Case

$125.54

-69.1% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.93

Bull Case

$207.12

-49.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.64

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth9.61%

Year 3 Revenue Growth18.34%

Year 5 Revenue Growth32.09%

Year 7 Revenue Growth20.45%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin11.10%

Terminal EBIT Margin12.00%

Tax Rate26.96%

Historical Capex / Rev9.27%

Terminal Capex / Rev4.00%

NWC / Revenue17.06%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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