Donald Carney & Michelle

Mueller

Table of Contents
BACKGROUND
HISTORY:
ELON MUSK AND RELEVANT
EXECUTIVES
STRATEGIC PLAN:
ORGANIZATIONAL STRUCTURE:
BUSINESS SEGMENTS:
BUSINESS PLAN:
CATALYSTS:
CURRENT MARKET SHARE:
COMPETITION
FINANCIAL ANALYSIS
TREND ANALYSIS:
EFFICIENCY RATIOS:
FINANCIAL RATIOS:
PROFITABILITY:

ISSUES WITH FINANCIAL

STATEMENTS
RISKS:
REVENUE BREAKDOWN:

Not just an automaker, but also a

technology and

VALUATION
RECOMMENDATION

design company with a focus on energy

Background

Main Headquarters: Palo Alto, California

About Tesla:
- Founded in 2003
- Teslas Mission: To accelerate the worlds transition to sustainable transport.
- Tesla is not just an automaker, but also a technology and design company with a
focus on energy innovation.
- Started by a group of engineers in Silicon Valley who wanted to prove to the
world that electric cars could be better than gasoline-powered cars.
- Uses an open source paradigm to share its technology
- Direct sales model
- IPO launch in 2010 raised $226 million
- Sales of 70,000 electric cars since 2008

Chairman, Product Architect, & CEO

Elon Musk

Bachelors degrees in physics & business

Co-Founded Tesla & oversees product strategy
Helped design ground-breaking Tesla Roadster
Started internet companies Zip2 and Paypal
Serves as CEO of SpaceX and is Chairman of SolarCity

&

Organizational Structure
- Relatively flat
- Open flow of information
- Team members can go to other departments for info
without going through managers
- Dont have time for that
- Team members are encouraged to reach outside of teams
and departments

Business Segment
Currently only in automotive industry
- selling two car models
- Model S
- Roadster
- selling parts to other automotive
makers
Moving into developmental services
- Gigafactory for batteries
- cost of up to 5 billion
- Home and business
- Powerwall

Teslas Business Plan

1-Year Plan:

Plans of cutting charging time down to just five minutes to fully charge
battery so that its the equivalent to the amount of time it takes to fill a tank of gas.

2-Year Plan:

Triple the amount of Super Charging stations along current routes and

creating new ones.

3-5-Year Plan:

Creating more affordable models for customers in the price range of $30-

$35,000

5-Year Plan:

By 2020 Tesla expects to be producing more lithium ion cells at their

Gigfactory than the entire worlds combined output in 2013.

Catalysts for Growth

- Opening dealerships
- Expected to have second largest increase of unit
production by 2018
- Increase number of vehicles by 2.5X in the next three
years: 245,000 to 630,000 units
- New industries: batteries, solar power plants and wind
turbines that produce zero emissions for charging
stations, thus creating a vegan power source.
- Supercharge stations

Current Market Share

2016 Electric Market

Competition

Financial Analysis

Trend Analysis and Capital Structure

Total Debt to Total Equity

272.90
Total Debt to Total Capital
73.18
Total Debt to Total Assets
42.54
Long-Term Debt to Equity
205.87
Long-Term Debt to Total Capital
55.21

Efficiency Ratios

Revenue per employee: $314,768

Net income per employee: -$28,938

Financial Ratios
Liquidity Ratios

Profitability Ratios

Issues with Financial Statements

-Negative Operating Income

-Negative Net Operating Cash Flow

Improving Financial Statements

Negative Investing Cash Flow:

Negative Earnings per Share:

Improving Financial Statements

-Generally Accepted Accounting Principles
-No accounting sleight of hand
-Cutting costs, selling more cars
-Day-to-day Operations
-Manufacturing Improvements
-Increasing Volume: Better Deals
-Inventory Management
-Decreasing R&D Expenses
-2013: Profitable for first time in ten-year history
-2013: Revenue of $562 million

Revenue Breakdown

Risks
-

Short tank life in comparison to charge time

Remembering to charge
Negative cost advantage amongst competitors
Traveling long distances to any desired location must
have charging stations along route
Open-source technology available to competition to
improve upon
Improvement in mileage in standard gasoline vehicles
Lack of charging stations
Currently Tesla not at a consumer price point
Battery life cycle
Stations powered by coal plants

Valuation/Recommendation

Valuation

Historical FWD P/E= 67.8

FY16 Estimate EPS = $3.49
88.24 x $3.49 = $236.62 LOW PT
Historical earnings surprise
average: 13.58
FY16E EPS $3.49*(1.1358)=$3.96
$3.96*67.8= $268.76 HIGH PT
Price Target 2015 = $252.69
(6.7% Return)

Investment Recommendation
BUY - This is not without risk
Current Price: 236.68
Target Price: 252.69
Risk Profile: High
Time Horizon: Two years +
52 Week Range:$177.22 - 291.42
Market Cap: 29,930 Million
Beta: 1.56

QUESTIONS?