Tesla Financing Growth Case Study Analysis

J.P. Morgan’s Analysis

The Wall street analyst J.P Morgan’s analyzed the share price valuation in a qualitative manner by using the market multiples and the DCF approach. After that the 50/50 percentweightages given in order to determine the final price of the share.

(RE Shrieves, JM Wachowicz Jr, 2001)

Pros

The 50/50 percent weightages allocation representing an authentic measure, which would yield an effective share price. In addition to this, both valuations methods are considered as best in determining the valuations.

Cons

The approach neglected the time value of money with the inclusion of ignoring the cost of capital. In addition to this, the approach is more complex and time consuming, because it will require to conduct two types of different approaches and would require two different type of information.

Regression analysis

A detailed regression analysis has been performed in order to examine theeffectiveness of all the proposed valuation methodsfor identifying the best solution (See appendix 4 for regression analysis). The results could be seen form the attached excel sheet. The detailed analysis suggested that all the values are fully depended on each other. All the variables should be incorporated with each other. The proper valuation has proposed that if company used DCF valuations method, then the company could earn increased profits(JDH van Wijngaarden, GRM Scholten, 2012), (RE Shrieves, JM Wachowicz Jr, 2001).

Strength and Weaknesses Analysis

A detailed strengths and weaknesses analysis has been performed for all the alternative valuation analysis in order to identify the best possible valuation method for the company , which could maximize the returns and earnings of the company (JDH van Wijngaarden, GRM Scholten, 2012).

The Wall street analyst Dougherty and Company analyzed the share price valuation on the basis of the study of the Tesla’s ecosystem within the range of six months. This valuation is based on the perception of the stakeholder’sassumption and the growth rate. Thus, yielding an effective measure and pricing valuation. The Wall street analyst Morgan Stanley analyzed the share price on the basis of three cases- bear case, bull case and a base case. After conducting each’s case discounted cash flow analysis, the best share price had been proposed, which was $333 per share, yielding a mid-range decision. Thus, this approach is comparatively better than other approaches because it is yielding three different measures and a thorough analysis. In addition to this, the bullish assumptions had been made. The Wall street analyst J.P Morgan’s analyzed the share price valuation by considering two different methods. The approach yields the lowest share price of $185, which is much lower than expected. In addition to this, the forecast was based on the 2020 pricing strategy with the inclusion of more time required, because of using two different valuations methods(See appendix 3 of each solutions’ strengths and weaknesses).

SWOT Analysis

A detailed SWOT analysis has been performed in order to identify the company’s prevailing situation with respect to its associated opportunities and challenges (JDH van Wijngaarden, GRM Scholten, 2012).

Strengths

  • Tesla Motors offered an innovative product portfolio to the end customers.
  • The company had achieved the 1.29% market share in the U.S market.
  • The company earned $4 million with the total assets of $8 billion and the market capitalization was $32 billion.
  • The company adopted low pricingstrategy as compared to its competitors.

Weaknesses

  • Tesla was highly dependent on the Panasonic market for the innovative battery cells for its products.
  • The cost of production was high, because of small economies ofscale and smallsales volume.

Because of low pricing strategy, the company was earning low profits as compared to its competitor’s same sales volume..............................

 

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