So how important is this cyber truck to Tesla's share price? Now we just heard the announcement the Cyber truck will commence production and 2024 will be the first year when we actually see some ramp up with regards to the Cyber truck. But the real question here is how big is this for Tesla as a company and more importantly for investors? How big is this for the share price? Because at the end of the day, every single Tesla investor cares about the share price long term. So how impactful is this on the share price of Tesla My name is Tom Nash and this is exactly the question we're going to answer today. Now I've made my own DCF a discounted cash flow valuation model of Tesla.

We're going to take a look at the DCF without the Cyber truck and the DCF after the Cyber truck gets into ramp up and we're gonna see the difference of the share price. And don't forget, the stock market is always forward looking. so whatever I'm going to show you on the screen is quickly going to get priced in into the current share price of this stock. It doesn't wait for the thing to happen, but once that certainty level goes up, it's going to get mostly priced in very very quickly, especially with the stock like Tesla that tends to price in future success very very quickly.

So the opportunity window here isn't big as always. In Tesla's case, there will be people who will be cynical and negative and they will miss out. And that's okay. this video is not for them.

Now what we're looking here quick is the DCF model that I'm going to use for this video now. Look, a DCF model is not perfect and I was working as a senior manager for Deloitte and I was doing this sort of DCF myself when I was doing villainous on companies. Of course we were using much more elaborate models. But make no mistake I think this is better if five you're the CF Like this, very simplified is the way to go.

Now what do we have here under the hood? Number one, we have this: This is going to be the foundation of our DCF the calculation of the cost of capital. In order for us to estimate how much the company is worth with the Cyber truck and without the Cyber truck, we first have to lay the foundation. Every DCF model at the end of the day is one thing and one thing only the sum of all the cash flows that Tesla will generate in its life cycle discounted back to today based on the risk profile of the company Let Me: Give An example: If I owe you a million dollars in five years and I'm offering you to give you a lump sum today in lieu of that one million, how much would you think? Well, you probably would take 300, 400, 5000, 600, 000 depends on how much risk I I pose. If I'm a wealthy person with ties to community and I'm making a lot of money and I'm respectful, then my risk profile is low.

But if I'm some sketchy dude and I owe a million and you don't even know if I'm going to be there in five years, you probably take two hundred thousand just to eliminate that risk. So that risk the higher the discount rate is, the more the valuation of the company drops down, the more the future cash flows gets squashed. Now, in the case of DCFS, we use a custom Capital to reflect that risk. That discount rate is essentially the weighted average cost of capital of the company.

And this is what you're seeing here: The Whack Wacc. So this is the calculation of the whack, the weighted average cost of capital of Tesla. If you want to learn how to do these for yourself and how this whole thing works, join our Patreon Patreon.com Forward slash Tom Nash I Teach these things on a patreon, especially in their Academy but more on that towards the end of the video. Let's move on.

So, the weighted average cost of capital of Tesla is 14. Now, the reason it's 14 is very, very simple. Just to keep things on a high level is because Tesla has no debt. Virtually so the cost of capital of Tesla will be primarily average of the cost of capital it has.

And since they don't have debt, then it's pretty much 100 based on how much the equity cost is and the equity cost for Tesla is 14. Now the way it's calculated is not very complicated. you can see it here on the screen. you can pause the video.

but essentially we take the risk-free rate, we take the Uh, the equity percentage, we take the overall Equity value, the risk premium, which is pretty much how much you can get in the S p minus the risky rate, and we create a calculation that gives us 14 for Tesla. Now 14 isn't cheap, it's a high cost of capital. Most people that do Tesla DCFS use either 10 or 12 and I think that's wrong I think 14. Although it's very, um, harsh on Tesla, this is the right way to do it.

So this I think Tesla is a 14 discount rate. Next let's go to the sales and let's go over the sales quickly. Of course you can see here, the Cyber truck is at zero. We have a 35 Revenue growth without the Cyber truck and at the end of the day we're going to base it on a 19 EB down margin.

This is what we're going to get as far as a DCF. Now this DCF includes a 73.3 billion dollars capex Capital expenditures mainly to build new factories again without the Cyber truck. 730 billion I think is normal and an eight percent effective tax rate which is where Tesla operates in the general sense of the world we're creating here a free cash Flow FCF line number 10. We're creating f free cash flow for every single year going forward and then we're bringing it down.

We're discounting it by the discount rate by the whack. the weighted average cost of capital based on the amount of years we're going into the future. So at the end of the day, we're getting this present value sum now. 133 billion dollars is what we get here.

and that is how much Tesla present value of all their future cash flows is worth. But wait, this is not yet the end. We also have to include future growth beyond that five-year period and this is what we get here: Present value of terminal value: 427 billion dollars and the total is 583 billion dollars because we also have to take into account the mass amount of cash they have and the lack of debt. So 583 billion this is the total value of Tesla without the Cyber truck based on my DCF Of course I'm also using here a multiple in a video multiple of 10 and that's going to give me 676 billion dollars.

So without the Cyber truck Tesla based on a very, very conservative model with 4 fourteen percent discount which is very high, 73 billion of spending on Capital expenditures is between 583 billion and 676 billion. As it stands now, obviously it's trading at 880 billion dollars, but this is just to show you the impact. now, we're going to add in the Cyber truck. The only thing we're going to change here is we're going to add another 20 billion dollars in capital expenditures.

We're going to go up to 94 billion dollars in capital expenditures from 73 because we believe that another 20 billion is what it will take to build more factories to make these extra cyber trucks. And we're going to assume that Tesla will eventually ramp up to 100 300 to 500 000 units of cyber trucks at the maximum level capacity for the near future. Again, same data, same discount rates, same everything. But look at what the difference is here.

773 billion dollars of total value and 916 in multiple value. And now let's go back to the original DCF and look at the share price here in the original: DCF without the Cyber truck Tesla currently 199 dollars per share. but once you factor in just the Cyber truck, no semi, no insurance, no the Tesla bot, none of this AI stuff, no Robo taxi. we still have a lot of things to add to this DCF to actually make it make sense, but just the Cyber cologne adds from 199 dollars to 266 dollars.

This is with the Cyber truck. so we're talking about an ad of about 70 dollars per share just on the Delta between without the Cyber truck with the Cyber truck. So that's a 70 bump in the share price which I see that will be reflected at the share price from this point on. I Don't know how long it's going to take.

with the case of Tesla it usually takes a lot faster than other companies because Tesla tends to price in future success now. Always Always Remember: with Tesla it's always pricing in the future faster than most other companies so it will never be trading at the level that is the fair value. Tesla is always trading forward. it's always trading based on future success.

So when you get this fair market value of 266 dollars, don't expect the company to drop to it. It might it might not I don't know I don't have a crystal ball. this is not Financial Advice: I'm not telling you to buy or sell Tesla I'm just telling you that I believe the difference The impact here. If you were wondering what's the impact of the Cyber truck on the Tesla share price, it's another 70 today to the share price again.

I Don't know when it's going to be reflected, how long it's going to take, how much of it is already reflected, but that's the difference I Think it's massive for Tesla It's massive for the Auto industry because at the end of the day, we're talking about Tesla entering for the first time in history into the most lucrative Target Market In the United States Auto industry, the trucks I mean the pickup trucks. This is the bread and butter of the US Auto industry. In fact the North American not only industry and Tesla finally jumping in into that category for the first time in its history is going to rock everybody's World We're talking about a very cautious estimate here that 70 I think is just the start. And of course if you learn how to do these things for yourself, they Htcf models these valuations.

How to become a better long-term investor. How to create your own process, your discipline, your system. How to do this for yourself. Join a Paid Independent.com Forward slash Tom Nash We have a brand new Toms Academy which I urge you to check out.

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no problem, no questions asked. As always. thank you for spending these few minutes with me. I'll see you next video.