Valuation of Tesla in 2025

Valuation of Tesla in 2025

Last year, Ark Investment estimated that Tesla’s share price would reach US$7,000 per share in 2024, or adjusted to US$1,400 in accordance with its five stock split ratio. Based on our latest research, we now estimate that this number may be close to US$3,000 in 2025.

In order to get this forecast, Ark Investment used a Monte Carlo model with 34 input values, the highest and lowest including 40,000 possibilities. Our bull and bear market targets are simulated top and bottom quartile results, as shown below:

Valuation of Tesla in 2025

Note: The figures for the 2025 price target are simply rounded up and are consistent with reasonable differences in forecasts.

Forecasts are inherently limited and unreliable. It is for reference only and should not be regarded as investment advice, or advice to buy, sell or hold any particular securities.

In our 40,000 simulations, there is no single bull-bear situation. We have selected reasonable situations for each result, as shown below:

Valuation of Tesla in 2025

Note: The total gross profit margin includes services, energy storage and others. In 2020, the gross profit margin of automobiles including credit is 26%, according to: https://www.sec.gov/archives/edgar/data/1318605/000156459021004599/tsla-10k_20201231.htm#item_6_selected_consolidated_financial_d. *

In the bear market case, Tesla is not so aggressively expanding its scale and can stay at a higher price for longer, which is beneficial to its profit margins. * * As of March 17, 2021.

Valuation of Tesla in 2025

Valuation of Tesla in 2025

Wrights Law: https://ark-invest.com/wrights-Law/. * * Simulation-driven production as a function of available cash flow for investing in electric vehicle manufacturing plants, but imposes a fixed scale limit on Tesla’s growth capacity, reflecting the company’s possible raw material and battery production bottlenecks.

Note: Wright’s Law: American Aeronautical Engineer Theodore Wright believes that through large-scale production, accumulated production experience will help factories reduce production costs. Therefore, after in-depth study of the cumulative output and cost changes of products, he proposed Wright’s Law in 1936: Every time the cumulative production volume of a product doubles, the cost will drop by a certain ratio. For the automotive industry, Generally 15%.

electric car

Since the analysis in 2024, we have added assumptions about Tesla’s capital efficiency. We previously estimated that Tesla will spend $11,000-16,000 for each additional unit of production capacity in 2024. In 2019, Tesla spent US$1.33 billion on capital expenditures (capital expenditures) and produced 509,737 cars, an increase of 144,505 from the previous year, which means that its capital expenditure for each additional car is approximately 9,200 Dollar. In 2020, Tesla spent US$3.16 billion on capital expenditures. Assuming a 60% increase in car production, the capital efficiency in 2021 is US$10,330. Please note that this calculation method may exaggerate the capital required for incremental vehicles, because part of the capital expenditure is used for long-term projects such as automated data centers and Tesla’s vertically integrated battery factory. On Battery Day, Tesla announced that over time, its updated cell chemistry and manufacturing process will reduce investment costs by 75%. In order to give Tesla the trust in what we consider to be excellent capital efficiency, we lowered our total capital expenditure estimates for each vehicle of our latest model.

Major updates to our model:

We have advanced the forecast price target by one year to 2025;

We re-estimated Tesla’s capital efficiency;

We have added Tesla’s insurance business to the model;

We added the assumption of artificial taxi service;

We have increased the likelihood that Tesla will achieve fully autonomous driving within five years.

Given these latest estimates, plus the additional year of growth added to our model, our forecast for Tesla’s unit sales in 2025 is between 5 million and 10 million.

Insurance

Because Tesla collects very detailed driving data from customer vehicles, Tesla’s profit margins on insurance may be higher than average. In cooperation with underwriters, Tesla launched its insurance products in August 2019. Currently, it can only be used in California. It is believed that in the next few years, Tesla can introduce its insurance products to more states and underwrite its own insurance policies. As the safety performance of Tesla cars is better than ordinary cars, Tesla should be able to use real-time data to insure its cars, implement dynamic pricing, reduce customer acquisition costs, and increase profit margins. Compared with the 13% pre-interest and tax profit of the forward company in 2019, Ark Investment estimates that Tesla can achieve a profit margin of close to 40%. If by 2025, Tesla sells 40% of its cars and provides its own insurance, then in our bearish scenario, Tesla’s insurance revenue may be close to $23 billion per year. In our bull market case, Ark Investment estimates that with the development of robot taxis, Tesla’s insurance income will be included in the platform fee. By 2025, insurance will increase our target price by approximately $60.

Human-driven car-hailing service

The short case of Ark’s investment now includes Tesla’s launch of a driver-driven taxi service opportunity. Prior to this, Ark Investment has stated in detail that the cost structure of Tesla’s human-driven taxi service will be lower than that of existing companies, thus laying the foundation for fully automated taxi rides. In our bearish example, the taxi service may increase Tesla’s operating profit by 20 billion US dollars by 2025, increasing its price target by approximately 500 US dollars. In order to prepare for its robotic taxi service, Tesla can first launch a human-driven ride-hailing network that provides a highly profitable source of recurring income and limits the negative impact of failed autonomous driving services. Human-driven taxi services can significantly increase Tesla’s price targets.

Taxi business

In our recent valuation model, Ark Investment assumes that Tesla has a 30% chance of achieving fully autonomous driving in the five years to 2024. Now, Ark Investment estimates that this probability is 50% by 2025. Since our last prediction, neural networks have solved many complex problems that were previously considered unsolvable, increasing the probability that robot taxis are feasible. Ark Investment estimates that Tesla’s fleet can reach 30-40 million miles per day, compared with only 20 million miles per day last year. If successful, Tesla can quickly expand its robotic taxi service, allocating additional cash to the productivity of its autonomous network services. If 60% of Tesla’s cars equipped with self-driving systems are used as robot taxis, then in 2025, Tesla can generate an additional $160 billion in EBITDA. In our bullish situation, in 2025, the taxi business will account for most of Tesla’s corporate value.

Note that autonomous driving drives a significant increase in the distribution of our expected price targets, as shown below. The first chart shows the possible distribution of all possible price targets in our Monte Carlo analysis, while the second chart shows what happens within the range of our distributed price targets.

Valuation of Tesla in 2025

In many of the lower results of our modeling, due to production constraints, Tesla’s annual output is less than 4 million vehicles, and technical and logistical bottlenecks hinder the launch of human-driven and autonomous ride networks, as shown in the gray part of the figure. When production is not restricted, the human-driven taxi service network increases the expected price target range, as indicated in green (2025, less than 20% of Tesla cars sold to taxis) (2025, 20- 70% of Tesla cars are sold to taxis) . Finally, in purple, the high-end price target includes the assumption that Tesla will launch a robotic taxi service.

In the target price of Tesla invested by Ark, please note that the production lines of electric vehicles and robot taxis produced 40% and 50% of Tesla’s expected market value. These two average values ​​were derived from our Monte Carlo simulations, as shown below Show:

Valuation of Tesla in 2025

Summarize

According to the updated overview of this blog, Ark Investment’s target price for Tesla in 2025 is $3,000. Ark’s bear market and bull market cases indicate that Tesla’s value may be approximately $1,500 and $4,000 per share, respectively.

Note: There is no Tesla’s utility energy storage or solar business in the model.

statement

1. Please note that the independent nature of Tesla’s future key driving variables means that in the 25th percentile case, not all of these variables are meant to occur at the bottom end of the result distribution; if you toss a coin three times , The negative side is the loser, the positive side is the winner, the 25th percentile situation is not three negative sides, but two negative sides and one positive side.

2. According to our 5-year target price, our company’s modeling will stop reinvesting in the production platform that year, and assume that the market will only pay industry standard multiples for cash flow (rather than paying higher multiples, because the latter is more in line with The possible continued growth trajectory of the company at that time) .

3. Please note that during Tesla’s fourth quarter 2020 earnings conference call, Elon Musk stated that he believes Tesla can achieve a “meaning more than 50%” growth rate in 2021: https://seekingalpha .com/article/4401481-Tesla-inc-tsla-ceo-Elon-Musk-on-q4-2020-results-earnings-call-transcript.

4. Please note that our bear market case estimates that US$23 billion in insurance revenue in 2025 will be close to US$26 billion in revenue.

Translator’s Note

After reviewing the valuation model used in Ark Investment, and considering that a large number of meaningless results will be generated under the Monte Carlo simulation method, it is found that some of the assumptions here are problematic, and the actual input data may be very little in the end, so the results are too optimistic .

Valuation of Tesla in 2025

Valuation of Tesla in 2025

The first is the car sales volume sold by Cars in 2025. According to a report recently released by the international credit rating agency Standard & Poor’s, it raised the growth forecast for the global automotive industry. The report predicts that global car sales will be approximately 83 to 85 million in 2021, an increase of 8% to 10%. It is difficult for Tesla to reach the sales volume entered in Monte Carlo by 2025 (such as 130 million in the first column) .

Second, Tesla will deliver around 500,000 cars in 2020. If it wants to achieve 10 million in 2025, the average annual compound growth rate will be as high as 82%, which is difficult to achieve. Although Tesla currently has the Shanghai super factory and the Fremont factory in California, it is still preparing to build factories in Berlin and Texas. The production date of the Berlin plant has been postponed from the end of this year to the beginning of next year, while the Texas plant is still scheduled to start delivering cars later this year.

Between 2016 and 2020, Tesla’s vehicle deliveries have grown at an average rate of 65%. In 2016, Tesla delivered 76,230 vehicles, and in 2020 it increased to 499,535 vehicles.

Assuming that the average annual growth rate of Tesla’s annual delivery volume in the next four years is 50%, and the average annual growth rate afterwards drops to 25%, then by 2030, Tesla’s car sales may be close to 10 million. If we only forecast Tesla’s growth rate over the past four years, Tesla’s expected growth number looks reasonable. However, growth in the past was built on a relatively low basis, and now it may not be easy to increase production at such a high rate.

Tesla’s current annual production capacity is about 1 million vehicles. In the future, with the addition of factories in Berlin and Texas, Tesla’s production capacity may be doubled. According to the average production capacity of each factory of 500,000 vehicles, to reach the target of 10 million vehicles, Tesla may need about 16 factories.

Excluding these less likely data, about 40% of the valid data in Monte Carlo are invalid. For other indicators, there may still be some overly optimistic assumptions, which are also limitations in valuation. Sexual place.

refer to:

https://deepmind.com/blog/article/alphafold-using-ai-For-scientific-discovery;

https://www.technologyreview.com/2020/07/20/1005454/openai-machine-learning-language-generator-gpt-3-nlp/;

https://openai.com/blog/clip/;

https://ai.facebook.com/blog/timesformer-a-new-architecture-For-video-understanding/.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/valuation-of-tesla-in-2025/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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