- The Weekly Buzz 🐝 by Blossom
- Posts
- 😰 Tesla Down 10% After Earnings, Its Biggest Slump Since 2020
😰 Tesla Down 10% After Earnings, Its Biggest Slump Since 2020
Can Robotaxis and Humanoid robots save the stock?
Maxwell Nicholson
July 28, 2024
TOP STORY
📉 Tesla Down 10% After Earnings, Its Biggest Slump Since 2020
😰 Mega-cap tech earnings are off to a rough start this week, with Tesla down 10% and Google down 7.5%.
📅 This upcoming week, Microsoft (Tuesday), Meta (Wednesday), Apple (Thursday), and Amazon (Thursday) are all set to report as well.
🤿 While Google had a fascinating week, with OpenAI essentially declaring war with its announcement of SearchGPT, I only had time to deep dive into one today, so buckle up and let’s explore what’s going on in the wonderful world of Tesla, breaking down why the stock got hit hard and whether it’s a good buying opportunity…
🚗 Tesla Facing A Demand Problem?
Taking a look at the Tesla earnings, one thing stands out most of all: Auto Revenue was down. And given Auto Revenue still makes up almost 80% of Tesla's revenue, it’s no surprise the market reacted poorly to earnings:
💰 Total Revenue: $25.05B, up 2% ($24.63 expected)
🚗 Auto Revenue: $19.9B, down 7%
🔋 Energy Storage: $3B, up 100%
🧰 Services and Other Revenue: $2.6B, up 21%
💸 Operating Income: $1.6B, down 33%
💸 Earnings per Share: $0.52, 13% below expectations
😰 And while Elon tried to soften the blow with promises of a new, cheaper EV next year, the numbers are a warning sign that demand for its core vehicles may be drying up.
Despite increasing locations by 20% and reducing the average selling price, deliveries were down 5%.
Tesla cars aren’t flying off the shelves as much as they used to
While EV sales have been slowing around the world (with only a 21% increase projected for this year compared to 100% in 2021), that can’t be blamed completely for this slump.
BYD, Tesla’s largest competitor in China, saw a 17.7% increase in sales in June likely somewhat by stealing market share from Tesla.
So if you’re valuing Tesla as a car company, it’s in pretty rough shape. But if so, Elon has a message for you:
🚫🚗 Tesla is not just a car company
“Anyone who doesn’t believe that Tesla will solve vehicle autonomy should not hold Tesla stock”
It’s a big claim and an important one. The valuation of Tesla right now is heavily based on its ability to deliver on two key projects: The Robotaxi and the Optimus Humanoid robot.
The numbers make that very clear, with Tesla trading for 106x price to operating income compared to 7.8x for Toyota, meaning the market is already pricing in extremely high future growth from these two unfinished projects.
So what do we know about these projects?
🚕 The Robotaxi
For those catching up to speed, Musk essentially envisions a world where all Teslas are part of a commercial robotaxi network like an "Airbnb on wheels."
The long awaiting Tesla robo-taxi event is set for October 10, after being pushed from August 8
Elon has stated that he would be “shocked if we cannot do it next year” referring to unsupervised full self-driving
Cathie Wood’s ARK invest is extremely bullish on the robotaxi, estimating that nearly 90% of Tesla’s enterprise value and earnings will be attributed to the business in 2029
So far, little has been shared in regard to how Tesla will deal with the regulatory barriers to getting a fleet of self-driving cars operational
🤖 The Optimus Humanoid Robot
According to Tesla, the Optimus has already started performing tasks autonomously (like handling batteries) in one of Tesla’s facilities.
Elon tweeted that Tesla will “have useful humanoid robots in low production for Tesla internal use next year and, hopefully, high production for other companies in 2026.”
Elon estimated the long-term demand for the robots to be “over 20 billion units” (i.e. essentially infinite demand)
😢 Elon’s Broken Promises
There are many who don’t trust Elon’s predictions and promises, and for good reason. Elon has a habit of making claims (especially around deadlines) that don’t materialize, like this claim in 2019:
But next year, for sure, we’ll have over 1 million robotaxis on the road
🤔 Is Tesla Stock a Buy?
So with all this in mind, and with the recent 10% drop, is Tesla a good stock to buy?
Well one thing is very clear: if you are investing in Tesla you are not investing in an automotive business - you are investing in its future growth opportunities from new business lines.
As a result, investing in Tesla is a highly speculative bet, largely separated from its current fundamental value. This means small pieces of news can cause big swings in the stock price, as so much is riding on the delivery of these future projects.
When when you pay for future product success like this… what happens if the products fail or they’re not nearly as profitable as someone thinks. It basically just suggests that the stock could fall massively if you’re already pricing in the success of a future product today…. Tesla is most definitely selling for a significant premium over what the business actually is today. ”
Ultimately, investing in Tesla is a bet on the company’s ability to deliver on Elon’s bold claims.
Whether that is an investment you want to make will depend on your belief in Elon’s ability to deliver and how much you can stomach the risk if he never does.
💡 Tesla is the 9th most held stock in Canada and the 6th most held in the USA on Blossom. It was the #5th most sold stock and the #6th most bought stock of the week.
PRESENTED BY PURPOSE INVESTMENTS
💸 A Unique Way to Gain Exposure to Mega-Cap Tech With Both Growth and Income
While the equity market performed well in the first half of the year, a closer look reveals the strength of mega-cap tech stocks, like Tesla 🚗and Apple📱, helped mask underlying issues.
🚗 This month, after reporting better-than-expected deliveries in Q2, Tesla’s stock surged to its highest since January. Optimism surrounding Tesla’s advancements in autonomous driving technology, particularly the planned debut of its robotaxi, has fuelled investor confidence.
🍎 Apple’s focus on expanding its ecosystem with innovative features and services – like the upcoming AI-enhanced iPhone 16 and anticipated Apple Intelligence platform – has strengthened its market position as a top performer.
💡 Did you know there’s a way to gain exposure to these two companies with a unique blend of growth and income? Tesla (TSLA) Yield Shares Purpose ETF ($YTSL) and Apple (AAPL) Yield Shares Purpose ETF ($APLY) offer exposure to their respective underlying stock while providing monthly yield.
With Yield Shares by Purpose, investors can:
Earn monthly yield
Gain exposure to each fund’s underlying stock
Invest in a US company in a vehicle that hedges back to the Canadian dollar
💸 If you’re not ready to invest right now and just looking for a safe, short-term, and liquid vehicle to park your cash, be sure to check out the Purpose Cash Management Fund ($MNY).
*See Purpose Investments Disclaimer at the end of the newsletter.
FROM THE COMMUNITY
🎙️ Top Discussions on Blossom
👇 Click to see the full post!
OFFERS FOR THE COMMUNITY
🎁 Blossom Offers
Disclaimer from Purpose Investments Inc:
Commissions, trailing commissions, management fees, and expenses may all be associated with investment fund investments. The prospectus contains important detailed information about the investment fund. Please read the prospectus before investing. There is no assurance that any fund will achieve its investment objective, and its net asset value, yield, and investment return will fluctuate from time to time with market conditions. Investment funds are not guaranteed, their values change frequently, and past performance may not be repeated.
If the securities are purchased or sold on a stock exchange, you may pay more or receive less than the current net asset value. Investment funds are not guaranteed; their values change frequently, and past performance may not be repeated.