Tesla due diligence report.

Oto Suvari
Aug 27 · 4 min read

Hatchworks has conducted due diligence on Tesla, the company that specializes in electric car and, through its SolarCity subsidiary, solar panel manufacturing. It is listed on the NASDAQ under the symbol: ‘’TSLA’’.

Tesla, the company that specializes in electric car and solar panel manufacturing, has been added to Hatchnet. They have raised a tremendous amount of $17.8B during 32 funding rounds. Their current market cap is $39.39B. If we take a look at their financial forecasts for the year 2020E and 2021E, we can see that there is a big projected rise in their net-income growth of about 831%. The revenue for 2021E is $37.8B, thereby implying an EV/Sales multiple of 1.23x, whereas some competitors, like Ford Motor Company, are at a much better EV/Sales multiple of 0.19x. Tesla’s net income for 2021E shows a profitable figure of $1.51B, which implies an expensive P/E multiple of 28.7x. It is worth noting that 2020E may be the first fiscal year when Tesla finally generates net profits as historical data shows a negative net income figure from year 2016 to 2019E.

By looking at Tesla’s operating margin forecast for 2021E, which is 6%, we can conclude that their revenue generation is higher than their expenditure, which was initially the other way around. Some of Tesla’s big competitors, like General Motors, have a more solid operating margin of 7.80%. In May 2019 Tesla did a Post IPO funding round, meaning that they issued more shares and bonds which is receiving cash in return for equity, thereby their cash reserves went up, but their debt increased. Given the current, in our opinion, overheated valuation and growth prospects, Hatchworks will not be investing in Tesla at this stage.

The Hatchscore is 3.1 out of 10. Full details can be found on Hatchnet: www.hatch-net.com/companies


What is Tesla?

Tesla, Inc. designs, develops, manufactures and sells electric vehicles, and energy generation and storage systems in the United States, China, Netherlands, Norway and internationally. The company operates in two segments: Automotive and Energy Generation and Storage.

Big investors:

  • Baillie Gifford and Company.
  • Capital World Investors.
  • Public Investment Fund.
  • Vanguard Group, Inc. (The).

Advisors and Bookrunners:

  • Goldman Sachs.
  • Morgan Stanley.
  • JP Morgan.
  • Deutsche Bank Securities.

What are the risks?

  • As the company’s debt load and corresponding interest expenses continue to rise, leading the company to ever rising losses.
  • A big increase in electric vehicle competition.
  • Tesla cars are still too expensive for many people.
  • If fuel prices become lower and more economically attractive, then Tesla’s product becomes less desirable and could lead to a drop in its market value.

Competitors:

  • Ford Motor Company. (F)
  • General Motors. (GM)
  • Honda Motors. (HMC)

Management team:

  • Elon Musk: CEO
  • Drew Baglino: CTO
  • Zachary Kirkhorn: CFO
  • Malcom Smith: VP

The Hatchworks Team

The forecast figures are based on the data of Marketscreener and not from Hatchworks: https://www.marketscreener.com/TESLA-INC-6344549/financials/


Legal Disclaimer — This report summary has been generated as a result of Hatchworks’ proprietary company vetting and filtering system. The level of due diligence conducted on investible assets conducted ranges from mediocre to significant, the latter being the case where Hatchworks has explicitly taken strategic positions in. By no means is the information in this file to be relied on as investment advice; this includes Hatchworks’ algorithmic composite score known as ’Hatchscore’. You will note that this report does not include a ‘buy’, ‘sell’ or ‘hold’ recommendation. Hatchworks has not received any compensation for this research. For more information you can reach us at info@hatchworksvc.com. This report is not for distribution in the United States of America. It is closed to U.S citizens. If you are a U.S. citizen, you should delete this report or return to sender.

Oto Suvari

Written by

Research & Development at Hatchworks & Neuchatel Ltd. Heading up the group’s R&D activities for Hatchworks, SPECTRE (www.spectre.ai) and linked projects.

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