TSLA analysis in April 2016

1. NASDAQ: TSLA
Bijen
Abdulrahman
Allison

2. Quote Overview
NASDAQ: TSLA
Last Price: $241.77
Market Cap: 30.73B (not a small cap company, as people may think)
Founded in 2003, IPO in 2010 at ~$19/share
About 50% CAGR since IPO

3. Business Summary
Tesla Motors, Inc. designs, develops, manufactures, and sells electric vehicles and stationary energy
storage products in the United States, China, Norway, and internationally.
It primarily offers sedans and sport utility vehicles. The company also offers electric vehicle
powertrain components and systems to other manufacturers.
Tesla Motors, Inc. sells its products through a network of Tesla stores and galleries, as well as
through Internet.

4. Elon Musk - Background
● Born June 28, 1971 (44yrs old)
● Co-founder of Zip2 (1995); co-founder of PayPal (1999); founder, CEO and CTO of SpaceX (2001); co-
founder, CEO and product architect of Tesla Motors (2003); chairman of SolarCity (2006); envisioner of
Hyperloop (2013); co-chairman of OpenAI (2015)
● At age 19 - Queen's University in Kingston, Ontario, for undergrad
● At age 21- transferred to the University of Pennsylvania
● At age 24 - graduated with BS in physics and a BS in econ
● In 1995, at age 24, Musk moved to California to begin a PhD in applied physics at Stanford University,
but left the program after two days to pursue his real aspirations within the Internet, renewable energy
and outer space
● Current net worth: $13.6 billion

5. Zip2 - 1995
● Started by Musk (age 24) and his brother with $28,000 from their father
● Web software company that provided local content, city-search and customized portals to
media and telecommunication companies
● Contracts with The New York Times and the Chicago Tribune
● Acquired by Compaq/Alta Vista/CMGi for $307mill in cash and $34mill in stock options in
February 1999
● Musk received 7% ($22 million) from the sale

6. PayPal - 1999
● In March 1999, Musk co-founded X.com, an online financial services and e-mail payment
company, with $10 million from the sale of Zip2
● One year later, the company merged with Confinity, which had a money transfer service called
PayPal, which was the branch the merger was focusing on - thus the company name change
● PayPal's early growth was driven mainly by a viral marketing campaign
● Musk was later removed from his CEO role due to disagreements with other company leadership
● In October 2002, PayPal was acquired by eBay for $1.5bill, of which Musk received $180mill
● Before its sale, Musk owned 11.7% of PayPal's shares

7. SpaceX - 2001
● SpaceX designs, manufactures and launches advanced rockets and spacecraft
● The company was founded in 2002 to revolutionize space technology, with the ultimate goal of enabling people to
live on other planets
● Currently has 3 vehicles - the Falcon 1, Falcon 9 and Dragon
● Only private company ever to return a spacecraft from low-Earth orbit - first accomplished in 2010
○ Dragon spacecraft attached to the International Space Station, exchanged cargo payloads, and returned safely
to Earth
● Currently under a $1.6bill contract with NASA to fly numerous (minimum 12) cargo resupplies to the ISS in the near
future
● Currently under a $440mill contract with NASA to make the Dragon crew-ready
● Currently under development of Falcon Heavy - the worlds (to-be) most powerful rocket

8. Tesla - 2003
● Founded by a group of engineers who wanted to prove that electric cars could be better than gasoline-powered cars with each
new generation being increasingly affordable, helping the company work towards its mission: to accelerate the world’s
transition to sustainable transport
● Tesla Roadster launched in 2008 - accelerating from 0 to 60 mph in 3.7 seconds and achieving a range of 245 miles per
charge of its lithium ion battery
○ the Roadster set a new standard for electric mobility
● Model S launched in 2012 - the world’s first premium electric sedan, built from the ground up to be 100% electric. 0 to 60 in
about 5 seconds
● In late 2014 Musk unveiled two dual motor all-wheel drive configurations of Model S that further improve the vehicle’s handling
and performance
○ 85D features a high efficiency motor at the front and rear, giving the car unparalleled control of traction in all conditions
○ P85D pairs a high efficiency front motor with a performance rear motor for supercar acceleration, achieving a 0 to 60
mph in 3.2 seconds – the fastest four-door production car ever made.
● Tesla owners enjoy the benefit of charging at home so they never have to visit a gas station or spend a cent on gasoline

9. SolarCity - 2006
● Musk provided the initial concept and financial capital for SolarCity, it was then co-founded by his cousins
● SolarCity is America's largest solar power provider making clean energy available to homeowners, businesses,
schools, non-profits and government organizations at a lower cost than they pay for energy generated by
burning fossil fuels
● The underlying motivation for funding both SolarCity and Tesla is to help combat global warming
○ In 2012 Musk announced that SolarCity and Tesla Motors are collaborating to use electric vehicle
batteries to smooth the impact of rooftop solar on the power grid
● 2014 Musk committed to building a SolarCity advanced production facility in Buffalo NY that would triple the
size of the largest solar plant in the US with plans to be one of the single largest solar panel production plant in
the world

10. Hyperloop - 2013
● Originally Musk’s idea
● Hyperloop Transportation Technologies and Hyperloop Technologies now racing to develop the
technology Musk termed the "fifth mode" of transportation, the hyperloop, a new type of high-speed travel
in which passenger pods hurtle through tubes at the speed of sound
● Both changed the idea in one way - instead of using air to levitate the pods they are leaning toward
magnetic levitation, which would lift the pods using powerful electromagnets
● SpaceX is having an open competition to design and build the best Hyperloop pod and to support the
competition and is constructing a one-mile test track
○ Teams will be able to test their human-scale pods during a competition weekend at the track,
currently targeted for Summer 2016

11. OpenAI - 2015
● OpenAI is a non-profit artificial intelligence (ai) research company
● Goal is to advance digital intelligence in the way that is most likely to benefit
humanity as a whole, unconstrained by a need to generate financial return

12. Tesla - International
United States
Europe
China
Australia

13. Model S and Model X
Tesla Model S and Model X have been their main product offerings thus far.
Model S has been more successful than Model X, but both suffer from the issue of high price points.

14. Electric Market Share

15. Nissan Leaf vs
Chevy Volt
Ford Focus
Toyota Prius

16. Model S - Higher $ - Outsells Nissan Leaf
Price Range Battery Horsepower Ugly?
Model S $75,000 240 Miles 90 kWH 259 No
Nissan Leaf $29,000 84 Miles 24 kWH 107 Yes

17. Model S Sales YoY Compared to Nissan Leaf
2012 2013 2014 2015 2016 (Q1) 2016 (Proj)
Model S 2,650 17,650 16,689 25,700 6,300 25,200
Nissan Leaf 9,819 22,610 30,200 17,269 2,931 11,724
United States Sales

18. Why is Tesla not yet profitable?
● Tesla does not have enough demand
○ Employees not being used to full potential
○ Massive expenditure on Gigafactory in Nevada
○ High Research & Development costs
● Elon Musk projects profitability for 2016
○ Average analyst predicts profitability also

19. Recent News
● Tesla introduces new product offering - “Model 3”
○ Unveiled on March 31st
● Tesla launches pre-orders of Model 3
○ March 31st - customers can pre-order in stores
○ April 1st - customers can pre-order online

20. New Product Offering - Model 3

21. Model 3 Features
● $35,000 pre-order pricing (limited time price tag -> will go to ~$45,000 after pre-order phase)
○ Can be reserved for $1,000 down today
○ Finally a car that has a lower price point and appeals to the majority of the population
● Highest safety ratings for any car in the world
○ Next highest is Tesla’s own Model S
● Fastest 4-door car in history
● 215 mile range per full charge
○ “Supercharge” capable

22. Superchargers - Current

23. Superchargers - By End of 2016

24. Nissan Leaf Charging Comparison - Plugshare
NISSAN LEAF
● 30 minutes charging
○ 67 miles

25. Pre-Order Details
● 250,000 PRE-ORDERS WITHIN 2 DAYS
○ More cars than the company has ever
sold since Tesla founding in 2003
■ 100,000 as of December 2015
○ Represents 5X manufactured cars
(50,000) in 2015
○ Elon Musk estimated to shareholders
only 60,000 to 120,000 pre-orders
○ $42,000 average sale vs $35,000 base
model price

26. Risk - Interest Rates
● Automobile companies are one of the most rate-dependent businesses
○ According to Federal Reserve projection models:
■ Every 1% increase in interest rates:
● Decreases annual production by 12%
● Decreases sales by 2.5%
● Increases consumer loan payment by about $50/month
● Two rate hikes are expected in 2016

27. Risk/Benefit - Oil Prices
● Oil price is at record lows
○ Not expected to recover in 2016
○ Not positive for Tesla
● Tesla still received 250,000 pre-orders
● Oil price will eventually recover
○ More growth, more orders for Tesla

28. Competitor Analysis

29. BETA Calculation

30. Michael Blair - Analyst
● Consultant at McKinsey
● VP of Canadian GE
● Founded Enfield Corporation (oil and natural gas exploration) in 1984
○ Grew to 10,000 employees by 1989
○ Sold the company
● Founded (CEO) Automodular Corporation in late 1990s
○ Automobile parts sub-assembly company
○ Served GM until 2010

31. Michael Blair -
2018 Projection
(Conservative)
● Model S already has 50,000
units sold per year (2015)
● Model X received 25,000 orders
● Model 3 already has 250,000 in
orders within 2 days of pre-
order launch

32. DCF (Realistic)

33. DCF (Optimistic, Pessimistic)

34. DCF (Goal Seek)

35. Comparative DCF to Nissan

36. Investment Thesis
● Elon Musk
○ Zip2, PayPal, SpaceX, SolarCity, HyperLoop, OpenAI
● Model 3 Pre-Order Launch (250,000 Orders within 2 Days)
○ More than expected (120,000)
○ More than total Tesla sales thus far (100,000)
● Electric car sales growth vs decline (Nissan)
● Publicly traded company in early growth stage
● Conservative DCF shows Undervaluation
○ More attractive upside compared to Nissan
RATING: 5

37. Sources
○ http://www.autonews.
com/article/20140114/OEM05/140119794/teslas-global-sales-top-
22000-in-2013-stock-rises-16
○ http://www.goodcarbadcar.net/2013/08/tesla-model-s-sales-figures-
usa-canada.html
○ http://insideevs.com/monthly-plug-in-sales-scorecard/
○ http://insideevs.com/bmw-sells-11024-i3s-u-s-first-full-year-availability/
○ http://www.plugincars.com/electric-car-quick-charging-guide.html