TESLA (TSLA STOCK): WE ROBOT, TOO GOOD TO BE TRUE?

Last night was Tesla's WeRobot party where they unveiled their robo van, the RoboTaxi, where people were getting rides around a studio lot. They had a drone, beautiful drone display, and they also, what stole the show was the Optimus humanoid robot. Elon Musk describing this as this will be the biggest product ever, far exceeding any sort of car sales, energy sales. The robots were walking among the crowds, handing out drinks, playing games, and yet the stock lost tens of billions of dollars of market cap today, down around seven, eight percent, suggesting a heck of an expensive party. So some folks are wondering why are you seeing this drop? One noted Tesla bear describes it as fraud, hiding in plain sight, and calling out a sell side note from Wall Street saying it is our understanding that these robots were not operating entirely autonomously, but relied on tele-ops. Another prominent venture capitalist talking about how tele-operation is impressive. This is not, however, autonomous AI. Should not be lied or misled by Elon because he wasn't calling out that it was some sort of tele-operation. Another Tesla bull in this case calling out, and he was at the party saying, look, he was really happy to be able to get the drinks and everything, but look, it isn't wholly AI. Clearly, human was responsible for the remote assists, but it does mean that next year will be exciting to see how much progress they've made learning from the interactions. So what are my thoughts on Tesla and Elon Musk and, you know, where does it go from here seeing this, you know, sizable drop in one day? First of all, this is not financial advice. Also recently, Michael, a premium member of the exclusive Unrivaled Investing community shared this a direct quote. So far, the subscription has paid for itself in three months. Looking forward to what the future holds. If you're looking for compelling ideas, come check out Unrivaled Investing. By the way, prices will be going up soon. You will not see prices lower than it currently is. So my thoughts on Tesla, I think it's captured by, you know, this post where, you know, someone said, look, swap the dude in a suit for a dude in a dark room backstage tele-operating still extremely impressive. Building these robots, even if, you know, walking among the crowds or serving drinks required some assistance, I think this is still a huge step in the right direction. The challenge is that you need to marry the expectations and dreams you have for a business with the underlying fundamentals. And you can see, yes, their fundamentals have been incredible historically growing from $25 billion in sales to nearly a hundred billion in 2023. This from AI ticker chat using their predict feature. The problem is that if you were to, you know, project this out in the years ahead saying 17% growth, you know, in a bull case annualized from here, getting to over $200 billion in sales, get to 15% margin significantly higher than where they were last year and a 35 times earning multiple well above the market rate. You're only talking about 13% upside. So in other words, what this is saying is that the fundamentals need to be much greater than 17% on the revenue growth higher than 15% on the margins or a much higher earnings multiple. I think it's harder to push that 35 times multiple. So really you're talking about these two variables, revenue growth and earnings multiples. Now let's talk about the likelihood of if they could actually achieve that. And so one key aspect to consider is, you know, how are they growing currently? You know, what are their current growth rates? And they just disclosed their deliveries for the third quarter. And I'm using the chat feature, which is now free to use in AI ticker chat. And the deliveries were only up around 6%. So this makes it even harder to sort of say, Hey, on the fundamentals, you're, you're getting that sort of trajectory that can support a $700 billion market capitalization. I mean, that is, you're, you're in the big boy club and 6% delivery growth isn't going to cut it. And, you know, but I think about Tesla, I think about the robo taxis, the potential of how it disrupts transportation. This is a huge part of the economy. I think about, uh, the robo van, I think he was calling it the robo van, uh, as opposed to the robo van on the call or on the, the, the party. And I think that has immense potential, you know, not only moving people, moving cargo, you could, you could have whole, you know, just, it could change how civilization works. You could have a huge party be like, Hey, it's going to be the robo van party. And we're all going to meet up in the desert somewhere, but we're all, you know, y'all show up on the, on the vans and then you all disappear from the vans. I mean, it's there's, there's so much potential here. And I think humanoid robots, I believe I'm a believer. I just read, uh, the singularity is near by Ray Kurzweil. I've read Elon Musk's bio by Walter Isaacsman, Walter Isaacman. I think Elon Musk gets there. I think the potential really is there that he delivers it. I mean, he's a workaholic. He's a fanatic. I believe that he can deliver it. So that's, that's a key aspect that investors need to think about if you're, if you're going to believe in it. And that's clearly being baked into the price, the challenges. Hey, if you're, if you're investing in Tesla right now at a $700 billion market cap, you're saying, I expect this to be like one of the big boys, uh, or a fellow big boy where it's like, Hey, it's, it's not, you know, Elon Musk's $700 billion company. I'm really playing for $4 trillion like, or multi-trillion dollar bets. And the challenge is that if you were to look at the multi-trillion dollar companies like Apple or Alphabet or Amazon, it needs to be married with once again, the fundamentals and looking at the underlying fundamentals of Tesla right now, you're talking about low sales growth. You know, you can see 1%, the only of the, of the trillion dollar players that had slower growth is Apple, but they make up for it with the fact that they have just an incredible amount of free cashflow, a hundred billion plus in free cashflow versus Tesla closer to 1 billion or $2 billion for free cashflow. So that's a big difference. So right now there's a tremendous amount of faith in Elon Musk. And I think he's earned it. I think he's earned a lot of that faith, but that if you have any sort of period where people go, wait a second, you know, that faith waivers, the fundamentals do not support the current price. That is clear, clear aspect. You know, that's, that's what the, the AI predict feature shows is that fundamentals do not support the current valuation, but it is based on the, he could deliver just an incredible future energy storage, AI potential humanoid robots. And I, I believe he'll get there. The challenge is what type of investor are you personally? Do you need to have something where, you know, I think one investor, Seth Klarman from bow post once talked about, uh, I think it was, I think he was the one who said it, who talked about, you need to have investing. That's both stake and sizzle. You know, you want some sizzle. You want an exciting experience right now. Tesla is mostly sizzle. There is some stake $2 billion in free cashflow, but $700 billion, you know, enterprise value there's, there's a lot of sizzle that's baked into it. So you as an investor need to figure out what are you looking for? Are you looking for something that has both? Are you looking for something that's predominantly sizzle? That's a, that's a tougher type of game because if the sizzle doesn't play out, you're left with nothing. And that's, that's the huge downside that you were seeing with the AI ticker chat, you know, predict feature just a second ago. So I, I do not own Tesla stock. I would personally love to buy some when I can say, Hey, here's the fundamentals. Here's some sizzle that's baked into it, but there's a clear fundamental backstop in terms of where this is. And you have this, this potential. And I think there are other plays out there where you can say, Hey, I'm optimistic about the future. I'm excited about what they're building. You know, you're growing, maybe it's not humanoid robots, but you know, I'm, I'm hopefully, hopefully at some point there'll be some humanoid robots, uh, publicly traded stocks. And then, you know, you can, you can make your play there. So I'm looking at this and I'm thinking at, at this point, Tesla still has a lot of free cashflow growth needed to get to the multi-trillion dollar club. I don't think the fraud, you know, allegations are, I think it's a little harsh personally. I do think it's an incredible feat and I'm excited to see, you know, what Elon can, can roll out in the years ahead. If you have a different take, love to hear it in the comments below. Thanks so much for tuning into unrivaled investing.