Valuing Tesla — A Multiples Puzzle
Why bankers struggle to apply traditional multiples to Tesla.
In 2020, Tesla traded at over 1,000x trailing P/E and 25x revenue — multiples that look insane for an auto manufacturer (Ford traded at ~0.4x revenue at the time).
Bull case: classify Tesla as a tech/energy platform, value the auto business on EV/Revenue with a high growth premium, and add separate option value for energy storage, FSD software, robotaxi, and Optimus.
Bear case: it sells cars. Auto comps (Toyota, BMW) trade at 6–10x EBITDA. A DCF using realistic auto margins (~10% long-run) couldn't support the share price.
Lesson: when the market refuses to value a company on a single industry's multiples, you need a sum-of-the-parts (SOTP) approach or a scenario DCF, and you have to defend your assumptions vigorously.
Key Takeaways
- →When multiples fail, use SOTP or scenario DCFs.
- →Optionality (FSD, energy, robotaxi) can justify premium valuations — but it's optional.
- →Always sanity-check implied long-run margins.