Musings on Markets: Tesla Valuation Disagreements and First Principles

Damodaran defends his Tesla DCF valuation of $130/share against critiques from both bulls and bears, explaining key assumptions around revenue growth ($400B by 2032), operating margins (16%), and terminal value. He argues that while Tesla is an exceptional company, its current market valuation prices in that exceptionalism, leaving limited upside, and that sound valuation must translate qualitative vision into quantifiable earnings and cash flows. The article explores the tension between company quality and investment value, emphasizing that growth and margin assumptions are constrained by real economic scale and competitive dynamics in automotive manufacturing.