Conventional business valuation and a non-conventional example: Tesla

Pásztor Viktória Eszter (2020) Conventional business valuation and a non-conventional example: Tesla. Pénzügyi és Számviteli Kar.

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Absztrakt (kivonat)

In a value-driven world the ability to determine the fair value of something is crucial. Not just for businesses, investors, but for the everyday people as well: we make investment decisions on a daily basis we just do not realize it.                 My aim with this paper was to build up the theory and methodology of business valuation from the basics like I was introducing it to someone who is never heard of it before. This approach ensure the profoundness and elaboration of my work, which are core values in case of a business valuation as well. In the beginning we get to know the aim and types of financial market, flow of capital and the role of everyday people in this circulation. The average people is prone to think that because they do not understand this system therefore they are not part of it. How wrong they are: people are one of the main pillars of a stable financial system.                 In the following sections I defined value in general and the tools which it can be measured. Despite these being mainly quantitative tools, it remained clear that there is room for creativity in valuation: it is up to us what kind of data we are working it, or the aspects of valuation. It can be completely tailored to our needs by varying the inputs of financial models, the aspects they are monitoring.                 When I was thinking about what company should I chose for valuation, I was sure about that I want pick a non-conventional one therefore I chose Tesla. Its performance in the stock market in 2020 was unbelievable, leaving a lot of question to the public: how can a vehicle company perform this good who wasn’t able the generate profit until 2017? Which sales are extremely low compared to other firms? How could it has bigger market capital than most of its biggest competitors’     combined? And the most basic question: how was it able to triple its stock prices within six months during a global pandemic?                 First and foremost it became clear that Tesla is not a vehicle company. Or at least this is not what the market values in this price. My first valuation, where I completely ignored revenues and growth from service providing, resulted in a similar stock price to its competitors which, as I said before, are very far from Tesla’s. It is clear that Tesla is a growth company therefore its stocks are growth stocks (behind growth stock there is no existing value, only the potential to gain it someday). Here another question occurred: how can be a company considered as a growth company if it operates in the industry which is not capable of keeping up growth in the long run? Because it cannot. Manufacturing has significantly lower monopolistic potentials, and the number of customers is a finite value which cannot be extended forever. Therefore the characters of the manufacturing industry had to come up with a solution for this problem, and they found a good one.                 Nowadays the aim of companies is not to expand their customer base but manage to create recurring revenues of them. For example, Microsoft stopped the practice of selling its software for good, instead they introduced subscriptions. You can “rent” Office software for a year instead of having it forever: customer recycled. The service industry has a lot more monopolistic characteristics than manufacturing and sales. The networking effect shows up more easily which has the ability to create a feedback loop, and this is the business model, “money cows” or cash generating machines can be built on, like Google Ads.                 This is why Tesla is expanding to services. It is planning to introduce self-driving subscription, car sharing features. It will try to follow sharing-economy, the economic modell of the future. Sharing economy is a peer-to-peer based activity of sharing access to goods and services on a community-based online platform. It is a way to maximize the utility of our assets. Unfortunately human race has a tendency of overproduction and accumulating assets. In the age, when threat of global warming is becoming bigger and more real, it is crucial to find ways to decrease the environmental footprint of human kind. Sharing economy is a great step ahead. Car sharing combined with the electric car and self-driving technology, Tesla will be able to offer a service that is very profitable both business and environment wise: it will be able to reform travelling by car. With a leader, like Elon Musk, who is a visionary engineer and a brilliant business man, the possibilities of Tesla are infinite. All of the biggest and most appreciated companies, like Google or Amazon, were able to make such a difference, shake the foundations of the world we lived in: these companies had such brilliant ideas which were able to change our perspective and ways of living life. I think this is what Elon Musk wants to achieve for Tesla, and to be honest, he is going to the right way. The ideas what drive Tesla are definitely from the future and nowadays this is what is the most valuable: visionary thinking and innovation. I cannot wait to see these ideas how these ideas will come to life.

Intézmény

Budapesti Gazdasági Egyetem

Kar

Pénzügyi és Számviteli Kar

Tanszék

Pénzügy Tanszék

Tudományterület/tudományág

NEM RÉSZLETEZETT

Szak

Pénzügy és Számvitel

Mű típusa:	diplomadolgozat (NEM RÉSZLETEZETT)
Kulcsszavak:	analysis, corporate finance, corporations valuation, investment analysis, valuation
SWORD Depositor:	Archive User
Felhasználói azonosító szám (ID):	Archive User
Rekord készítés dátuma:	2021. Már. 16. 13:20
Utolsó módosítás:	2021. Már. 16. 13:20

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