The Tesla Run-Up: A Follow-Up with Investment Implications

11 Pages Posted: 6 Aug 2016

See all articles by Bradford Cornell

Bradford Cornell

California Institute of Technology

Date Written: June 17, 2016

Abstract

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

Cornell, Bradford, The Tesla Run-Up: A Follow-Up with Investment Implications (June 17, 2016). Journal of Portfolio Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2818536

Bradford Cornell (Contact Author)

California Institute of Technology ( email )

Pasadena, CA 91125
United States
310-825-2922 (Phone)
310-206-5455 (Fax)

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