I may not have the power to change the status quo in any of these businesses, but I can stir the pot…”, Take his damning assessment of fair value accounting. I was wondering whether you have an update post/valuation for Tesla planned, incorporating the past developments.I also purchased Tesla stock at a similar price (a few weeks before this post) but have recently sold it after the large price appreciation, and would therefore like to know where your thoughts lie at this point in order to compare them to mine.Thank you very much for the quality content you consistently put out. YouTube Video. © 2020 Chartered Accountants Australia and New Zealand ABN 50 084 642 571 (CA ANZ). analyse your use of our products and services, assist with our promotional and marketing efforts, and provide content The Beyond Mea... Tesla's Travails: Curfew for a Corporate Teenager. This is how, despite his unflinching honesty – or more likely, because of it – the professor finds himself in the unlikely position of being one of the most sought-after, and most respected, experts in the valuation field. Although I have a feeling they will, simply because sometimes hearing the unvarnished truth about something can make you better at it.”. They let me reach a much broader audience than I could have 30 years ago…. Same can be observed in China where competition is even more intense. “You can collect all the information in the world, use the best tools, and make your best estimates, but life delivers surprises. In my last valuation of Tesla, set in June 2018, I considered possible, plausible and probable valuations for the company.In my story, which I admitted was an optimistic one, I mapped out a pathway for the company to deliver $100 billion in revenues in 2028, while pushing pre-tax operating margins to 10% by 2023. He … View my complete profile The rise in failure risk (from 5% in 2018 to 20% in 2019) is at least partially offset by a lower risk free rate and a cost of capital. It is the equity value per share that is maximized at 60% debt. The company's debt overhang, already a concern a year ago, has become a clear and present danger to the company. I teach corporate finance, valuation and investment philosophies at the Stern School of Business at New York University. Aswath Damodaran dostrzega je i łączy w spójną całość: w finanse korporacji. As for the bull case, I will leave it untouched, since it strikes me as more fairy tale than valuation, a world where there will be 7.2 autonomous cars on the road in 2023, with Tesla controlling a 70% market share, and generating $52 billion in annual cash flows. Subscribe to: Post Comments (Atom) Twitter. Members of CA ANZ are not liable for the debts and liabilities of CA ANZ. Prof. Aswath Damodaran has the most famous yet unheard of blog that you can find online. That seems missing from this debate overall (not here in particular just in general it seems). A couple of thoughts. Labels: Pricing and Value, Shareholder Value. An investor in Tesla should earn a special premium for having to endure news stories about the company that are so unusual that they would be considered fiction at other companies. Open banking: What’s in it for accountants? Hey Aswath, Thanks for your extremely knowledgeable videos! 10! The class webcasts are on YouTube and you will need to be online, to watch them. YouTube Video. The opposite actually happened - over the last year cost of capital for Tesla has increased materially - bonds are currently trading at 8%-10% yields and company is hardly able to issue any new equity (as evidenced by the latest capital raise).2) Competition. I think Tesla mistook the Model 3 back-log demand for a steady-state demand. When the stock is traded and markets are viewed … 10! 10! The refreshingly frank, often outspoken Professor of Finance at New York University’s Stern School of Business lives by a simple rule: Never go anywhere you need to be invited back. This is a 15-week undergraduate class on valuation, aimed at helping you attaching a value and/or a price to just about any asset. 11! Damodaran himself completed his schooling in Chennai. Even if you take the ARK bear case as realistic, with Tesla projected to sell 1.7 million cars in 2023 and earn operating margins close to the auto sector, the pricing per share that you get will be closer to $250/share, with a more realistic share count and time value adjustments, not the $560 that you see on the ARK spreadsheet. In my last valuation of Tesla, set in June 2018, I considered possible, plausible and probable valuations for the company.In my story, which I admitted was an optimistic one, I mapped out a pathway for the company to deliver $100 billion in revenues in 2028, while pushing pre … In our past trainings with him all our participants were enthusiastic with the motivating and dynamic method of delivery as well as the personal interaction. Sovereign&DefaultSpreads:&Two&paths&to&the& same&des=naon…& Aswath Damodaran! “In my session, I use three words: make, it, real. “I realised this was what made me happy. My thought is, less than their debt, leaving their equity at zero. Aswath Damodaran finds himself is one of the most sought-after experts in valuation. By Anupam Nagar Valuation guru Aswath Damodaran says companies, like human beings, have a life cycle and a firm’s valuation should be able to reflect its position in the lifecycle. Bringing together everything that has happened at Tesla over the last year, I find myself telling the same story that I told about Tesla a year ago, of a company that would find a pathway to revenues of $100 billion in 2028, with strong operating margins, remains intact, with one notable change. You basically have to accept it is a process. Anyway, if I am correct and peak sales are in the rear-view mirror, Tesla has a big problem. Terms and Conditions, Type a minimum of three characters then press UP or DOWN on the keyboard to navigate the autocompleted search results. Your revenue projections have remained unchanged despite clear evidence that new launches from competitors are eating Tesla's cake. Tare 6 months from production in a brand new gigantic factory in Beijing. Value companies today. View the downloadable version of Acuity magazine in pdf format. The other is a bigger and more intractable problem. YouTube Video. There’s nothing I’m going to gain by finding Tesla to be cheap or expensive [for example]. Apologies if that's already been stated somewhere or if you have a fixed criteria I missed. 1) Banks also offer equity research as part of the IPO services. Debt Ratios by Sector, US (January 2018) Debt Ratios by Sector, Global (January 2018) Spreadsheets. You need to tie those numbers together with a story. In this section, I will update my Tesla story and valuation first, then look at the uncertainty around the valuation and close with a comment on a "valuation" by ARK Invest, one of Tesla's biggest institutional cheerleaders. He’s been awarded the UCLA Berkeley Earl F. Cheit Award for Excellence in Teaching, as well as Stern’s Excellence in Teaching Award, and he was the youngest winner of NYU’s Distinguished Teaching award. Using a technique that I find useful, when confronted with divergent views, to deal with uncertainties, I computed Tesla's values in a simulation, with the results below: in summary, the median value across the 100,000 simulations is $180/share, the 10th percentile delivering a $52 value/share and the 90th yielding $380/share. “If I wasn’t teaching valuation, I’d be teaching high school math, and if I wasn’t teaching high school math, I’d be teaching middle school. 17:01 Over decades he has created and helped shaped the field of valuation. YouTube Damodaran said the kind of CEO a company appoints should be dependent on its position on its lifecycle trajectory. “Because I’m a teacher, and not a consultant or an appraiser,” he says, “it gives me the freedom to say what’s on my mind. They're doing that because they overestimated demand?Professor-where is the limit sell placed? From Musk's Twitter escapades with the SEC, to talk about electric lawn blowers to concerns about a debt death spiral, the company has managed, yet again, to get in its own way, and this time, it has paid a price in the market, as its stock price tests lows not seen in a couple of years. Thanks for this big fan of your work. I teach classes in corporate finance and valuation, primarily to MBAs, but generally to anyone who will listen. As with every Tesla valuation that I have done over the last six years, this one comes with caveats and uncertainties, and the contrasting views that bulls and bears have about the company are captured in the table below: As you can see, I borrow from both sides of this debate, and I am sure that Tesla bulls will be disappointed that I don't have higher revenues for the company and Tesla bears will take issue with my reinvestment assumptions and expectations that the company will eventually deliver solid margins. Be willing to say you were wrong, and willing to correct yourself when wrong. One way or another, I’m gonna get you!” he says, laughing. “I remember walking into the first class I ever TA’d, and I knew it was what I wanted to do with the rest of my life,” he says. But I just got lucky.”. This is a full-semester valuation class that I teach at the Stern School of Business at NYU. Follow by Email. Labels: Investment banking, IPO, Venture Capital. Professor Damodaran, Your paper on ESG offers a very timely debate on how the world of ESG investing has evolved so far over the past 5-7 years. Aswath Damodaran 18 Discounted Cashﬂow Valuation: Basis for Approach where CF t is the expected cash ﬂow in period t, r is the discount rate appropriate given the riskiness of the cash ﬂow and n is the life of the asset. “You can never master it [valuation]. Valuation Guru Aswath Damodaran has made a wakeup call to those who believe in old-style value investing.The Professor of Finance at Stern School of Business at New York University (NYU) says value investors have got stuck in the 20th century. Damodaran himself has been voted ‘Professor of the Year’ five times by Stern’s graduating MBA class. From Class Rooms to Class Zooms: Teaching during COVID times! The first session is on January 23, 2017 and it will go through May 8, 2017. Thanks. With Elon Musk as part of the package, Tesla has a poison pill that few companies will want to imbibe, and it is likely that the relationship will have to be severed or at least significantly weakened for an acquisition to occur. Aswath Damodaran Aswath Damodaran 1. It’s the inherently unpredictable nature of business valuation that appeals to Damodaran. “No, no, no. Market data (June 26, 2020) Regional breakdown - Market Changes and Pricing (June 26, 2020) ... Aswath Damodaran I am a Professor of Finance at the Stern School of Business at NYU. I don’t have a formal financial model but my belief is that Tesla’s maximum quarterly revenue was in the past - Q3 or Q4 last year. By Aswath Damodaran If a company chooses to pay an employee with options or restricted stock, that action will affect the value of your share of equity in the company, no matter how many contingencies are added to these claims. A Viral Market Update XIV: A Wrap on the COVID market, premature or not! 15:48 Aswath Damodaran looks at a range of these companies, from start-ups in new businesses to distressed companies, from banks facing regulatory turmoil to commodity firms, and from emerging market upstarts to multinationals that spread across geographies and businesses. “A valuation is a bridge between stories and numbers.”, Damodaran was going to visit Melbourne in October to present a full-day workshop at CA ANZ’s biennial Business Valuation and Forensic Accounting (BFVA) Conference. by Aswath Damodaran Describes the process of getting from the value of the operating assets to the value of equity per share (cash, cross holdings and options). I teach classes in corporate finance and valuation, primarily to MBAs, but generally to anyone who will listen. “On all three dimensions accountants have a tough time… They’re so busy entrenching and defending what they’ve already done, it makes a bad valuation even worse.”. Teacher Aswath Damodaran. Borrowing a movie title to categorize what's happened to the company in the last year, I would break the news down into the good, the bad and what I can only term as gobsmacking, where you whack your head and say "what the heck was that?". I intend to have online versions of all three courses here, as well as other finance-related videos. I remain skeptical on the odds of an acquisition, precisely because I don't see Musk going quietly into the night, but adding an acquisition floor at a $15 billion value for equity (about $60/share) increases the simulated value for the stock by about $10/share. His YouTube videos on subjects such as “Equity Risk Premiums”, enjoy 165,000+ subscribers. Not a biggie, but clients ask for it. “When you value Tesla [for instance], there are no precise answers. “There’s no point valuing a company in 1988. Simple. His YouTube videos, on subjects such as “Equity Risk Premiums”, “Acquisition Valuation” and “The Determinants of Betas”, enjoy a staggering 165,000+ subscribers, while his Musings on Markets blog has had more than 17 million page views since 2008. I disagree with your assumptions, but that is part of what makes life interesting. Thank you Professor for your analysis.I'd like to know how can I perform a simulation analysis like you. by Aswath Damodaran Lay out the basis for the option premium and look at the conditions that have to be met for option pricing models to be useful in valuing an asset. He studied accounting at Madras University before undertaking a Master of Science in Management (akin to an MBA) at the Indian Institute of Management, Bangalore. 2! By Aswath Damodaran If a company chooses to pay an employee with options or restricted stock, that action will affect the value of your share of equity in the company, no matter how many contingencies are added to these claims. 2 General Information ... ¨ YouTube Channel : There is a final option, if your broadband connection is not that great and you are watching on a Tablet/smartphone. If you are using one of my valuation books for reference, try the supporting websites. “I have absolutely no qualms in telling people what’s on my mind,” Damodaran says. His YouTube videos on subjects such as “Equity Risk Premiums”, enjoy 165,000+ subscribers. Subscribe To Musings on Markets 1! This is a full-semester valuation class that I teach at the Stern School of Business at NYU. My suggestion is to reconsider the assumption that Tesla will continue to grow beyond what they achieved in Q3 & Q4. Data. When you spoke about User businesses, one recent company that comes to my mind in India is Zomato. Sovereign&DefaultSpreads:&Two&paths&to&the& same&des=naon…& Aswath Damodaran! Blog Posts on Value Investing (2020) Value Investing I: The Glory Days; ... Aswath Damodaran I am a Professor of Finance at the Stern School of Business at NYU. Prof. Aswath Damodaran is the Kerschner Family Chair Professor of Finance at the Stern School of Business at New York University. 2 General Information ... ¨ YouTube Channel : There is a final option, if your broadband connection is not that great and you are watching on a Tablet/smartphone. Default spread in basis points! That was almost 40 years ago. So what’s his secret to being an award-winning educator? I would be lying if I said that I do not find the company fascinating, and as has been my pattern for the last six years, it is time for a Tesla valuation update.