The Tesla Run-Up: A Follow-Up with Investment Implications
11 Pages Posted: 6 Aug 2016
Date Written: June 17, 2016
In the Fall of 2014, Aswath Damodaran and I published an article in the Journal of Portfolio Management that analyzed the run-up in Tesla stock from $36.62 on March 22, 2013 to $253.00 on February 26, 2014. In the article, Cornell and Damodaran (2014), we argued that the almost sevenfold increase in price could not be explained by fundamentals alone. As part of that study, we conducted a discounted cash flow (DCF) analysis to estimate the fundamental value of Tesla. Using aggressive assumptions, including a period of sustained growth in revenue of 70% and a corresponding dramatic increase in operating profitability, the DCF model produced a value for Tesla of $100.35 per share – only about 40% of the then market price. In this paper, I examine the performance of Tesla since the publication of the original article and discuss the implications of the subsequent performance for the valuation of Tesla.
Keywords: investments, Tesla, Valuation
JEL Classification: G10, G12
Suggested Citation: Suggested Citation