Hey guys, it's sasha i've been meaning to talk about my tesla validation for quite some time. People keep asking why i am so bullish and i have made a model for my valuation of tesla that i wanted to go and share with you and walk you through. Exactly why i got my answers. An important note here is that i have had to simplify quite a few things in this model.

Some of the simplifications are because of time. Some of them are because they don't really have any real effect, and so it doesn't really make sense to make things more complicated for the model to become a lot more difficult to understand, but also some others, because i would have had a really really boring. Really. Dull video that would have lasted about three hours for me to be able to explain exactly what i'm trying to do so.

This is just a very simplified version of my personal model. I personally am using it for my own investing decisions. It could well have mistakes, it could will have things that i've missed it. May i have not spent months perfecting it.

This is just something that i threw together reasonably quickly, so i am not a financial advisor. This is not any kind of financial advice. I can provide financial advice to you if you do need financial advice, make sure you go and seek the help of a suitably qualified professional. This is just for educational and informational purposes.

Only so what i am going to do is walk you through my assumptions and explain exactly why i got to the valuation that i am happy with. This is pretty important because otherwise i'm going to get a lot of comments from people telling me that i have forgotten something or that i didn't talk about something, even though maybe i did so. I wanted to explain my reasoning first off. Let me quickly cover some things that i have not included in this model.

I have not included any additional self-driving revenue, including fitting as a retrofit, to existing cars, because i'm not sure exactly where the revenue model on that is going to be or the order of magnitude or whether they're even going to be charging and how much the different People so i've kind of excluded it for this, for this model, i've not added any revenue or profit for servicing. In this as again, this probably is a big oversight, and maybe i should have, but i i've not for this model - i've not baked in any robo taxi business, which is a super popular assumption with some other tesla models and some people base their entire valuation. Pretty much on this, but i have baked in none of this because i don't know if tesla is going to be doing this or if other companies will use tesla cars for their businesses or or what the business model is going to be there. I've also not assumed the start of new, yet to be determined.

Business lines and tesla is very good at starting new business lines, but i just kept things super simple, because it makes me much happier with the outcome um if any of these things that i've just mentioned that i've not included, do provide an upside. I'm only going to be even more happy, so, let's very quickly walk through the assumptions. The first tab is just a bunch of constants. I have some scalars in here some finance assumptions.

Most of it is pretty boring, not interesting. The two things worth pointing out are the 10 discount rates. I'm using some might go for more. Some might say that it's maybe a bit racy.

I i'm pretty happy tesla's one of the largest companies in the world. They have multiple different growing revenue streams. They have multiple different production facilities in different countries and even after taking into account the market, risks and returns. I am perfectly happy with that.

The other thing is, i have added quite a fair amount of capex expenditure capital expenditure over the next few years and a big big jump in liabilities over the coming years. And that's because i have some pretty big assumptions around the growth and the development of new factories, which is where we're gon na go next to the automotive assumptions in the next tab. I have made a 10-year model here because it felt more appropriate than standard five. It doesn't really matter it allowed me to go and project some things beyond where i would have been able to with just a five-year model.

I've also gone pretty conservative here, you'll notice that some of the existing factories do not scale to the one million per year. Production that musk has previously stated is technically, maybe possible. I have just broken down my location and made what i think are my best guest uh. Guess estimates so tesla, california and shanghai are the ones that are already up and producing cars, shanghai's still really new.

So it's still growing and i anticipate it will continue growing for the next few years. Quite aggressively they've also bought a new plot of land next to the shanghai factory, literally just across the road, and i am assuming that this is going to be the site where they're going to be producing the new 25 000 model. 2. Possibly, maybe i don't know, but that's the assumption i've made it kind of makes a lot of sense in china and asia in general, because it's going to be the small car, you know that is more affordable, but as with all tesla pricing, i think the 25 000 mark is probably the lowest possible price without any of the extras, without any of the extra variance and after taking into account uh government grants that will apply um.

So i think the actual sale price in my assumption is going to be quite a bit higher than that minimum mark. I then have giga berlin starting production in the model 3 and model y uh categories in q4, 2021, just just a small start, and then ramping up production to include the model 2, which i think is also going to be a relatively popular uh model. For you, european market, who prefer their cars a little bit smaller giga texas, is currently under construction and has a short run of model 3y at the end of q4. In my model, with the cyber truck and semi coming at some point next year, i think maybe q1 q2, depending on which one it is maybe even going to q3 for one of those which comes later, i'm expecting this site to be able to make 700 000 Vehicles per year, full capacity, but it may well be able to do a lot more than this.

I actually think this is maybe on the conservative side. I've then penciled in three further factories other than the ones that we already know about, because elon has previously said that they're going to be starting the work on the development and construction of new factories once they're done with these ones. So i have penciled them in sort of a few years down the line, and i don't know where they're gon na be based. This is based on guesstimates, based on some rumors, some things that people have previously mentioned, and i have named them: giga asia, giga, east coast and giga mexico.

Now, there's already a big gig in new york factory, which is on the east coast that some people might point out, but it doesn't currently produce vehicles. It's focused on batteries and their energy business. So i'm presuming there's going to be a third u.s production site for the entire east coast of the country. That is further that way than austin, which is where they're currently building as the demand for these cars grows, plus i'm expecting one more in asia outside china, because it also is a huge market, and i think they will definitely want to have more than one factory There and i've assumed one other servicing central south america, as well as exports to other countries, including possibly even more to europe as well.

If you look further down, i actually only reach 4.5 million cars per year in 2030.. This is less than many other projections and i'm pretty happy if tesla outpaces these numbers. I may well begin increasing these later this year if they continue to do incredibly well and reach something that is maybe even further than what i've got for year, one which is a million vehicles. I then have a few assumptions on insurance.

This is a business that elon seems to be really excited about and i'm assuming growth to 33 of all new tesla cars being sold with this insurance. But then i am discounting this quite heavily on retention, i'm assuming only 65 renew year on year as cars get sold as some of them get written off as whatever happens, and i'm trying to be a little bit conservative on that front, although i think the 33 May be a bit racy, i kind of feel that, because they are able to scale and essentially they're able to maintain their black box audits of what the drivers are doing, i think they'll be able to have a an upper hand being able to price these insurance Policies versus their competition. I then have some assumptions on energy. This is the bit that is really important, and you need to pay attention to.

Tesla is currently working a lot on their solar and storage solutions, and, although i have sola in here, it's the storage bit that i'm really excited by this is a really quite new business for tesla, but it is beginning to grow at a really crazy pace. It grew by about 200 percent over the last 12 months and tesla hasn't even properly begun, really accelerating their business. They've just announced a new deal with apple, as well as big projects to supply storage solutions to california and possibly texas um, and this is a business that can really grow a really really huge amount. As renewable energy sources, like tidal, geothermal, a bunch of other ones, come on board um as nuclear becomes more and more of a global thing and replacing coal etc.

I think these solutions are going to be the ones that are enabling energy sources that are developed at times of low usage at much lower prices to be able to be redeployed during peak hours, and this is going to be a big, big global solution that i Haven't seen, other companies really focus anywhere near this level of attention on now, i've made some pretty bold growth assumptions here and they're, based on the big battery-specific factories that are already in place that i've listed in my assumptions, but also i expect there to be a Lot more build, i actually think nevada is going to be growing from its current size to become. Was it the largest building in the world, which is what they originally planned, and i think that will be happening. They have these new huge capacity mega packs that can deploy in batches of up to 1 gigawatt hours per installation - that's 1 000 megawatt hours as per the units in this table that i'm using. That is a huge amount.

I've made some rough assumptions on utilization, energy, price and margin. This could yield, and i feel that these may not be a million miles off. Uh it'll be interesting to see how this one unfolds, tesla, don't publish much data on their energy business, which is why this one is a lot less scientific, perhaps than what i've done with the car side. So then i have a calculator tab and that just takes all these assumptions and turns them into revenue and profit numbers.

And then i have an output tab, which is where i do all the final sums. So you can see that my projections have revenue increasing quite dramatically over the next 10 years to over one trillion dollars towards the end of the period. Now. This is a lot.

This is more than twice the. What walmart is currently doing and walmart is the biggest company out there for revenue numbers the profit line, there's some pretty huge things too. My projections have the energy business overtake the car business in terms of profits in 2029 and become the biggest contributor to the p. L at that point, then, after we'll do the rest of the sums we'll get to the real answer.

The total present value of the discounted cash flows is 322 billion dollars, assuming the same 10 discount going forward and a 10 flat growth rate from 2030 onwards. For 100 years to get them to roughly the same place in age as ford is right. Now i get a total discounted cash flow of 2.8 trillion dollars so with the 960 million shares that are out there in circulation. At the moment that puts a target share price for me at two thousand, eight hundred and ninety three dollars.

The amazing thing is that, even if i delete the energy business entirely from these numbers, if you don't believe them at all, my target share price is still 1 841, which is almost three times the current price of the shares, and that's using really quite conservative assumptions On the cars manufactured and it increases by less than five times over the next decade from what i think the number will be in 2021.. So that is why i have such a huge amount relative to my tiny portfolio. Uh such a big proportion. My portfolio invested in tesla and why i'm so bullish about them? I just wanted to share my thoughts, but as always, this is just my opinion.

You need to go and do your own research. You need to make sure that you do your own math. You need to go and check your own numbers. This is just my view.

It may be very wrong. It may be completely off the mark, and this is not kind of not any kind of recommendation of advice. I am not a financial advisor, as already mentioned. Thank you very much for watching hey.

I really appreciate anyone who gets to the end of the video. Thank you so much and as always i'll see you guys later, you.