1. Valuation Thesis & Model Architecture
Valuing Tesla, Inc. (NASDAQ: TSLA) requires decoupling two fundamentally distinct operating profiles:
(1) A cyclical, capital-intensive automotive manufacturing core subjected to global EV pricing pressure and factory retooling CapEx;
(2) High-margin recurring SaaS / autonomous ride-hail revenue streams (Full Self-Driving licensing, Megapack energy storage, and Robotaxi fleet monetisation).
2. WACC Calculation & Capital Structure Assumptions
| Valuation Input Parameter | Assumed Value | Defensible Rationale & Source |
|---|---|---|
| Risk-Free Rate (Rf) | 4.25% | U.S. 10-Year Treasury Benchmark (Constant Maturity) |
| Equity Risk Premium (ERP) | 5.00% | Damodaran Normalized Implied U.S. Equity Premium |
| Unlevered Asset Beta (β) | 1.42 | Blended Auto OEM (0.95) & Enterprise Tech (1.65) Peer Median |
| Cost of Equity (Ke) | 11.35% | CAPM Formulation: Rf + β(ERP) |
| Weighted Average Cost of Capital (WACC) | 10.82% | Weighted across Debt/Equity capital structure (96.5% Equity / 3.5% Debt) |
3. Discounted Cash Flow Sensitivity Matrix
Below is the 2-way sensitivity table cross-referencing Terminal Growth Rate (g) against Weighted Average Cost of Capital (WACC) to establish an intrinsic enterprise equity value per share.
| Terminal Growth (g) \ WACC | 9.5% WACC | 10.5% WACC | 10.82% (Base) | 11.5% WACC |
|---|---|---|---|---|
| 2.5% Terminal Growth | $212.40 | $184.20 | $176.50 | $161.80 |
| 3.0% Terminal Growth (Base) | $238.10 | $204.60 | $195.40 (Fair Value) | $177.30 |
| 3.5% Terminal Growth | $271.80 | $230.90 | $219.10 | $196.50 |
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