Aswath Damodaran finds himself is one of the most sought-after experts in valuation. My twitter feeds (almost entirely on valuation/corporate finance) can be found at @Aswath Damodaran. He’s been awarded the UCLA Berkeley Earl F. Cheit Award for Excellence in Teaching, as well as Stern’s Excellence in Teaching Award, and he was the youngest winner of NYU’s Distinguished Teaching award. That’s certainly one of the reasons, he agrees. His YouTube videos on subjects such as “Equity Risk Premiums”, enjoy 165,000+ subscribers. 1! In short, right now, it is more option than conventional going concern value, and even if I believed it, I would make more money selling short on Uber and Lyft, than buying Tesla. Sovereign&DefaultSpreads:&Two&paths&to&the& same&des=naon…& Aswath Damodaran! I teach classes in corporate finance and valuation, primarily to MBAs, but generally to anyone who will listen. Aswath Damodaran is the Kerschner Family Chair Professor of Finance at the Stern School of Business at New York University. After this, he headed to the US to complete a second MBA and a PhD, both in finance and both at UCLA. Borrowing a movie title to categorize what's happened to the company in the last year, I would break the news down into the good, the bad and what I can only term as gobsmacking, where you whack your head and say "what the heck was that?". Datasets. Aswath Damodaran I am a Professor of Finance at the Stern School of Business at NYU. Be willing to say you were wrong, and willing to correct yourself when wrong. They let me reach a much broader audience than I could have 30 years ago…. And&athird&–Average&DefaultSpreads:&January& 2013 Rating! Real time figures from Norway on sales of Audi e-tron and Jaguar i-Pace vs Model's X/S are the best examples of that. I don’t know if anyone has posted this here before, but Aswath Damodaran, a professor at NYU, teaches both an undergraduate and an MBA level valuation class at NYU. Since the stock was trading at close $360 at the time of the valuation, I concluded that it was significantly over valued. Just to give a sampling, here are the other items that added to the smoke around the stock: For the bulk of its existence, Tesla has been a story stock. True to form, Elon Musk roiled the waters in August 2018 with his now infamous tweet about funding being secured for a $420 buyout of the stock, causing a surge in the stock price, before questions arose about both how secured the funding actually was and whether the $420 price itself was fiction. A Do-it-yourself (DIY) Valuation of Tesla: Of Investment Regrets and Disagreements! The first part are the webcast related to the class and the second part are tools webcasts, designed to help you apply the concepts to real companies. In that post, I also listed possible, perhaps even plausible, scenarios where Tesla's value per share could be higher than $400/share, but argued that it would require the equivalent of a royal flush for the company to get there, a combination of a ten-fold increase in revenues, an operating margin of 12% and reinvesting more like a technology than an automotive company. Today, Damodaran holds the Kerschner Family Chair in Finance Education at Stern. Thanks for this big fan of your work. (“It’s a Kabuki dance where people decide to attach a number to an asset and dance around it.”) Or his scathing opinion of small-cap premiums. by Aswath Damodaran Describes the process of getting from the value of the operating assets to the value of equity per share (cash, cross holdings and options). “And I believe that you sometimes have to draw on an inner strength to fight your valuation battles… you will suffer losses along the way but a Jedi does not waver.”. In fact, in the 24 hours before our interview, Damodaran offered this truth bomb to managing consulting firm McKinsey & Company: “I was at McKinsey talking about disruption and I said McKinsey has made ‘disruption’ a buzzword. “If I wasn’t teaching valuation, I’d be teaching high school math, and if I wasn’t teaching high school math, I’d be teaching middle school. 10! In spite of these adjustments, I have consistently come up with valuations well below the price, finding the stock to be valued at about half its price only a year ago. My name is Aswath Damodaran and I teach corporate finance and valuation at the Stern School of Business at New York University. Welcome to the madness :-). No comments: Post a Comment. Just because you have a D and a CF does not mean that you have a DCF (discounted cash flow), It is better to be accurate than precise, and accuracy is relative. Posted by Aswath Damodaran at 3:44 PM. A Viral Market Update XIV: A Wrap on the COVID market, premature or not! Save your 7 paragraphs. That seems missing from this debate overall (not here in particular just in general it seems). Meatless Future or Vegan Delusions? If you want to see which chapters map on to which sessions, click here. YouTube Video. To provide perspective on why the value per share today is higher, even with a much greater chance of failure, I compared the numbers that I used in my valuation in June 2018 to June 2019: Note that while my end game on revenues ($100 billion by 2028) and operating margins (10% in 5 years) has not changed, the base numbers make both easier reaches. Damodaran’s “Jedi guide to valuation” draws on his book The Dark Side of Valuation: Valuing young, distressed, and complex businesses. While there are some entanglements (such as the one with Panasonic in the battery factories) that will have to be worked out, there have generally been two impediments on this path. Risk Adjusted Value: Three Basic Propositions" The value of an asset is the present value of the expected cash flows on that asset, over its expected life:" " " " You … - Selection from Damodaran on Valuation [Book] Default spread in basis points! I teach classes in corporate finance and valuation, primarily to MBAs, but generally to anyone who will listen. “Luckily, I was listening that day. Subscribe to: Post Comments (Atom) Twitter. With Elon Musk as part of the package, Tesla has a poison pill that few companies will want to imbibe, and it is likely that the relationship will have to be severed or at least significantly weakened for an acquisition to occur. The Beyond Mea... Tesla's Travails: Curfew for a Corporate Teenager. 10! I intend to have online versions of all three courses here, as well as other finance-related videos. Prof. Aswath Damodaran has the most famous yet unheard of blog that you can find online. Professor Damodaran, Your paper on ESG offers a very timely debate on how the world of ESG investing has evolved so far over the past 5-7 years. Or you're silly. "Aswath Damodaran is simply the best valuation teacher around. Although I have a feeling they will, simply because sometimes hearing the unvarnished truth about something can make you better at it.”. This year marks a turning point, as I find Tesla to be under valued, albeit by only a small fraction. As I watched Musk repeatedly put Tesla's story and value at risk with his distractions, I was reminded of teenagers around the world, with immense potential and intelligence, who risk it all for momentary and often meaningless rushes. Aswath Damodaran is not trying to win any popularity contests. Over decades he has created and helped shaped the field of valuation. Value Investing III: Requiem, Rebirth or Reinvention? Aswath Damodaran! I did my first valuation of Tesla in 2013, and undershot the mark, partly because I saw its potential market as luxury cars (smaller), and partly because I under estimated how much it would be able to extract in production from the Fremont plant. As with every Tesla valuation that I have done over the last six years, this one comes with caveats and uncertainties, and the contrasting views that bulls and bears have about the company are captured in the table below: As you can see, I borrow from both sides of this debate, and I am sure that Tesla bulls will be disappointed that I don't have higher revenues for the company and Tesla bears will take issue with my reinvestment assumptions and expectations that the company will eventually deliver solid margins. It’s the inherently unpredictable nature of business valuation that appeals to Damodaran. I am a teacher first, who also happens to love untangling the puzzles of corporate finance and valuation, and writing about my experiences. The value per share that I get with both effects built in is about $190/share: If there is a modification to my story, it would be this. Thanks. Aswath Damodaran 2 Discounted Cashflow Valuation: Basis for Approach n where CF t is the cash flow in period t, and r is the discount rate appropriate given the riskiness of the cash flow and t is the life of the asset. Discounted Cash Flow Valuation! " “I’m also being helped by technology,” Damodaran says modestly, as if the rest of us might also enjoy more than 166,000 Twitter followers if only we had access to technology like he does. Missing wages. By that stage, he was making a beeline for a career in banking when an epiphany stopped him in his tracks. When you spoke about User businesses, one recent company that comes to my mind in India is Zomato. There is a YouTube playlist for this class, where all class sessions will be loaded. 17:01 It’s the inherently unpredictable nature of business valuation that appeals to Damodaran. I was wondering whether you have an update post/valuation for Tesla planned, incorporating the past developments.I also purchased Tesla stock at a similar price (a few weeks before this post) but have recently sold it after the large price appreciation, and would therefore like to know where your thoughts lie at this point in order to compare them to mine.Thank you very much for the quality content you consistently put out. What tools did you use? That day may be here, as I put in a limit buy order at $180/share, knowing fully well that, if I do end up as a shareholder, this company will test my patience and sanity. by Aswath Damodaran Lay out the basis for the option premium and look at the conditions that have to be met for option pricing models to be useful in valuing an asset. He’s not kidding. With Tesla, good news is always bundled with bad, some of it caused by macro events but much of it the consequence of self inflicted wounds: It is also worth noting that a significant part of Tesla's time has been spent extracting itself from another unforced error. I disagree with your assumptions, but that is part of what makes life interesting. But I just got lucky.”. This spreadsheet allows you to input past returns on a stock and a market index to analyse its price performance (Jensen's Alpha), its sensitivity to market movements (Beta) and the proportion of its risk that can be attributed to the market. “You can never master it [valuation]. (“A complete fiction.”). He had also written “A viral market meltdown”, a three-part blog series exploring how the coronavirus had played out in markets. There is a YouTube playlist for this class, where all class sessions will be loaded. Professor Aswath Damodaran's research on corporate profits is spotlighted. Please enable JavaScript in order to get the best experience when using this site. I love your work no one define tasla value as you did I had couple of issue your cap exp call is not correct because tasla do not produce Ic engion so it doesn't take into its assembly line and what about bettery or energy store business which may be as big as transportThanks Regard Farooq. 2 General Information ... ¨ YouTube Channel : There is a final option, if your broadband connection is not that great and you are watching on a Tablet/smartphone. He teaches the corporate finance and valuation courses in the MBA program as well as occasional short-term classes around the world on both topics. The first session is on January 23, 2017 and it will go through May 8, 2017. “Five times as many people watch my YouTube videos as read my blog posts, and my videos are translated into a dozen languages. Airbnb Inc. is doing the right thing going public now and the Covid-19 pandemic may actually help them get valued at the top end of the range, Aswath Damodaran, finance professor at … As for the bull case, I will leave it untouched, since it strikes me as more fairy tale than valuation, a world where there will be 7.2 autonomous cars on the road in 2023, with Tesla controlling a 70% market share, and generating $52 billion in annual cash flows. And that’s a feature of business valuation, not a bug.”. I teach corporate finance, valuation and investment philosophies at the Stern School of Business at New York University. It should come as no surprise to anyone that Tesla is back in the news, though it seems to be for all of the wrong reasons. Your revenue projections have remained unchanged despite clear evidence that new launches from competitors are eating Tesla's cake. (He hopes to return with his workshop in 2021.). Particularly for something this risky! “I write, I blog, I video – I hit people with multiple media. They may have saturated their markets for their existing products, competition has begun to arrive, and their product pipeline is not mature (they don’t have the ability to manufacture the Model Y in scale anytime soon). And when he’s not delivering courses in corporate finance, and equity instruments and markets, Damodaran’s day-to-day involves educating educators. Surely you want a discount? Apologies if that's already been stated somewhere or if you have a fixed criteria I missed. This is a full-semester valuation class that I teach at the Stern School of Business at NYU. 9! In this simulation, I have assumed that Tesla will remain a stand alone, going concern, and that the equity value could drop to zero, if there is a shock to the value of operating assets, given the debt load. Damodaran himself has been voted ‘Professor of the Year’ five times by Stern’s graduating MBA class. 15:48 Damodaran’s wisdom can be downloaded directly to your device from YouTube, Twitter, his personal website, his blog, or his regular appearances on US TV business channel CNBC. This is how, despite his unflinching honesty – or more likely, because of it – the professor finds himself in the unlikely position of being one of the most sought-after, and most respected, experts in the valuation field. Subscribe to: Post Comments (Atom) Twitter. Aswath Damodaran looks at a range of these companies, from start-ups in new businesses to distressed companies, from banks facing regulatory turmoil to commodity firms, and from emerging market upstarts to multinationals that spread across geographies and businesses. Respectfully. 15:48 “Most valuation classes are becoming spreadsheet classes, where you’re taught to be an Excel ninja… If all you have are numbers in a spreadsheet it’s not a valuation; it’s numbers in a spreadsheet. I teach classes in corporate finance and valuation, primarily to MBAs, but generally to anyone who will listen. 17:01 Basically, my passion is teaching, and my interest lies in finance simply because my skill set works there.”. “No-one knows the answer to a real-time valuation,” Damodaran tells me. My thought is, less than their debt, leaving their equity at zero. Thank you Professor for your analysis.I'd like to know how can I perform a simulation analysis like you. They're doing that because they overestimated demand?Professor-where is the limit sell placed? I may not have the power to change the status quo in any of these businesses, but I can stir the pot…”, Take his damning assessment of fair value accounting. Terms and Conditions, Type a minimum of three characters then press UP or DOWN on the keyboard to navigate the autocompleted search results. It is the equity value per share that is maximized at 60% debt. He’s so passionate about education that all of his teaching – his classes, seminars, executive classes, online classes, data sets, tools, spreadsheets and more – are freely available on his website. 10! YouTube Video. When Acuity first spoke to him in March, Damodaran had recently valued the effect of the coronavirus on the S&P 500 for the first time. Follow by Email. Yet even this “Dean of Valuation”, as Damodaran is affectionately known, has struggled as much as anyone with the enormity of the impact of the COVID-19 pandemic. In fact, I am tempted to add a corporate teenage phase in. “It’s run by 10 universities and, essentially, it encourages business schools to send faculty to a central location, where people talk about teaching.”. “…People might not agree with me but I’m not going to hold back.”, The homepage of his website, Damodaran Online, for example, opens with the following shot across the bow: “…I happen to be at the intersection of three businesses – education, publishing and financial services – that are all big, inefficiently run and deserve to be disrupted. He explains that he heard an internal voice speaking to him when he was working as a teacher’s aide (TA) for an MBA class at UCLA in order to make some fast cash. Labels: Investment banking, IPO, Venture Capital. “I was able to say this because I really don’t care whether McKinsey invite me back again. All of which proves Damodaran’s second law: You have to be willing to be wrong. Professor, thanks for updated Tesla valuation, however I think your valuation model clashes with reality.I will touch on two key points:1) Cost of Capital - the only reason you valuation remained almost unchanged from a year ago despite fourfold increase in the risk of failure, was decline in the cost of capital. A Viral Market Update XIV: A Wrap on the COVID market, premature or not! His YouTube videos, on subjects such as “Equity Risk Premiums”, “Acquisition Valuation” and “The Determinants of Betas”, enjoy a staggering 165,000+ subscribers, while his Musings on Markets blog has had more than 17 million page views since 2008. I’ve learned things I didn’t know about valuation in just the past nine days. The first session is on January 23, 2017 and it will go through May 8, 2017. The class is 26 sessions long and begins on February 2, 2015 and ends on May 11, 2015. Prof. Aswath Damodaran is the Kerschner Family Chair Professor of Finance at the Stern School of Business at New York University. YouTube Video. YouTube Video. When you say buy shares, do you have a percentage amount you allocate to your portfolio or does it depend by name? Data. Labels: Pricing and Value, Shareholder Value. He’s known for his truth bombs, but Aswath Damodaran’s second law of valuation is that you have to be willing to be wrong. This site uses cookies and other tracking technologies to assist with navigation and your ability to provide feedback, Hopefully this is one of those times, as I like the company and the product and I always welcome good jobs in the US. In my last valuation of Tesla, set in June 2018, I considered possible, plausible and probable valuations for the company.In my story, which I admitted was an optimistic one, I mapped out a pathway for the company to deliver $100 billion in revenues in 2028, while pushing pre … “I teach a class of teachers through a program called the International Teachers Programme,” he says. You're a short. He … Aswath Damodaran is Professor of Finance and David Margolis Teaching Fellow at the Stern School of Business at New York University. 11! View the downloadable version of Acuity magazine in pdf format. © 2020 Chartered Accountants Australia and New Zealand ABN 50 084 642 571 (CA ANZ). If they aren’t growing and they are still losing money, what are they worth? I believe that simply applying 30% revenue growth rate in years 1-2 and 20% in years 3-5 is a dramatic oversimplification and an extremely bullish assumption in itself. 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