Tesla Financing Growth Case Study Help
Opportunities
- The company can expand its operation in the worldwide regions along with the expansion in the product portfolio line.
- In the fast-growing technology phase, company could use innovative products in order to increase its production process and making it simple and quickest.
- The demand for electronic cars would increase with a significant margin, because the prices of oil represented an increasing trend.
Threats
- The competition was highly intense and competitive, because number of cars was manufacturing with the concept of different fuel consumption tools.
- The prices of raw material were increasing day by day, because of high technology and innovations, which require more increased investment and cost of production.
Tesla Financial Growth Analysis
A detailed financial growth analysis has been performed in order to examine the company’s current situationwith the inclusion of future predicted valuation for gauging the effectiveness of the proposed valuation method. Discounted cash flow valuation method estimates the value of the company based on its projected cash flows. DCF valuation method could be considered as an income-based approach. DCF valuation could be used by investors to measure the fair price value of the share. Investor must consider the factor which can affect the company’s performance.
After examining all the costs and profits for Tesla Motors, we discounted back all the profits of Tesla Motors up to the year 2020 through the discount rate of 12.6% (WACC), which is given in the case. We have drawn this rate from the J.P Morgan analysis. J.P Morgan has recommended $185 stock price, which is looking practical and justifiable price because this stock price has been drawn from the discounted cash flows and from the multiples-based analysis(Keçeli, 2013).
Ratio Analysis
A detailed ratio analysis hasbeen performed in order to examine the company’s current ratios and future predicted ratios for gauging the effectiveness of the proposed valuation method(D Nissim, SH Penman, 2001). (See appendix 2 for ratio analysis)
The analysis included liquidity ratios, solvency ratios and the profitability ratios. the analysis represented an increasing trend in all the ratios except the current and quick ratios. Thus, it is concluded that the company is earning positive outcomes with the help of its invested capital. the projected ratios are also showing an increasing trend. Thus, it is concluded that the company would earn increase profits and yield its investors a positive income in future with the help of its new product- Model 3 electronic car. In addition to this, the projected valuations represents the positive income and positive NPV, which is representing that the project is profitable(JDH van Wijngaarden, GRM Scholten, 2012).
Recommendations
All the proposed alternative valuation methods have been critically reviewed and analyzed in order to examine the best valuationmethod. The financial analysis proposed that the company should adopt the DCF analysis valuations suggested by the J.P Morgan, which will yield increased revenues and returns in future along with an effective pricing strategy. Thus, it is recommended that Tesla should adopt DCF analysis valuations, which is providing positive NPV with the hep of invested capital and equity. The capitalization would yield anincreased revenue in future and the investors could earn an increased amount.
Conclusion
It is concluded that Tesla investor were worried about the investment opportunity in Tesla by assuming the current stock price and the Tesla’s available financial information and wanted to know the fair view of the current price for further investment. The financial analysis proposed that the company should adopt the DCF analysis valuations suggested by the J.P Morgan, which will yield increased revenues and returns in future along with an effective pricing strategy. Thus, it is concluded that the company would earn increase profits and yield its investors a positive income in future with the help of its new product- Model 3 electronic car..............................
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