It's October 2010. William Blazejeski is a doe eyed, bushy tailed senior at Stetson University about to present his semester long project to the Roland George Investment Program - the prestigious student run investment fund that utilizes real money for students to trade taken from the endowment. TSLA was $20.00 at the time. Not anymore!

1. Tesla Motors Buy Recommendation
Purchase 1,700 Shares
-William Blazejeski

2. Company Background
• Founded in 2003
• Consumer Cyclical – Auto
& Truck Manufacturer.
• High performance EV’s
(Electric Vehicles.)
• The upcoming Model S.
• Partnerships with Daimler,
Toyota, and Panasonic.
• Dynamic management.
• NUMMI Plant.

3. Electric Vehicle Growth
• EV’s are expected to
represent 5-10% of new
vehicle sales by 2020.
• The U.S. is trying to
reduce our dependency
on foreign oil and the
new “green” movement.
• Incentives to purchase
EV’s are provided by both
State and Federal
governments.
• EV attempting to
penetrate market.
– Must overcome “Range
Anxiety,” other worries.

4. Industry Overview
• The auto industry has seen significant changes over the past two
years.
– GM & Chrysler Bankruptcy.
– Tarnished view of the American Auto industry.
• The “Cash for clunkers” program in 2009 temporarily artificially
increased auto-sales in the U.S.
– This explains a drop in auto-sales for 2010.
• “The consumer is crawling back, particularly in the more affluent
and higher-quality credit segments, which should provide upside to
our 2011 (auto industry) outlook.”
– Barclays Analyst
• Consumers looking for “Greener” vehicles, with such vehicles
expected to represent anywhere from 20% to 1/3 of Urban vehicles
at the end of the decade.

5. Trading History
Ticker
Sector
ROE
P/E
Recent Range
TSLA
Consumer
Cyclical
N/A
N/A
$34.50 $14.98 $3.24
-36.42 billion
• Tesla went public June
29th, 2010 on the
NASDAQ stock exchange
under the symbol TSLA,
with an IPO price of
$17.00
– This was the first IPO of
an American automaker
since Ford in 1956.
– Concurrent with the
IPO, Tesla sold $50
million dollars worth of
share to Toyota at the
IPO price.
Mkt Cap Beta
1.11
AvgVl
Fair $
924k
$51.00

6. Recent News Affecting Share Price
• On November 4th, Tesla’s biggest supplier of lithium ion batteries,
Panasonic, purchased $30 million dollars worth of TSLA stock at
$21.15 a share. This bumped their share price up to $25.00 per
share.
• Third quarter losses were less than what analysts had expected.
This pushed the share price up further to over $30.00.
– Later that week, rumors of a takeover by Ford briefly lead to significant
buying on November 17th afternoon trading.
• A Bloomberg report calculated that of 10.3 million dollar shares in
float, about 6.6 million of which are shorted.
TSLA 3-Month Stock Performance

7. Tesla’s EV Technology
• Batteries are more
efficient than
competition.
• Batteries are less
expensive than
competition.
• Cylindrical cells as
opposed to
prismatic cells.
• Commercial
“laptop” batteries.
• Patented liquid
cooling technology.
• In the future, more
cost savings with
the Model S
through economies
of scale.
Note: The Roadster is currently the only vehicle on the market.

8. Tesla Models
The Model S
The Roadster

9. The Roadster
• 0-60 MPH in 3.7 Seconds.
• 231 Miles on a single
charge.
• $109,000 MSRP.
• Zero emissions.
• Over 1,200Roadsters are on the road in 28 different
countries, with 6 million driving miles already clocked in.

10. The 2012 Model S
• 160 - 300 mile range. • 0-60 MPH in 5.6 Seconds.
• $57,400 MSRP.

11. The Tesla Designed Smart Fortwo
• 85 mile range.
• 3.5 hour charge.
• Launch in 2012.

12. The Tesla Designed Toyota Rav4

13. Investment Points

14. The Model S
• The model S will
increase revenue from
$0.1B (2010) to $1.8B
by 2013.
• It will compete in the
Luxury Sedan Market.
– At 18.5k vehicles
produced in 2013, this
represents only 2% of
this market.
• Over 2,800
reservations with
$5,000 deposits
already made and
counting.
Luxury Vehicle 2013
Estimated Market Share
Acura RL
BMW 5-Series
Audi A6
Cadillac CTS
infiniti M- Series
Lexus GS460
Mercedes-Benz E-Class
Tesla Model S

15. Earnings Estimates
• Revenue will increase dramatically following the 2012 launch
of the Model S, the next Roadster in 2013, and a new third
vehicle sometime in 2015.

16. Management
• Elon Musk (CEO)
– Co-founded Tesla in 2003
• Also co-founder of PayPal, chairman of SolarCity, and CEO of SpaceX.
Holds engineering and business degrees from U-Penn.
• Deepak Ahuja (CFO)
– CFO of Ford South Africa 2003-2006
• John Walker (VP, North America Sales & Marketing)
– Over 15 years with Audi.
• Gilbert Passin (VP, Manufacturing)
– Held high positions in Toyota Manufacturing. Also held
manufacturing positions with Volvo and Mack Trucks.
• George Blankenship (VP, Design and store development)
– Oversaw the growth of over 250 retail stores worldwide each
year while with the Gap. Created the retail growth strategy that
has made “The Apple Store” one of the greatest retail success
stories in corporate history.

17. Other Investment Points
• Tesla’s battery technology is by far the best in the industry.
• Tesla recently purchased the former New United Motors
Manufacturing (NUMMI) plant for $42 million dollars.
– This plant has the capability of producing up to 500k vehicles
annually and is only 20 miles away from their company
headquarters in Palo Alto, California. Tesla is now retrofitting the
facility for production of the Model S.
• Tesla owns and operates all of their own dealerships.
– More control over brand image and higher operating margins.
• Tesla’s technology is 2-3 years head of competitors.
• Investments from Toyota, Daimler, and Panasonic confirm
the company’s legitimacy.
– Investments of $50 million, $50 million, and $30
million, respectively.

18. Financials
• Earnings
– Tesla is currently gearing up for the production and launch of
their flagship Model S vehicle. EPS have been negative this year
and are projected to be (1.38) at year end. Positive EPS are not
expected until 2013.
• Cash flow
– Capital expenditures during the next three years will be high as
manufacturing lines and other equipment necessary for the
Model S are laid out. Cash will remain in outflow until 2013.
• Revenue
– Currently, about 85% of revenue comes from vehicle and option
sales, while the other 15% comes from powertrain, component, and related sales.
• The Department of Energy loan
– The DOE will extend a loan totaling $465million dollars to Tesla
at a 3% interest rate for the company to develop and produce
electric vehicles.

19. Valuation
Multi-stage residual income model.
Two-stage free cash flow model.
Averaging the result of the two models, I came up with a
fair value of $50.87.

20. Investment Risks
• Any delays in the design, manufacture, launch
and financing of the Model S will incur more costs
for the company.
• Consumers must be willing to accept this new
technology.
• Tesla is ahead of the game with regard to EV
technology, and must stay this way in order to
maintain their competitive edge.
• Supplier dependency.
– This may become less of an issue with Model S.
– Investment from Panasonic is good news for Tesla.

21. Recommendation
• There are currently no other U.S. auto
manufacturing companies completely
dedicated to the development of Electric
Vehicles. This is a blossoming industry, and
there are many factors that make me believe
now is the time to invest in this industry.
• Tesla’s stock is currently undervalued.
• I recommend the Roland George Investment
program purchase 1,700 shares of TSLA.