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article imageNYU finance professor says Tesla stock worth under $70

By Jenna Cyprus     Sep 23, 2013 in Business
Ever wondered how Tesla Motors is doing in the field of stocks and market shares? A finance professor from NYU makes a prediction but doesn't even come close.
The same NYU finance professor who correctly predicted the top stocks for Apple and the bottom for Facebook just announced what he believes is the fair value for Tesla. According to Business Insider, Aswath Damodaran posted in his blog at the beginning of September that he believes Tesla is only worth $67.12 per share, quite the decrease from the current rate of $170.62, its price as of closing on Wednesday, September 18, 2013.
Damodaran predicts that Tesla will grow to more than $8 billion in operating income by its 10th year, making it more profitable than almost all other automobile companies (besides Toyota Volkswagen and BMW, according to Business Insider).
Revenue Forecast
Even though Tesla has lost $216.72 million over the last 12 months, Damodaran predicts that by 2022, Tesla will post revenues of $65.42 billion. He states that this is a generally optimistic view and is compared to other currently existing automobile companies that are still on the market today. Damodaran also considered the fact that Tesla will have to reinvest back into the company and grow revenues and start posting profits before they are considered mature.
The professor's positive outlook into the future profitability of Tesla has also take into account its ingenuity and the future probability of popularity and demand for electric cars, which are the only type of automobiles that Tesla manufactures.
Business Valuation
Because Damodaran is a valued part of the finance community, many investors were not happy about his value estimate of $67.12 for Tesla stock. The professor wrote up a second blog post that further explains why his business valuation was determined in the manner that it was. He first states that Tesla could be a "Disruptor", meaning that it could redefine the automotive industry and "change the definition of what comprises success...it is possible that Tesla will create a new paradigm for a successful automobile company: a company that generates Ford-like revenues with Porsche-like margins."
In addition, Damodaran also states that Tesla's main focus has been in its unique power train in battery technology that will make its cars so successful. This type of unique technologic company may be valued differently than a traditional automotive corporation. Tesla is also at the unique crossroads of being the leader in its industry: electric cars. This could positively increase its value over the next 10 or 20 years.
Damodaran and his follow-up blog post with an additional statement reiterating that he would not buy Tesla stock at its current price. Whether or not current shareholders will follow the NYU professor's advice or not, the fact remains that Tesla is one company to keep an eye on in the years ahead.
More about Tesla motors, Tesla, Autos, Cars, Hybrid
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