Thread by @garyblack00

I’m going to try explaining this again. $TSLA value can be calculated using a present value (PV) framework. Inputs:
Curr Yr EPS
EPS growth next 5 yrs
Div payout (if any)
10yr Treas yld
Equity risk prem (ERP)
Beta
Steady state P/E 5 yrs out based on proj EPS growth after Yr 5.

2/ I estimate $TSLA value using a 5-yr PV framework. Others use 10 or even 20 years. TSLA’s PT is the price at which I expect TSLA to trade in 6-12 mo. Mathematically, the PT is the PV of all dividends, plus the future price of TSLA in 5 yrs, disctd back at TSLA’s cost of equity.

3/ $TSLA pays no dividends, so all value is in the 2025 stock price, which is based on the P/E in 5 yrs, mult by the proj earnings in 5 years.The discount rate is the risk-free rate (10yr Treas yld), plus a risk premium equal to the mkt equity risk premium (ERP) ~6% x TSLA beta.

4/ My $TSLA PT is $600, based on a 2025 EPS of $18 @ 50x P/E at 2024 YE, based on proj 2025-30 EPS growth of 25% (2x PEG). My 2024 YE price of $900 is disct’d at 9.5% for 4.25 years (Oct 2020 to Dec 2024). The 9.5% rate is 10yr Treas yld of 0.8%, plus 6% ERP x TSLA beta of 1.45x.

5/ When $TSLA beats Street EPS ests, TSLA stock increases because future earnings may get revised upward, and P/Es get repriced higher if markets assume the acceleration in growth will persist. Non-recurring items (e.g., one time tax credits, legal settlements) get excluded.

6/ $TSLA often rises before earnings if investors expect delivery growth, price increases, or margin expansion will exceed Street expectations. Delivs are a function of global SAAR, EV penetrat’n and TSLA’s EV share. Investors who buy in front of earnings often sell on the news.

7/ To determine if $TSLA is cheap, one compares price to present value. If price is well below PV, a stock is viewed as cheap. Some analysts use P/Es as shorthand to assess cheapness. Normally they look at P/E vs future 5-yr EPS growth. PEGs <2x are usually considered cheap.

8/ Three conditions can cause P/Es to go higher (multiple expansion):
- Higher future vol/rev/earnings growth, usually because TAM expands or mkt share increases
- Lower int rates
- Lower beta
$TSLA stock increase most when earnings ests increase and P/Es expand simultaneously