When Is Tesla Going To $1000?

| About: Tesla Motors (TSLA)

Tesla (NASDAQ:TSLA) announced the details of its GigaFactory, and within those details, we now have actual guidance for Tesla's 2020 production - 500,000 vehicles.

Using this and my previous calculation of the worldwide demand for the Model S and the Model X, I can now chart Tesla's growth to 2020.

I will assume a $100,000 average sales price [ASP] for the Model S and the Model X. Currently, the ASP for the Model S is about $107,000 and the Model X is expected to be nearly 10% more expensive than the Model S. Assuming that the option intake rate will decrease over time, $100,000 seems a reasonable ASP for both the Models. For the Model E, which is supposed to start at about half the price of the Model S, I will assume an ASP of $50,000. Exactly half the ASP of the Model S and Model X.

This gives us revenues of about $35 billion from cars alone.

However the GigaFactory guidance also says that the factory will produce about 50GWh of packs. If we assume that the 2020 Model S and Model X have 20% bigger battery packs than the current Model S, then they will have 100kWh battery packs. If we also assume, to be on the pessimistic side for additional battery capacity, that everyone opts for the 100kWh packs, the Model S and the Model X will consume about 20GWh of battery pack capacity. If we assume that the Model E will have a 75kWh pack and everyone selects that, it will consume about 22.5 GWh of battery pack capacity.

That leaves us with an additional 7.5GWh of capacity that Tesla can sell for storage applications to other customers like SolarCity (NASDAQ:SCTY). If we assume that Tesla sells these at about $200/kWh, we have another $1.5 billion in revenue. This is in addition to any reconditioned recycled packs that can also be used for energy storage.

By 2020, Telsa will also be supplying powertrains and technology to other auto companies like Toyota (NYSE:TM) and Mercedes. However, for the time being, I will ignore revenue from those endeavors.

In 2020, if we assume Tesla has net margins of 10% [only 3% more than BMW (OTCPK:BAMXF)], a very pessimistic assumption for me, considering my previous article here, we would have earnings of at least 3.6 billion. At that point, my assumption is that Tesla will be growing at least 20% - adding another 100,000 vehicles to their 500,000 annual production. However, I will assume that earnings only grow 15% because Tesla is increasing volumes of lower priced vehicles. BMW currently has a PEG ratio of 3. If we use this same PEG ratio for Tesla, then we have a P/E at that point of 45. That gives us a valuation of about $162 billion.

Using Tesla's current reported share count of 137 million and annual dilution of 3%, we would have a share count of about 163 million, giving us a share price of about $1000 in 2020.

What does this make Tesla worth now? Assuming a discount rate of 20% and a 7 year time frame to get to $1000, we have a discounted present value for the stock at $279.

Disclosure: I am long TSLA. I will trim my position by 20% if the stock hits $280 within the next month. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.