MS TSLA downgrade - AI Dream Meets Auto Reality; Downgrade to Equal-weightpdf
MS TSLA downgrade - AI Dream Meets Auto Reality; Downgrade to Equal-weightpdf
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  1. Adam.Jonas@morganstanley.comEvan.Silverberg@morganstanley.comDaniela.Haigian@morganstanley.comDiego.Ortega.Laya@morganstanley.comMORGANSTANLEY&CO.LLCAdamJonas,CFAEQUITYANALYST+1212761-1726EvanSilverberg,CFA,CPAEQUITYANALYST+1212761-4376DanielaMHaigianRESEARCHASSOCIATE+1212761-6071DiegoOrtegaLayaRESEARCHASSOCIATE+1212761-9835MorganStanleyappreciatesyoursupportinthe2023InstitutionalInvestorNorthAmericaResearchSurvey.Requestyourballothere.Autos&SharedMobility/UnitedStatesofAmericaStockRatingEqual-weightIndustryViewIn-LinePricetarget$250.00Shrprice,close(Jun21,2023)$259.46Mktcap,curr(mm)$899,80752-WeekRange$314.67-101.81FiscalYearEnding12/2212/23e12/24e12/25eEPS($)**4.073.033.694.91PriorEPS($)**-3.023.444.53ModelWareEPS($)3.622.583.244.44Unlessotherwisenoted,allmetricsarebasedonMorganStanleyModelWareframework**=Basedonconsensusmethodologye=MorganStanleyResearchestimatesStockRatingEqual-weightIndustryViewIn-LinePriceTarget$250.00TeslaInc|NorthAmericaAIDreamMeetsAutoReality;DowngradetoEqual-weightWeseeTeslaasanAIbeneficiaryANDanautocompany.Highexpectationsontheformerhasbroughtthestocktoafairvaluation,movingustoEWwitharevised$250PT(BullCase$450,BearCase$90).WHAT'SCHANGED?TeslaInc(TSLA.O)From:To:PriceTarget$200.00$250.00RatingOverweightEqual-weightIammostgratefulforyoursupportfortheMorganStanleyAuto&AutoPartsteaminthisyear'sAll-AmericaInstitutionalInvestorsurvey.Respectfully,AJ:Howtovote:Torequestaballot,pleasegotohttps://voting.institutionalinvestor.comandselect“All-AmericanResearchTeam”.Ihavetobeup-frontwithyouall.WhiletheteamhasdefendedtheTeslaOWratingallyear,Ididnotseethis111%YTDrallycoming(theS&P500isup14%YTD,forcontext).Wethinkit'sunderstandableandaresympathetictothechangesinthemarketnarrativearoundthename.We'renottryingtocall'theend'totheTeslarallyandfromourdiscussionscontinuetofindasignificantdegreeofinvestorskepticism/lackofexposurearoundthename.WhilewemovetoEqual-weight,inourview,Teslaremainsa'mustown'companyinanyEVportfolio.WeseecontinuedevidencethatTeslaisemergingasanindustrial'standardbearer'foroneofthegreatestindustrialchangeswe'vewitnessedinoveracentury-theelectrictransportandrenewableenergyeconomy.ThisgoeswellbeyondsuperchargingdealswiththelikesofGMandFordandlookforotherpotentialareasofcollaboration(batterysupply,operatingsystem,FSD,etc.)tofollow.Someinvestorsmayfeelinclinedtoplaythepositivemomentumfromhere,butwebelievethecurrentprice,atover100xourFY23USGAAPEPSforecast,discountssignificantlymorethanTeslaasjustadominantEVcompany.Webelievestockupsidefromheremustcomedespiteourviewofcontinueddownwardskewtoconsensusestimates(seeExhibit1)whichmayprovemoreTeslaInc(TSLA.O,TSLAUS)MorganStanleydoesandseekstodobusinesswithcompaniescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanleyResearch.InvestorsshouldconsiderMorganStanleyResearchasonlyasinglefactorinmakingtheirinvestmentdecision.Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.1June 22, 2023 10:00 AM GMT
  2. challenging.WeraiseourTeslapricetargetto$250from$200,BearCasevaluationto$90from$70,andBullCasevaluationto$450from$390.Followingthesechanges,wechangeourratingtoEqual-weightfromOverweightgivenarelativelyfullvaluationandamorebalancedriskrewardandhighlightkeydriversandinvestordebatesforthestockatthislevel.TeslaasanAIcompany.FollowingNvidia'sblowoutquarter,AIexposedstockshaveoutperformedbroadlyandinvestorsareconstructingportfolioswithexposuretothetheme.WhileweunderstandwhyTeslagetsaseriousmentioninanAIconversation,webelieveare-ratingonthisthemeisintherealmofthenon-disprovablebullcase.AutonomousdrivingandgenerativeAIstillremain,inourview,twoverydifferenttechnologicaldisciplines.WhilethemarketmaywanttodreamontheAItheme,we'dpreparetowakeuptothesoundofablaringcarhorn(NvidiaiscoveredbysemisanalystJoeMoore).YoucanwatchareplayoftheZoomWebinaronTeslaAIwithMorganStanleySemisanalystJoeMooreHERE.Teslaasa'platform'operatorwhocanprovideservicestocompetitors.AsTeslaapproachesthe$300level,wethinkthestockbeginstodiscountabusinessbasedonrecurringsoftware-derived/software-deliveredrevenue(i.e.SaaS)fromitsvehiclenetworkandotherservicesbeyondjustthe1-timesaleofautomobiles.Whilewedidnotexpectthisrecentrallyinthecompany’sshares,wesuspectmanyinvestorsmaybeagainlookingatwaystojustifythevaluationbeyondtheconfinesofaunitxpriceautomotive/hardwaremodel.We'vealreadybeguntoseethisplayout:Ford,GM,andmostrecentlyRivianhavejoinedTesla'sincreasinglyubiquitoussuperchargingnetworkinthelastmonth.Teslaearningsstillatrisk.Despitetherecentrally,weexpectmaterialnegativerevisionsforTeslaconsensusearningsforecastsandcontinuetoexpectalong-termtrendofpricedowns/ATPdeclinesatTesladrivenbyintensifyingcompetitionwithChineseEVplayersandaslowingautoconsumer.Itseemsthemarketiseitherlookingthroughthepotentialrevisionsorassumingalesssevereearningsdowndraftthanpreviouslyexpected.Ourforecastfor$3.03FY23NonGAAPDilutedEPSis~10%belowtheconsensusestimateof$3.36.HavewepassedthroughtheworstofTesla’sprice-cut-drivenestimatereset?Is$3/sharethebottomforTeslaearningsthiscycle?2
  3. RiseoftheChineseOEMs.Asthelargest,mostsaturatedEVmarketintheworld,aslowingoftheChinesedomesticEVmarkethasacceleratedinvestorquestionsaboutapotentialreleaseofChinesesupplyintotheexportmarket,yearsaheadofexpectations.WehaveyettoseeanotherOEMthathasbeenabletorivalTeslawithanEVthatofferscurrent,attractiveuniteconomics.TheTeslahegemonyestablishedintheWesthasmadethecompanyseeminglyinvulnerabletocompetitionuptothispoint.ChineseOEMsarethefirstthatmayhaveashotatdisruptingthewayinvestorsviewTesla'sEVdominance.AlthoughweacknowledgethattherearemanyfactorscontributingtoChineseOEMsgainingshareintheirhomemarket(incentives,increasedcapacityfrommultipleplayersetc),TeslahasbeenlosingshareinChinasincethepeakin2020.OurmessageisthatinvestorsshouldgetcomfortablewithTeslasharingtheEVsandboxwithChinainthequartersandyearstocome.ValuationRelativeValuation.Arecentrunthathastakenthestockashighas$274,beforeyesterday'scloseof$259hasbroughtthestocktoover50xFY23eEBITDAvsthestock’s3yearhistoricalaverageof39xand5yearaverageof27x(for~EV/ForwardYearconsensusEBITDA).WethinkthatTeslamighthavebeencaughtupintheAImultiplepremiumgiventherecentwaveofinterestsurroundingthetechnology.WhilewedoagreewiththemeritsofclassifyingTeslaasan“AIcompany”(IsTeslaanAICompany?Yeah,SureBut...),wewouldurgecautionagainstgroupingallaspectsofAI(forexample,LLMwithvision-basedneuralnetworktraining)intoonebucket.Asaresult,webelievethatTesla’scurrentvaluationisrelatively“full”.Exhibit1:TeslaMorganStanleyEstimatesvs.Consensus2Q23eMSevs.ConsFY23eMSevs.ConsFY24eMSevs.ConsMSeCons%differenceMSeCons%differenceMSeCons%differenceAutoDeliveries(000s)432.7446.0-3.0%1,818.61,821.0-0.1%2,513.52,357.06.6%SolarDeployed(MW)111.3113.0-1.5%396.4359.310.3%515.3476.48.2%StorageDeployed(GWh)4.03.77.3%15.914.410.7%23.924.0-0.6%TotalRevenues($mn)24,09723,9370.7%98,86799,492-0.6%133,809128,2304.4%GrossProfit($mn)4,3834,410-0.6%18,07519,288-6.3%24,59128,331-13.2%EBIT($mn)2,4802,569-3.5%10,39111,652-10.8%14,55518,609-21.8%NonGAAPDilutedEPS$0.72$0.77-6.5%$3.03$3.36-9.8%$3.69$4.83-23.6%Source:Factset,VisibleAlpha,MorganStanleyResearchExhibit2:TeslaForwardYearEV/EBITDAx10x20x30x40x50x60x70x80xJune-18June-19June-20June-21June-22June-23EV/EBITDA5YAverage3YAverageSource:FactSet,MorganStanleyResearch3
  4. ChangestoBull/Bear/BaseCaseScenarios.Outofthe$50addedtoourTeslapricetarget,$42wascomprisedofincreasestoourvalueofTeslaNetworkServicesandTeslaEnergy.Just$8wasdrivenbythecoreautosbusinesscomparedtootherfactors.Exhibit3:Consensus'23EV/EBITDAvsLongTermGrowthAPTVNFLXAAPLNVDAMBLYTSLA(PT)GOOGLCRM0x10x20x30x40x50x60x70x0%10%20%30%40%50%60%70%EV/EBITDA'23eLong-TermEPSGrowthSource:FactSetExhibit4:USEVOEMs-RiskAdjustedReturn("RAR"–SharpeRatiostylemetrictakingaverageofPriceTarget,Bull,andBear,dividedbythespreadinBull-Bear)25%1%9%11%0%5%10%15%20%25%30%35%RivianTeslaFiskerLucidOverweightEqualweightUnderweightSource:MorganStanleyResearchBearCasevaluation($90from$70):Our$90bearcaseascribes$60/shareforautomotivewhichassumes5.5mnunitsby2030ata13%EBITDAmargin.WeincludeTeslaMobility(rideshare)at$0,TeslaNetworkServicesat$15/share(10mMAUsby2030)andTeslaEnergyat$15/share.Teslaasa3rdpartysuppliervaluedat$0/shareand$0valueforinsurance.Atourbearcase,Teslatradesat~3.8x2030eEV/EBITDA.BaseCasePT($250from$200):OurPTof$250iscomprisedof6components:(1)$94/shareforcoreTeslaAutobusinesson7.9mmunitsin2030,9.0%WACC,12x2030exitEBITDAmultiple,exitEBITDAmarginof16.4%.(2)TeslaMobilityat$11onDCFwith~500kcarsat$1.7/mileby2030.(3)Teslaasa3rdpartysupplierat$28/share.4)Energyat$48/share,5)Insuranceat$8/share,and6)NetworkServicesat$60/shareon20.5mmMAUs,$100ARPUby2030,anda30%discountfor4
  5. ChangestoEstimatesOurestimatesforTeslaAuto(Core)andourincomestatementforFY23andFY24remainrelativelyunchanged,withthemajorityofourchangeinpricetargetprimarilydrivenbyincreasestoancillarybusinessassumptionslongerterm.technological,regulatory,andexecutionrisk.AtourPT,Teslatradesat~11x2030eEV/EBITDA.BullCasevaluation($450from$390):Forthecoreautobusiness,weassumeTSLAisabletodeliver10mmunitsby2030with~22%EBITDAmargins,whichimpliesavalueof~$194/share.WevalueTeslaMobility/Ridesharingat$37/share(1mmfleetby2030),andforEnergy,$65/share(35%20yrrevCAGR).$40/shareisallocatedforTeslaasanEVpowertrain&batterysupplier(assumes3mmunitsat25%EBITDAmarginand25xexitEV/EBITDAat2030).Insuranceisvaluedat$16/share.TeslaNetworkServicesvaluedat$98/share,on25mmconnectedMAUsat$120MonthlyRRU.Atourbullcase,Teslatradesat~20x2030eEV/EBITDA.Exhibit5:TSLAPriceTargetBridgefromOld($200)toNew($250)Source:MorganStanleyResearchExhibit6:SummaryofPriceTargetMethodologybyCaseBullCaseTeslaAuto(Core)$19410millionunitsby2030with22%EBITDAmargin.TeslaEnergy$6535%20yrrevenueCAGR,30%grossmarginby2030TeslaInsurance$1650%penetration,20%underwritingmarginby2030TeslaMobility/ride-sharing$371millioncarfleetby2030,18%OPmarginTeslaNetworkServices(net)$9825mmMAUat$120ARPUby2030.Netofeliminations.EVP-train3rdparty$403.0millionunitsby2030,25%EBITDAmarginand25xexitEV/EBITDATotal$450BaseCaseTeslaAuto(Core)$947.9millionunitsby2030at11.6%OPmargin(16.4%EBITDAmargin)TeslaEnergy$4824%20yrrevenueCAGR,25%grossmarginby2030TeslaInsurance$815%penetrationand12%underwritingmarginby2030TeslaMobility/ride-sharing$11~500kfleetby2030,12%OPmargin,$1.7/mile,3%terminalgrowthrateTeslaNetworkServices(net)$6020.5mmMAUat$100ARPUby2030.Netofeliminations.70%probability.EVP-train3rdparty$281.6millionunitsby2030,25%EBITDAmarginand25xexitEV/EBITDA.Total$250BearCaseTeslaAuto(Core)$605.5millionunitsby2030with13%EBITDAmargin.TeslaEnergy$1512%20yrrevenueCAGR,20%grossmarginby2030TeslaInsurance$0Assumed$0valueinbearcaseTeslaMobility/ride-sharing$0Assumed$0valueinbearcaseTeslaNetworkServices$1510mmMAU,$50ARPUby2030EVP-train3rdparty$0Assumed$0valueinbearcaseTotal$90Source:MorganStanleyResearchNetworkServices:Raisingprobabilityto70%(from50%previously)5
  6. increasedourPTby$14.Raising2030MAUattachrateto65%(from56%previously)increasedourPTby$10.Raising2030ARPUto$200/mo(from$80/mopreviously)increasedourPTby$6.Energy:Raisinggrowthrateto27.3%(from25.1%previously)withnochangetogrossmargin(constantat23.2%)increasedourPTby$12.Auto:WeincreasedFY24autosgrossmarginto18.5%(17.5%ex-ZEV)vs.17.9%previously(16.9%ex-ZEV).FY30grossmarginincreasedto17.6%(17.0%ex-ZEV)vs.16.8%(16.8%ex-ZEV)previously.Wealsoincreasedregulatorycreditrevenueperunit,toarriveathigherregulatorycreditrevenues(FY25at$1,821mnvs.$1,546mnpreviouslyandFY30at$2,356mnvs.$0mnpreviously).SlightlyincreasedmarginandregulatorycreditrevenuesinouteryearsincreasedourPTby$8.Exhibit7:ChangestoourEstimates:IncomeStatementIncomeStatement($MM)2023eOld∆2024eOld∆RevenueAuto84,80084,8000114,769114,7690Energy+ServicesandOther14,06814,068019,04017,8711,169ZEVCredit1,4471,44701,3821,3820TotalRevenue98,86798,8670133,809132,6401,169COGSAuto68,01868,018093,49394,270(777)Energy+ServicesandOther12,77512,775015,72514,777948GrossProfitAutoGrossProfit16,78216,782021,27620,499777%GrossMargin19.8%19.8%0.0%18.5%17.9%0.7%%GrossMargin(ex.ZEV)18.4%18.4%0.0%17.5%16.9%0.7%Energy+ServicesandOtherGrossProfit1,2931,29303,3153,094221%GrossMargin9.2%9.2%0.0%17.4%17.3%0.1%TotalGrossProfit18,07518,075024,59123,593998%GrossMargin18.3%18.3%0.0%18.4%17.8%0.6%R&D3,2373,264(26)4,4164,37739%ofSales3.3%3.3%(0.0%)3.3%3.3%0.0%SG&A4,4474,44705,6205,833(213)%ofSales4.5%4.5%0.0%4.2%4.4%(0.2%)RX000000OperatingIncome10,39110,3652614,55513,3831,173%Margin10.5%10.5%0.0%10.9%10.1%0.8%SBC1,6141,620(5)1,6951,701(6)InterestExpense(329)(329)0(223)(223)(0)Otherexpense/(income),net(48)(48)0(48)(48)0Pre-TaxEarnings10,67210,6462614,73113,5571,173IncomeTax1,3421,33842,5832,372211%TaxRate12.6%12.6%0.0%17.5%17.5%0.0%NetlosscontributabletoNCI(116)(116)0(122)(122)0NetIncome9,2159,1922212,02611,064962GAAPEPS$2.58$2.57$0.01$3.24$2.98$0.26DilutedCommonSharesOutstanding3,5753,57503,7153,7150FreeCashFlow6,8796,8621711,95511,035920CapitalExpenditures8,2078,20708,6988,62276Source:MorganStanleyResearchExhibit8:ChangestoourEstimates:CoreAutosBusinessSegments2023eOld∆2024eOld∆2025eOld∆2030eOld∆UnitsRoadster200200-2,0002,000-2,1002,100-2,6802,680-ModelS35,69535,695-42,83442,834-49,25949,259-65,90865,908-ModelX30,40030,400-34,96034,960-40,20440,204-61,17161,171-Model3607,180607,180-819,693819,693-1,065,6011,065,601-1,783,3841,783,384-ModelY1,140,0001,140,000-1,482,0001,482,000-1,778,4001,778,400-2,777,9002,777,900-Cybertruck5,0005,000-100,000100,000-140,000140,000-469,748469,748-Compact---30,00030,000-300,000300,000-1,706,2501,706,250-MPV----0-50,00050,000-955,500955,500-Semi100100-2,0002,000-10,00010,000-29,80829,808-TotalUnits1,818,5751,818,57502,513,4872,513,48703,435,5643,435,56407,852,3497,852,3490ATPAverageATP$46,077$46,077$0$45,111$45,111$0$43,190$43,190$0$39,544$39,544$0Source:MorganStanleyResearch6
  7. TeslaisstillourpreferredwaytoplaythelongtermEV/batteryonshoringtheme,anditremainsa'mustown'companyinanyEVportfolio.Teslaisinthemidstofanindustry-wideEVpricewar,fallingmarginsandEVmarketdeceleration.Ifthecompanywasn'tbenefittingfromsignificantgovernmentincentives(IRA)andpricecuts(30%onModelYYTD),Teslacouldbeburningcash.However,withinourcoverage,weseeTeslaasbestpositionedtonavigatethegeopoliticalandeconomicchallengesinherentinre-wiringtheEVbatterysupplychain.Morethan'AIplay,'webelieveTesla'sroleinbuildingade-riskedEVsupplychainisunderappreciatedbythemarket.Forfurtherreading,pleasesee:Exhibit9:NAAutosRankingTableMSCons1FerrariOW€6.15€6.92(11.1%)2FordMotorOW1.561.79(13.1%)3Harley-DavidsonOW4.764.78(0.4%)4GeneralMotorsOW5.726.72(14.9%)5AmericanAxleOW0.420.3810.4%6MagnaInternationalOW4.754.94(3.9%)7RivianOW-5.67-5.39NM8BorgWarnerInc.OW5.034.990.8%9AvisBudgetOW32.4033.64(3.7%)10CarMaxOW3.032.4523.7%11TeslaEW3.033.44(11.9%)12FREYRBatteryEW-1.66-1.27NM13LearEW11.2011.031.5%14HertzEW2.002.53(20.8%)15VisteonEW6.267.02(10.8%)16CarvanaEW-4.98-6.38NM17APTIVEW4.374.360.3%18AdientUW1.341.58(15.5%)19AutoNationUW21.4022.23(3.8%)20LucidUW-1.32-1.27NM21Group1AutomotiveUW41.2841.42(0.3%)22LithiaMotorsUW33.8034.47(2.0%)23AsburyAutomotiveUW29.9031.60(5.4%)24SonicAutomotiveUW6.776.523.9%25PenskeAutomotiveGroupUW15.3015.91(3.8%)26Li-CycleUW-1.01-0.76NM27QuantumScapeUW-0.89-0.83NM28FiskerUW-1.65-0.77NM29MobileyeGlobal++0.640.640.0%NorthAmerica2023eEPSSource:FactSet,MorganStanleyResearchTeslaInc:TheRealReasonTesla'sSharingitsChargingNetwork?(15Jun2023)TeslaInc:TSLAUp13StraightDays:What’sGoingOn?(13Jun2023)TeslaInc:Sergio’sProphecyPuttotheTest?(12Jun2023)Podcast|MorganStanleyTechTalk:AdamJonasonTSLAAIstory,GM&Fordchargingdeals,EVpricecuts|Episode122(13Jun2023)TeslaInc:TeslaFinancialServices:It'sTime(12Jun2023)GeneralMotorsCompany:GMJoinsTeslaSuperchargerNetwork,StockRises(9Jun2023)TeslaInc:Tesla’sAIRally,Apple’sHeadsetBattery,andMyTruck(7Jun7
  8. 2023)TeslaInc:IsTeslaDoingDetroitaFavor?Part2(31May2023)Autos&SharedMobility:WhatCanDetroitDo?(30May2023)TeslaInc:Trade,Build,Settle:ElonMuskPlaysElectricCatan(25May2023)8
  9. $250.00OurPTof$250iscomprisedof6components:(1)$94/shareforcoreTeslaAutobusinesson7.9mmunitsin2030,9.0%WACC,12x2030exitEBITDAmultiple,exitEBITDAmarginof16.4%.(2)TeslaMobilityat$11onDCFwith~500kcarsat$1.7/mileby2030.(3)Teslaasa3rdpartysupplierat$28/share.4)Energyat$48/share,5)Insuranceat$8/share,&6)NetworkServicesat$60,20.5mmMAUs,$90ARPUby2030,30%discount.MeanMorgan Stanley EstimatesConsensus Price Target Distribution$24.33$335.00Source:Refinitiv,MorganStanleyResearMS Rating▪Adouble-fly-wheel.WebelieveTSLAcleverageitscostleadershipinEVstoaggressivelyexpanditsuserbaseandovertimegenerateahigher%ofrevenuefromrecurring/high-marginsoftware&services.▪Services/Charginginfocus.WeforecastTSLA'sservicesEBITDAtoaccountfor22%oftotalEBITDAby2030&~38%by2040.Includes:FSD,infotainment,upgrades,charging,maintenance,etc.▪ValuationfullwithabalancedR/R.IncludingServices,Energy&Insuranceinourforecast,at$250,Teslatradesat~11x2030EBITDAand~2x2030sales.BearCaseof$90withBullCaseof$450.▪Growth:WeforecastTSLAtosell7.9mmunitsby2030andgrowtotalrevenueata25%8yrCAGR.Consensus Rating Distribution51%Overweight37%Equal-weight12%UnderweightSource:Refinitiv,MorganStanleyResearRisk Reward ThemesDisruption:PositiveSecularGrowth:PositiveElectricVehicles:PositiveView descriptionsofRiskRewardsThemeshere$450.00~20x2030eEV/EBITDAForthecoreautobusiness,weassumeTSLAisabletodeliver10mmunitsby2030with~22%EBITDAmargins,whichimpliesavalueof~$194/share.WevalueTSLAMobility/Ridesharingat$37/share.ForEnergy,$65/share(35%20yrrevCAGR).$40/shareallocatedforTSLAasanEVpowertrain&batterysupplier(assumes3mmunitsat25%EBITDAmarginand25xexitEV/EBITDAat2030).Insuranceisvaluedat$16/share.TSLANetworkServicesvaluedat$98/share,on25mmconnectedMAUsat$120MonthlyRRU$250.00~11x2030eEV/EBITDAOurPTof$250iscomprisedof6components:(1)$94/shareforcoreTeslaAutobusinesson7.9mmunitsin2030,9.0%WACC, 12x2030exitEBITDAmultiple,exitEBITDAmarginof16.4%.(2)TeslaMobilityat$11/shareonDCFwith~500kcarsat$1.7/mileby2030.(3)Teslaasa3rdpartysupplierat$28/share.4)Energyat$48/share,5)Insuranceat$8/share,&6)NetworkServicesat$60/share,20.5mmMAUs,$100ARPUby2030,30%discountfortechnological,execution,andcompetitiverisks.$90.00~3.8x2030eEV/EBITDAOur$90bearcaseascribes$60/shareforautomotivewhichassumes5.5mnunitsby2030ata13%EBITDAmargin.OthervalueisascribedtoTeslaMobilityat$0/share,TeslaNetworkServicesat$15/share(10mMAUsby2030)andTeslaEnergyat$15/share.Teslaasa3rdpartysuppliervaluedat$0/share,$0/sharevalueforinsurance.RiskReward–TeslaInc(TSLA.O)BeyondEVs:InternetofCarsandNetwork/SoftwareServicesOptionalityPRICETARGETMS PT$194.84RISKREWARDCHARTANDOPTIONSIMPLIEDPROBABILITIES(12M)Key: Historical Stock Performance Current Stock Price Price TargetSource:Refinitiv,MorganStanleyResearch,MorganStanleyInstitutionalEquitiesDivision.TheprobabilitiesofourBulBase,andBearcasescenariosplayingoutwereestimatedwithimpliedvolatilitydatafromtheoptionsmarketasof{{date}}21Jun,2023.Allfiguresareapproximaterisk-neutralprobabilitiesofthestockreachingbeyondthescenarpriceineitherthree-months’orone-years’time.View explanationofOptionsProbabilitiesmethodologyhere$259.46$450.00(+7733.4.444%%))Prob(>450.00)~2.7%$90.00(-6655.3.31%1%))Prob(<90.00)~6.9%$250.00(-33..6655%%))Prob(>250.00)~41.3%JUN'22DEC'22JUN'23JUN'240120240360480USDEQUAL-WEIGHTTHESISBULLCASEBASECASEBEARCASEH9
  10. Drivers20222023e2024e2025eTotal Deliveries1,313,8511,818,5752,513,4873,435,564Total Revenue ($, mm)81,46298,867133,809176,755Auto Gross Margin (%)28.519.818.518.1Free Cash Flow ($, mm)7,5666,87911,95518,900Net Debt (Cash) ($, mm)(19,086)(26,164)(38,119)(57,019)5/5BEST24 MonthHorizon5/5MOST3 MonthHorizonIndicatorofChange0.75DisclosureRate25%Sales,ChinaMarketAnnouncementsPricingAdjustmentsBerlin/AustinGigaRampFremontBatteryPilotRampCybertruck&NewModelannouncementsEmergingCompetition(fromtraditionalOEMs,startups,&largetechfirmServicesdisclosure0-10%Latin America0-10%MEA0-10%UK20-30%Europe ex UK20-30%Mainland China30-40%North AmericaSource:MorganStanleyResearchEstimateView explanationofregionalhierarchieshereSource:Refinitiv,FactSet,MorganStanleyResearch;1thehighestfavoredQuintileand5istheleastfavoredQuintileInst. Owners, % Active47.5%HF Sector Long/Short Ratio1.4xHF Sector Net Exposure8.3%Refinitiv;MSPBContent.IncludescertainhedgefuexposuresheldwithMSPB.Informationmaybeinconsistentwithormaynotreflectbroadermarktrends.Long/ShortRatio=LongExposure/Shortexposure.Sector%ofTotalNetExposure=(Foraparticularsector:LongExposure-ShortExposure)/(Acrossallsectors:LongExposure–ShortExposure).DisclosureonservicerevsIncreasedFSDattachrateCostmilestonesonnewbatteryNewmodelintro(Cybertruck,multivan,Semi)3rdpartybatterywinGeographicpenetration&newcapacityCompetition:legacyOEMs/Chinesedomestics/mega-techExecutionriskwithmultiplefactoryrampsFailureformarkettorecognizeservicesop&lowerthanexpectedattachrate&RPUChinarisksDilutionValuationMeanMorgan Stanley EstimatesSource:Refinitiv,MorganStanleyResearFY Dec 2024eSales /Revenue($,mm)111,634157,673EBITDA($,mm)19,70136,811EPS($)3.448.31RiskReward–TeslaInc(TSLA.O)KEYEARNINGSINPUTSINVESTMENTDRIVERSGLOBALREVENUEEXPOSUREMSALPHAMODELSSUSTAINABILITY&ESG+1.0-1.0RISKSTOPT/RATINGRISKS TO UPSIDERISKS TO DOWNSIDEOWNERSHIPPOSITIONINGMSESTIMATESVS.CONSENSUS133,809127,73320,93023,7413.694.85H10
  11. ValuationMatrixExhibit10:ValuationMatrixTeslaValuationMatrixInputs2022-Q4CurrentSharePrice($)$259.46DilutedSharesOutstanding(mm)-YE223,471MarketCap900,586NetDebt(YE-22)(19,086)EnterpriseValue881,5002022CAGR2022E2023E2024E2025E2030Eto2030Sales81,46298,867133,809176,755411,93122%OperatingIncome13,65610,39114,55520,15557,476%Margin16.8%10.5%10.9%11.4%14.0%EBITDA17,36014,94120,93028,59177,20021%%Margin21.3%15.1%15.6%16.2%18.7%EPS$3.62$2.58$3.24$4.44$11.3615%SharePrice/Sales(x)EV/Sales(x)Price($)2023E2025E2030E2023E2025E2030E2023E2025E2030E2023E2025E2030E$30$104,130$85,0441.1x0.6x0.3x0.9x0.5x0.2x5.7x3.0x1.1x11.6x6.8x2.6x$50$173,550$154,4641.8x1.0x0.4x1.6x0.9x0.4x10.3x5.4x2.0x19.4x11.3x4.4x$70$242,970$223,8842.5x1.4x0.6x2.3x1.3x0.5x15.0x7.8x2.9x27.2x15.8x6.2x$90$312,390$293,3043.2x1.8x0.8x3.0x1.7x0.7x19.6x10.3x3.8x34.9x20.3x7.9x$100$347,100$328,0143.5x2.0x0.8x3.3x1.9x0.8x22.0x11.5x4.2x38.8x22.5x8.8x$120$416,520$397,4344.2x2.4x1.0x4.0x2.2x1.0x26.6x13.9x5.1x46.6x27.0x10.6x$140$485,940$466,8544.9x2.7x1.2x4.7x2.6x1.1x31.2x16.3x6.0x54.3x31.5x12.3x$160$555,360$536,2745.6x3.1x1.3x5.4x3.0x1.3x35.9x18.8x6.9x62.1x36.0x14.1x$170$590,070$570,9846.0x3.3x1.4x5.8x3.2x1.4x38.2x20.0x7.4x66.0x38.3x15.0x$180$624,780$605,6946.3x3.5x1.5x6.1x3.4x1.5x40.5x21.2x7.8x69.8x40.5x15.8x$190$659,490$640,4046.7x3.7x1.6x6.5x3.6x1.6x42.9x22.4x8.3x73.7x42.8x16.7x$200$694,200$675,1147.0x3.9x1.7x6.8x3.8x1.6x45.2x23.6x8.7x77.6x45.1x17.6x$210$728,910$709,8247.4x4.1x1.8x7.2x4.0x1.7x47.5x24.8x9.2x81.5x47.3x18.5x$220$763,620$744,5347.7x4.3x1.9x7.5x4.2x1.8x49.8x26.0x9.6x85.4x49.6x19.4x$230$798,330$779,2448.1x4.5x1.9x7.9x4.4x1.9x52.2x27.3x10.1x89.2x51.8x20.3x$240$833,040$813,9548.4x4.7x2.0x8.2x4.6x2.0x54.5x28.5x10.5x93.1x54.1x21.1x$250$867,750$848,6648.8x4.9x2.1x8.6x4.8x2.1x56.8x29.7x11.0x97.0x56.3x22.0x$270$937,170$918,0849.5x5.3x2.3x9.3x5.2x2.2x61.4x32.1x11.9x104.8x60.8x23.8x$290$1,006,590$987,50410.2x5.7x2.4x10.0x5.6x2.4x66.1x34.5x12.8x112.5x65.3x25.5x$310$1,076,010$1,056,92410.9x6.1x2.6x10.7x6.0x2.6x70.7x37.0x13.7x120.3x69.8x27.3x$330$1,145,430$1,126,34411.6x6.5x2.8x11.4x6.4x2.7x75.4x39.4x14.6x128.0x74.3x29.1x$350$1,214,850$1,195,76412.3x6.9x2.9x12.1x6.8x2.9x80.0x41.8x15.5x135.8x78.8x30.8x$370$1,284,270$1,265,18413.0x7.3x3.1x12.8x7.2x3.1x84.7x44.3x16.4x143.6x83.4x32.6x$390$1,353,690$1,334,60413.7x7.7x3.3x13.5x7.6x3.2x89.3x46.7x17.3x151.3x87.9x34.3x$410$1,423,110$1,404,02414.4x8.1x3.5x14.2x7.9x3.4x94.0x49.1x18.2x159.1x92.4x36.1x$430$1,492,530$1,473,44415.1x8.4x3.6x14.9x8.3x3.6x98.6x51.5x19.1x166.8x96.9x37.9x$450$1,561,950$1,542,86415.8x8.8x3.8x15.6x8.7x3.7x103.3x54.0x20.0x174.6x101.4x39.6x$470$1,631,370$1,612,28416.5x9.2x4.0x16.3x9.1x3.9x107.9x56.4x20.9x182.4x105.9x41.4x$490$1,700,790$1,681,70417.2x9.6x4.1x17.0x9.5x4.1x112.6x58.8x21.8x190.1x110.4x43.1x$510$1,770,210$1,751,12417.9x10.0x4.3x17.7x9.9x4.3x117.2x61.2x22.7x197.9x114.9x44.9x$530$1,839,630$1,820,54418.6x10.4x4.5x18.4x10.3x4.4x121.8x63.7x23.6x205.6x119.4x46.7x$550$1,909,050$1,889,96419.3x10.8x4.6x19.1x10.7x4.6x126.5x66.1x24.5x213.4x123.9x48.4x$570$1,978,470$1,959,38420.0x11.2x4.8x19.8x11.1x4.8x131.1x68.5x25.4x221.2x128.4x50.2xEnterpriseValue($MM)MarketValue($MM)EV/EBITDAP/ESource:MorganStanleyResearch11
  12. DCFExhibit11:TeslaCoreAutoDCFTESLACoreAutoDCFExcludesNetworkServices,Energy,Insurance,Mobility,Battery.TreatsSBCasCashExpense.(In$Millions)2018201920202021202220232024202520262027202820292030FY2018FY2019FY2020FY2021FY2022FY2023FY2024FY2025FY2026FY2027FY2028FY2029FY2030UnitVolume245,231367,656499,647936,2221,313,8511,818,5752,513,4873,435,5644,404,0285,188,3746,175,3416,999,8877,852,349%Growth49.9%35.9%87.4%40.3%38.4%38.2%36.7%28.2%17.8%19.0%13.4%12.2%AutomotiveRevenuePerUnit($)75,07955,01651,34848,88553,03945,83445,11143,19041,95241,55940,65940,15739,544%Growth-26.7%-6.7%-4.8%8.5%-13.6%-1.6%-4.3%-2.9%-0.9%-2.2%-1.2%-1.5%AutomotiveSales(ExServices&Other)18,51520,82127,23647,23271,46284,800114,769150,203186,959217,961253,551283,547312,872%Growth12.5%30.8%73.4%51.3%18.7%35.3%30.9%24.5%16.6%16.3%11.8%10.3%AutomotiveGrossProfit4,3414,4236,97713,83920,35416,78221,27627,25934,64439,39745,00149,49055,135%Margin23.4%21.2%25.6%29.3%28.5%19.8%18.5%18.1%18.5%18.1%17.7%17.5%17.6%EBITDA(GAAP)1,2231,7494,1049,18916,61613,59218,10223,74130,81535,40341,02845,58251,215%Margin6.6%8.4%15.1%19.5%23.3%16.0%15.8%15.8%16.5%16.2%16.2%16.1%16.4%D&A1,6401,8242,0052,5553,2873,9445,5097,2108,97410,46212,17013,61015,018%ofCapex78%137%64%39%46%48%63%74%76%74%74%73%73%EBIT(GAAP)(417)(75)2,0986,63513,3299,64712,59316,53121,84124,94128,85731,97136,197%Margin-2.3%-0.4%7.7%14.0%18.7%11.4%11.0%11.0%11.7%11.4%11.4%11.3%11.6%OtherIncome2245(122)135(43)(48)(48)(48)(48)(48)(48)(48)(48)PretaxIncome(395)(30)1,9766,77013,2869,59912,54516,48321,79324,89328,80931,92336,149IncomeTaxes581102926991,1321,3422,5833,6505,0946,8928,57610,15214,394%EffectiveRate25.0%25.0%25.0%25.0%25.0%25.0%25.0%25.0%25.0%25.0%25.0%25.0%25.0%NetIncome(unlevered)(453)(141)1,6846,07112,1548,2589,96312,83316,69918,00120,23321,77121,755PlusDepreciationofPP&E1,6401,8242,0052,5553,2873,9445,5097,2108,97410,46212,17013,61015,018Other0000000000000LessChangeinWorkingCapital269447(1,169)(2,291)2,891(16)(609)29252,5132,7673,3433,842%ofChangeinSales19.4%-18.2%-11.5%11.9%-0.1%-2.0%0.0%2.5%8.1%7.8%11.1%13.1%CapitalExpenditures2,1011,3273,1576,4827,1588,2078,6989,72211,82814,11716,54818,71120,597%ofSales11.3%6.4%11.6%13.7%10.0%9.7%7.6%6.5%6.3%6.5%6.5%6.6%6.6%Other0000000000000UnleveredFreeCashFlow(1,183)(90)1,7024,4345,3924,0117,38310,31912,92111,83313,08913,32812,334EBITDA51,215Sales312,872NetDebt(Cash)YE2023(26,164)TeslaDilutedShares(YE2023)3,6551234567ExitEBITDAHigh14.0xExitPPGHigh3.0%ExitP/SalesHigh180%ExitEBITDALow10.0xExitPPGLow2.0%ExitP/SalesLow130%DiscountRateHigh10.5%FYMonthofValuation12.0(BeginningofthisMonth)DiscountRateLow7.5%MonthofFYEnd12.0(EndofthisMonth)EV/EBITDATerminalValueExitEBITDAMultiple10.012.014.0DiscountRate7.5%9.0%10.5%7.5%9.0%10.5%7.5%9.0%10.5%PVof2023CashFlow---------PVof2024-2030CashFlow61,62859,12354,79161,62859,12354,79161,62859,12354,791TerminalValue512,148512,148512,148614,577614,577614,577717,007717,007717,007PVofTerminalValue247,230214,988187,308296,676257,985224,769346,122300,983262,231EnterpriseValue308,857274,111242,098358,303317,108279,560407,749360,106317,021%ValueinTerminal80.0%78.4%77.4%82.8%81.4%80.4%84.9%83.6%82.7%%ValueinCashFlows20.0%21.6%22.6%17.2%18.6%19.6%15.1%16.4%17.3%EnterpriseValue274,111317,108360,106EquityValuePerShare8294106ImpliedAutomotive2025EV/EBITDA13.4x6.2WACCCalculationRiskFreeRate4.00%LeveredBeta1.2UnleveredBeta1.3EquityRiskPremium6.00%CostofEquity12%CostofDebt4.5%Equity/Capital65%%DebtCapital35%TaxRate25%WACC9.0%Source:MorganStanleyResearch12
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