Ahead of Model 3: Tesla Value for 2019 Versus Ford and GM Today

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The last week of March is expected to be huge for Tesla Motors Inc. (NASDAQ: TSLA) as the company unveils its highly awaited mass market electric vehicle, the Tesla Model 3. What is so different here versus the prior Model S and the Model X sport utility vehicle is that the Model 3 is expected to be priced around $35,000 per car.

It goes without saying that there is a lot of hype and a lot of anticipation here. As such, 24/7 Wall St. wanted to look at Tesla’s longer-term expectations by Tesla’s followers to see if the expectations are just far too great. Maybe they are, maybe they are not. If not, investors could be sitting on more than they bargained for.

We cannot rule out how Tesla will be compared to Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) in the years ahead. Tesla is a high-beta and high-multiple stock, and its $228.00 share price generates a market capitalization rate of $30 billion. Ford’s market cap is $52 billion and its 2015 sales were $149.5 billion. GM’s market cap is $47.7 billion and sales in 2015 were $152 billion. Many investors do not want to consider valuations today — but what about when you compare today to 2019?

So far, Tesla has been hampered in its ability to generate a critical mass of cars. After all, you could drop $100,000 or so on a car, unattainable for most consumers who actually would like to drive a Tesla car. The Model 3 is the effort that can take Tesla into selling hundreds of thousands of models per year.

CEO Elon Musk is expected to release the design of the Model 3 on Thursday and is also expected to allow Tesla to begin taking $1,000 deposit checks to secure a vehicle order.

24/7 Wall St. went to Reuters to take a look at the longer-term consensus estimates. These are provided, with growth rates, for 2016 through 2019 as follows:

  • Expectations for 2016 are $8.549 billion in revenue (up 61%) with $1.31 earnings per share (EPS) (up 157%).
  • Expectations for 2017 are $10.826 billion in revenue (up 26%) with $3.34 EPS (up 154%).
  • Expectations for 2018 are $13.596 billion in revenue (up 25%) with $5.35 EPS (up 60%).
  • Expectations for 2019 are $18.753 billion in revenue (up 38%) with $8.89 EPS (up 66%).

It is assumed that Tesla will still pay no dividend even in 2019. Its pretax profit in 2019 is expected to be $1.2 billion, with EBIT of $1.52 billion and EBITDA of more than $2.8 billion.

It just has to be understood that investors who buy Tesla’s stock are not worried about what the multiples are for earnings (P/E) and revenues (P/S) for 2015 or even 2016. But for 2018, Tesla is still valued at 2.2 times sales and about 43 times earnings. For 2019, Tesla’s forward multiples fall to 1.6 times sales and 25 times earnings.