Tesla's Energy Segment and Autonomy Pivot: A Potential Game-Changer Amid Stock Volatility

Tesla's Energy Segment Could Be Instrumental Amid Autonomy Pivot (NASDAQ:TSLA)

In an optimistic outcome, I estimate that Tesla could achieve 30%+ revenue CAGRs, and have its P/S ratio expand, over the next 10 years. In my last broad coverage of Tesla (NASDAQ:TSLA) (NEOE:TSLA:CA), I focused on the long-term thesis related to autonomous taxis. In addition, I touched on the long-term thesis related to Optimus in my Q2 analysis. However, one element that came up recently in my coverage of Enphase was Tesla's position in energy storage, which is a much smaller element right now in the company's long-term direction but is the focus of this analysis. It is an area of its operations I have not given significant attention so far, but I believe that it does deserve it. I believe Tesla's energy business is going to shine in the next few years and could be instrumental in supporting the company's valuation amid its strategic pivot to autonomy and robotics. The long-term thesis for Tesla needs short-term financial support from segments that are not vulnerable to changes in its automotive segment, and the energy storage business is arguably the most stable provider of growth, which could later be a segment that is much less prominent once the Optimus and autonomous taxi initiative is showing financial returns. The company's position in energy generation and storage is underpinned by three core elements at this time, namely the Solar Roof, Powerwall for residential use, and Megapack for utility-scale storage. Of these, the Megapack is particularly strong, and its integration with Powerhub and Autobidder allows for real-time monitoring and control of energy assets and real-time trading, autonomously participating in energy markets. Secondly, the Powerwall 3 is market-leading, offering a usable storage capacity of 13.5 kWh. The Powerwall 3 has a continuous power output of 11.5 kW, which allows it to handle significant energy loads and serve as an uninterruptible power supply during outages. By storing solar energy, the Powerwall allows homeowners to reduce their reliance on the grid, providing greater energy independence and security. The Solar Roof, which is less of a medium-term revenue opportunity, is a solar power generation tool that directly replaces roof tiles. They are also made of tempered glass, which makes them more durable than standard roofing tiles. With photovoltaic cells embedded in the tiles, the system pairs especially well with a Tesla Powerwall. Notably, this has not yet gained widespread adoption. I believe this could be one of the first parts of the Tesla business that gets sold as the company more aggressively focuses on autonomous driving and Optimus. That is not to say that the technology is not important, but I believe it will be harder for the company to develop a medium-term moat in this area than with the Megapack and Powerwall. Focusing on the market for both the Powerwall and the Megapack, the field is saturated. In terms of the Powerwall, LG Chem RESU offers a slightly higher capacity option (up to 16 kWh). The Generac (GNRC) PWRcell has usable energy capacities ranging from 9 kWh to 18 kWh. The Enphase (ENPH) IQ Battery 10 has a usable energy capacity of 10 kWh, which makes it a far weaker competitor. Surprisingly, therefore, there are stronger competitors to the Powerwall at the moment from a purely technical standpoint. Tesla is also ramping up production at the moment with an upcoming plant in Shanghai, China. These factories aim to produce 40 GWh annually, giving Tesla a leading position to meet the growing demand for renewable energy. Key competitors in the field include Fluence (FLNC), CATL, and BYD (OTCPK:BYDDF) (OTCPK:BYDDY), which has become famous as a key competitor to Tesla across the board. The Megapack can store up to 3.9 MWh of electricity, but Fluence's Gridstack Pro offers a capacity of 5-6 MWh per enclosure, and the CATL Tianheng system offers a capacity of 6.25 MWh per unit (claimed to be the highest in the world). BYD's MC Cube-T offers a capacity of 6.43 MWh per unit. Based on this analysis, Tesla has some catching up to do. However, the question remains whether Musk will choose to invest so much of Tesla's resources into energy storage now or whether he is likely to straightforwardly redirect capital toward autonomous vehicles and Optimus, which could cause stock price volatility if current growth segments are disregarded. That being said, Tesla is achieving record deployments. In 2023, the company deployed 14.7 GWh of energy storage, more than doubling the 6.5 GWh deployed in 2022 and nearly ten times the 1.65 GWh deployed in 2019. In Q2 2024, Tesla set a company record by deploying 9.4 GWh of energy storage, more than doubling its previous quarterly record. In Q2, the energy generation and storage business contributed nearly 12% of Tesla's total revenue, which is up from 6% in the same period in the previous year. Furthermore, its energy generation and storage revenue jumped 100% YoY as of Q2. These all indicate reasons to be bullish amid a decline in automotive revenues. However, this is a short-term observation, and the long-term thesis looks a lot different to me. In my opinion, while the growth in its energy storage segment is currently very strong, this acts as a medium-term diversification and is potentially a good segment of the business for management to focus on growing while it transitions its core operational focus toward autonomous taxis and Optimus. As the path to scale for both of these elements is likely to take over a decade, energy storage is certainly not an element of the business I think management will be looking at tapering soon, as it bolsters the stock price and improves sentiment amid what will potentially be declining medium-term automotive sales for periods during the pivot. At this stage, we also do not have a clear market for Optimus, and so there are still elements of speculation in the long-term thesis for Tesla that is likely to cause negative reactions in the stock price and affect internal order. That being said, I reiterate that I think management might double down on the energy segment in the medium term and focus on competitiveness in technical capabilities of the Powerwall and Megapack, and potentially significantly reduce this segment later once the pivot to robotics and automation becomes more financially asserted. As far as the long-term thesis goes, I do not see the energy business as playing a significant role. I believe that the scale of Optimus and robotaxis 20 to 30 years out, if successfully executed, is going to dwarf the revenue potential of its energy generation and storage operations. Statista forecasts that the yearly revenue generated from autonomous taxis will grow to $9 trillion by 2030. Musk has mentioned in various interviews that I have watched that he believes Optimus will be the biggest long-term opportunity for Tesla. If Musk were to sell 8 billion $20,000 Optimus robots over the next 30 years, this would equate to $160 trillion in revenue. That outcome is still speculative and based on some conjecture, but the target is achievable. The question is if there will be inhibitions in production, increasing the cost of manufacturing and lowering margins, and also whether the market is as tenable as Musk currently envisages. Even on financing, the target market of the whole global population wanting or being able to afford an Optimus bot seems unlikely to me, especially considering the competition that could arise. Tesla is richly valued at the moment, and in my previous analysis, I outlined a 2029 price target of $1,050. While there are rational concerns at the moment about a medium-term collapse in Tesla's share price as a result of lower medium-term growth rates and currently very high valuation multiples, I believe it is the long-term narrative surrounding Optimus and autonomous taxis that will be able to sustain sentiment for the duration of contractions in growth rates related to a decline in its moat in EVs and its pivot toward its new distinct operating model in AI. There is a lot of skepticism surrounding Tesla's market position at the moment, but I believe that many of the Tesla bears have failed to recognize the validity of Tesla's unique position to achieve full autonomy and to bring Optimus to market at scale. Some investors consider this long-term vision to not be grounded in reality, but we must remember that despite timelines that might not coincide with Musk's initial predictions, he has managed to make Tesla the most successful EV manufacturer and retailer in the world. From my research and analysis, it is clear that the Tesla bears have failed to recognize the long-term direction of Tesla and are instead focusing on the specifics, which might not align with management's initial intentions but are subject to change as it relates to Tesla's extremely high level of agility. We can place the above chart into context by outlining certain ratios from the table: The above ratios show that the P/S ratios and P/E ratios have only contracted a minor amount in comparison to their respective growth rates. Therefore, there is still a lot of sentiment in the market that is being sustained, which I believe is hinged on the company's direction toward autonomous taxis and Optimus. This is why I consider it so important for Musk and Tesla's management team to continue to focus on strengthening the long-term thesis and begin to outline for investors the market opportunities and statistical revenue and profit potentials of the autonomous taxi and Optimus operations. I believe that this will significantly help to support the company's valuation in the medium term during moments of contraction related to the pivot. There is undoubtedly a significant amount of risk here right now, but the potential reward is very high if the pivot is successfully executed. I have mentioned many times in my previous theses that Tesla's gross margin is likely to scale significantly as a result of its operating model becoming more focused on software than manufacturing, but in addition to this, its revenue growth rates could be much higher than initially anticipated by most analysts with a successful autonomous taxi and Optimus market. The current consensus is that Tesla will achieve a revenue CAGR of 19.70% over the next five years. However, I believe that if it can successfully begin to implement its autonomous taxi network at scale and take Optimus to an initial market, it could outperform this and reach a CAGR of approximately 22.50%. I estimate this primarily because Tesla has a significant opportunity to compete in the ride-hailing market at a lower cost to consumers, which I believe is underestimated by many analysts. As it may take up to 10 years for its autonomous taxi operations to be implemented as the core revenue generator of its business, with Optimus also beginning to show significant sales, my estimate for a revenue CAGR over the next decade increases to 30%+. This is what I estimate is going to support the company in sustaining current stock market sentiment and then potentially having its P/S ratio expand to 9.50, which is its five-year average achieved when it had forward revenue growth of 34.30% as a five-year average. We are in the very early days of robotics, automation, and AI capabilities. Hence, extrapolating beyond this into higher CAGRs related to an advanced moat in humanoid robots and autonomous taxis is too speculative right now. Still, it is worth considering that the market opportunity for Tesla could be much larger than most analysts currently anticipate. Based on this analysis, Tesla could have a market cap of over $12 trillion in 10 years. However, this significantly depends on the market for Optimus, and if this market is not as viable as initially assumed, with much lower levels of initial adoption, such a significant market cap increase would be unlikely. I believe the lower-risk market cap growth opportunity at this time, which will be more material to Tesla's 10-year growth CAGRs anyway, is in autonomous taxis, and I do consider the growth potential here to be more easily viable than Optimus over the long term, without significant shifts in market preferences and a heavier macroeconomic integration of AI in physical applications opening mass-scale desirability for humanoid robots. It seems likely to me that there will be certain businesses or households that own many Optimus bots and many businesses and households that own none, as I currently envisage the future market. The greatest risk to my long-term investment thesis on Tesla relates to the company's ability to execute Musk's vision. As the valuation of the company is already very high, periods of stock price decline during moments of fundamental contraction during the pivot could sow internal disorder, affecting the operational focus of the company. The company's long-term strategic direction is currently significantly based on success with FSD and regulatory approval regarding its autonomous taxi operations. Tesla currently does not have fully autonomous vehicle regulatory approval, but it is close to this goal in Europe and China. The hurdle in the United States is more significant, and there could be delays related to this. Even though the evidence is mounting that autonomous transport is safer than having a human driver, Tesla's systems operate a more advanced camera-based approach, which could take more time to pass through regulation. However, this chart from Cruise gives a good outline of the general safety increase from autonomous transport: Furthermore, I believe the greatest threat to Tesla is that much of its success and vision rests on Musk's ability to lead the company. If, for whatever reason, the CEO can no longer give active service, I believe the company is not one of those organizations that would be able to execute its long-term strategy unabated. Other businesses can withstand changes in CEOs as the nature of their organizations is not hinged on visionary leadership and radical innovation. With Tesla, Musk appears fundamental to the company's long-term direction and the sustenance of its share price. Therefore, there is immense concentration and personnel risk in the continued leadership presence of Musk himself. Thankfully, to date, Musk has given no sign or intention that he will or will have to step aside. I believe Tesla is beginning a very significant shift in its operating model, with the long-term potential being significantly underestimated by many analysts. Tesla's energy business is the strongest element of its operating model at this time in terms of growth rates, but I believe that this segment will take a back seat and potentially have parts divested as the revenue capabilities from Optimus and autonomous taxis become more asserted. As a long-term investor, my rating for Tesla is currently a Buy based on my updated analysis of its operational positioning, including the current strength from its energy business which can inform its long-term growth direction.

Tesla Set For A Breakout After A Flat Year (NASDAQ:TSLA)

Growing EV competition from Chinese and domestic manufacturers is intensifying, challenging Tesla's market share and pricing power globally. Tesla's (NASDAQ:TSLA) (NEOE:TSLA:CA) outlook remains bullish due to its fundamental solid growth across all its business segments; in Q2 of 2024, Energy Storage revenues enhanced 100% YoY, recording a new high of 9.4 GWh deployed and setting the firm well on track to more than $13 billion revenue generation through 2025. Tesla also constructs a capital-efficient business into autonomous driving and robotics at the bottom of the S-curve, underpinned by early leadership in full self-driving technology that should disrupt many industries. Following our strong buy rating in June with a $200 price target, Tesla reached and surpassed the target, delivering a 23% return. Updated technicals demonstrate continued bullish momentum. TSLA's current price is $230, with an average price target of $316, which aligns with the 1.618 Fibonacci retracement level. This signals a potential bullish trend continuation. The optimistic price target of $368 corresponds to the 2.118 Fibonacci extension, suggesting that Tesla could experience a substantial upside if the market momentum remains strong. Conversely, the pessimistic target of $200 stands at the 0.5 Fibonacci level, which reflects a downside risk based on potential corrections or broader market downturns. Moreover, the RSI is currently at 58.46, which indicates that Tesla is moving towards the overbought territory. The upward trend in the RSI line (after taking support near 50) suggests renewed buying interest, which means the current price action may move towards the upside for the short- to mid-term. Further, the VPT line points to a recovery of bullish volume momentum after short-term weakness. The line stands at 4.49 billion, and the moving average of 4.42 billion supports the likelihood of a sustained price increase if the trend holds. Tesla's seasonality over the past 14 years shows mixed performance. September has a low 40% probability of positive returns, urging caution for investors this month. June stands out as the strongest, with a 79% chance of gains, followed by November at 71%, reflecting strong mid-year and late-year trends. Weaker months include October (36%) and August (43%), indicating more volatility or bearish tendencies. While September's outlook is cautious, TSLA tends to perform better during mid-year and late-year periods, offering stronger historical opportunities for potential gains. Tesla's market opportunity is transforming into a solid lead in autonomous driving, robotics, and energy storage. Deutsche Bank marked Tesla as a "technology platform" with the potential to disrupt industries. This vision is anchored in Tesla's focus on robotaxis and humanoid robots. The company aims to go beyond car manufacturing, expanding into new sectors. The autonomous driving market is predicted to soar in developed markets. Based on an annual growth of 33%, it may exceed $2.8 trillion by 2033. Tesla's early lead comes from its advanced AI and vast driving data. Its FSD software is central to this push. As FSD's price drops and its capabilities grow, mass adoption becomes likely. This shift could cement Tesla's top-line growth and street sentiment about its dominance in autonomous technology. Tesla's humanoid robot, Optimus, is in early development and performs well in repetitive or hazardous tasks. The global robotics market could surpass $375 billion by 2035. The number of US humanoid robots may hit 63 million by 2050, with a $3 trillion market shift. Tesla's expertise in AI and robotics may help the company capture a significant market share. The ongoing development of its technologies will likely derive top-line growth in a whole new segment. Similarly, Tesla's energy storage business is also bringing in substantial revenue expansion (100% YoY in Q2 2024) that could generate over $13 billion in sales by 2025. Investments in battery storage in 2024 are booming and surpass $50 billion. In Q2 2024, Tesla deployed 9.4 GWh in energy storage (more than 40GWh in 2024), setting a new record. The rising demand for energy storage stems from the shift to renewable energy. Tesla's products like the Megapack and Powerwall are key to this strategy. Fundamentally, Energy storage is a high-margin business for Tesla that complements its EVs and strengthens its brand. As solar and wind energy become popular, reliable storage becomes more crucial. Tesla has a significant opportunity to tap into this demand, as the energy storage market had 3X YoY growth in 2023. This may create room for Tesla's top-line growth, and its focus on cost reduction and technology improvements will support its expansion. In addition to these opportunities, Tesla's automotive business may boom by introducing new models. It is preparing to ramp up Cybertruck production and lower-cost models by 2025. Short-term margin softness has occurred due to higher costs, restructuring, and AI investments, but these challenges are temporary. Tesla's margins may improve as it achieves cost efficiencies with innovations like the 4680 battery cell production and robotaxi initiative. Tesla's FSD software is one of the most advanced systems today, and it targets the first to hit a fully autonomous robotaxi fleet (the first mover advantage against Waymo) as the robotaxi market could surpass $10 trillion by 2030. Beyond all this, Tesla's upcoming Q3 earnings and robotaxi event (in October 2024) are vital as the street looks for signs of recovery from its recent margin pressures. The consensus estimate for Tesla's normalized EPS is $0.63 (-5.02% YoY). The revenue estimate for Q3 2024 stands at $25.66 billion, representing a YoY growth of 9.88%. While this is solid growth, it's slower than Tesla's history, reflecting the hit the company is taking from pricing pressures and increasing competition in the EV market. For Q4 2024, though, Tesla revenues are forecasted to grow 7.53% to $27.06 billion, promising a rebound in performance from new and refreshed models now hitting the road. Tesla's revenue growth has a 31.56% CAGR over the last 3 years. Over the past decade, the top-line CAGR was even higher at 44.29%, highlighting the company's ability to expand rapidly. However, recent revenue growth slowed to 1.37% YoY due to external pressures. These include supply chain disruptions, inflation, and increased EV competition. At the bottom line, operating income growth has been strong, with a five-year CAGR of 84.75%. Yet, in the last year, EBIT declined by 43.03% due to spending on AI, robotics, and growth initiatives. This temporary setback should reverse as these investments yield results. Moreover, Tesla's EPS growth has followed a similar path. The company's EPS has expanded 77.89% over the last three years but reported a decline to 1.06% YoY in the trailing twelve months. The company targets long-term growth rather than short-term profits, and the boom in its EPS growth could happen when its energy storage and autonomous driving sectors start to grow. This may lead to high stock valuations and massive price changes in upcoming quarters. Finally, Tesla's stock has a 24-month beta of 1.95, indicating it is more volatile than the market. For example, competitors like Toyota (TM), BYD (OTCPK:BYDDF), and Ferrari (RACE) have far lower betas. Tesla's high volatility owes to its high-growth expectations, but this risk is partly compensated for by Tesla's strong financial position and capacity utilization. Tesla stands at an Altman Z-Score of 10.76, a low risk of financial distress that places it in another league, relatively speaking, with other car manufacturers. By comparison, Toyota has a Z-score of only 1.67 and a BYD of 1.72, which is substantially lower. The divergence in EPS growth estimates between Q3-Q4 2024 and Q1-Q2 2025 indicates that while Tesla faced short-term headwinds, its financial performance may improve towards the end of the year. For Q4 2024, the EPS estimate rises to $0.68, reflecting only a modest YoY decline of 4.3%. There are uncertainties in Tesla's near-term outlook, particularly regarding vehicle pricing and cost inflation. Hence, these factors may affect consumer purchasing power, particularly for high-priced EVs. Furthermore, Chinese and domestic EV manufacturers introduce more competitive models as competition increases in the EV market. In addition, dependency for sales on Model 3/Y and the very slow rollout of new models such as Cybertruck and the Semi further reduces the ability to exploit the EV market. This is reflected by modest Q3 and Q4 revenue growth projections. Tesla delivered 444K vehicles in Q2 2024, slightly below expectations, impacting the stock price. Analysts project 469K deliveries (Canaccord reduced the estimate) in Q3 2024, so its market value growth is directly tied to new models and production scaling. Thus, any continued issues in deliveries may hit the stock harder. In terms of valuation, Tesla's P/E ratio marks a weakness in its long-term growth potential. The forward P/E ratio is 96.92, massively higher than the sector median of 15.79, representing a 514% premium. Tesla's short-term leads in the EV market justify some premium, but not to this level. Critically, the company's P/E ratio is just 15% undervalued from its five-year average of 114.1, which limits potential upside against dropping earnings in upcoming quarters. Similarly, Tesla's price/earnings-to-growth (PEG) ratio of 8.93 is massively higher than the sector median of 1.39, reflecting the high street expectations of Tesla's bottom-line growth due to high progress in areas such as energy storage, autonomous driving, and robotics. In short, while the company's valuations may seem stretched compared to traditional automakers, they are justified as Tesla can consistently disrupt industries and generate significant growth across multiple business segments. Finally, at the macro level, US elections and street worries about a potential full-scale war between NATO and Russia may lead to market-wide corrections. The market may perceive the war as highly probable, based on Western support for Ukraine's use of long-range missiles (after the Kursk Oblast incursion) and the dollar's de-stability (massive net interest outlays on federal debt surpassing WWII levels). Tesla's strong fundamentals paint a bullish outlook for the company. The energy storage business scaled 100% YoY in Q2 of 2024, and forecasts show it will reach over $13 billion in revenue by 2025. Leading in autonomous driving and robotics, aside from the developing sectors of FSD and humanoid robots, positions Tesla for tremendous expansion in the future. Despite temporary setbacks from investment in AI and growth initiatives, Tesla's strong revenue history and expansion across diverse industries indicate long-term value and strong growth potential across its business segments.

Tesla: Overvalued Without The Dream Segments (Rating Downgrade) (NASDAQ:TSLA)

Intangible segments like RoboTaxi and robotics are still considered optionality, I am not comfortable paying for them yet. In my previous Tesla, Inc. (NASDAQ:TSLA), I laid out an investment thesis revolving around paying for the tangible parts of the business and having the rest as an optionality. In my intrinsic valuation, Tesla was trading around fair value, which was enough for me to buy the stock considering I did not include value from the RoboTaxi, robotics, or Supercharger network parts of the business. Tesla has run up since then and is now slightly overvalued when I only account for the core parts of the business, which is why I downgrade the stock to a hold. When looking at Tesla, it's important to do so on a sum-of-the-parts basis, as the segments provide vastly different outlooks and margin profiles. I am not one to track the daily stock quote, but I do find it essential to revisit the story and valuation whenever there is material development, such as quarterly earnings or major news. At the same time, if there is a need to react and adjust projections due to tiny result variations, the intrinsic valuation may have sensitivity issues and should demand a lot more equity risk premium. I have two quarterly results worth of additional information at the time of writing, so I will take you through what may have changed since my first article. Looking at the automotive business, I had an initial scare, seeing huge drop-offs in factory capacity utilization and weakening in deliveries. However, a quarter is just that, a single period. Deliveries returned to historical averages where they are equivalent to or greater than the production rate. Capacity utilization, however, continues to trend down, eating away at the inventory supply built up from Q1. For anyone confused about Tesla deliveries exceeding the quarterly production capacity, it's possible due to inventory surplus. This is reported in days of global supply availability. Before Tesla increased their capacity in Q2 of 2022, the available supply was getting dangerously low. However, since the introduction of Giga Berlin and scaling up existing facilities, the supply has been growing. As an investor, you want supply to be low as it implies that the demand for the vehicles is greater than the output, which in turn can drive margins up. Seeing supply at a month globally was an alarming figure as of Q1, but it's important to understand the state of the global economy and not rely on this metric alone to understand demand for Tesla's. In terms of margins, the gross margins have stagnated at 18%; not even a large influx of regulatory credits could improve the margins for Q2 2024. The regulatory credits as a percent of total automotive revenues were the highest since Q1 2021. I derive that the reason for the stagnant margins in Q2 2024 is a decline in China-based revenue. We know that the vehicles produced in China drive the largest margins; therefore, taking a hit in that market hurts overall margins, which explains the regulatory credits not being sufficient to pass the 18% gross margin plateau. We now have 4 quarters of 18%, something that will have to increase in a couple of quarters if I am to keep my vehicle margin story intact for the periods leading up to 2033. The automotive segment in general is still on track in accordance with my past projections, and I see no reason to adjust them. I am tracking the margin story for the coming periods, as I may have to revise down margins in future valuations. Something that may come to surprise to the upside is the energy business. CEO Elon Musk had rosy commentary for this segment in the Q2 2024 earnings call: We previously talked about the potential of the energy business and now feel excited that the foundation that was laid over time is bearing the expected results. Energy storage deployments more than doubled with contribution not just from Megapack, but also Powerwall, resulting in record revenues and profit for the energy business. Energy storage backlog is strong. And more double it did. Looking at the development of the energy storage business, it is becoming quite impressive in its ability to scale. The correlation of storage deployed and energy storage sales is not quite 1:1, but they're closely correlated. Revenues from that segment doubled year-over-year, while Tesla deployed 157% more storage. My intrinsic valuation for the sum of the energy segment has taken quite a hit as I have decided to completely remove the solar part of the business. If and when solar becomes a part of the core business, I will have another look. As of right now, the energy story is made up entirely of energy storage. The final segment of the tangible Tesla business is the services side. I have formulated the segment to be made up primarily of full self-driving (FSD) and vehicle servicing revenues. It does not include RoboTaxi and robotics, as they're part of the optionality I described in my initial thesis. Depending on what Tesla unveils at their autonomy event scheduled for the 10th of October, that may come to change. I have left the vehicle servicing intact but made adjustments to the FSD projections. As stated in my previous article, I do not account for one-time purchases of FSD. Instead, I assume FSD adoption rates and annual subscription costs. The adjustment I have made is the average price per vehicle, as it has decreased compared to Q4 2023, which I initially based my assumptions on. This has a positive effect on the model as it implies there will be more Tesla vehicles available because I derive the vehicle sales by dividing automotive sales by the median vehicle cost. More vehicles mean net more vehicles on FSD, assuming the same adoption rates, which in turn drives the valuation higher. The reason I assume the current average price per vehicle for all future projection periods is because it's impossible to know the full extent of the vehicle lineup Tesla will carry through 2033. There are other factors such as cyclicality, brand equity, inflation, and so forth. These are variables that can't be estimated accurately; therefore, I use the current average. I have kept the FSD adoption rate projections intact, as I have not seen any material changes that would impact them. In summary, the overall story I told through the numbers in my intrinsic valuation remains largely the same. There have been some minor changes, mainly the removal of the solar segment in its entirety, that have had some impact, but the overall trajectory of the business is intact. This brings us to the rating downgrade. Even though the trajectory of the business remains the same, the stock has pulled forward to such a degree that it now also values the intangible parts as reality. The intangible parts of the business, such as the RoboTaxi, robotics, and supercharger network monopoly segments, remain an optionality for me. I can't tell a story and justify it in my valuation because we simply do not have enough information to accurately project these parts of the business; therefore, I am not comfortable paying for them either. In my previous article, I received all those segments for free as the business was fairly valued while only looking at the currently operational parts of the business. If I include my best estimates for the intangible business segments, there is ~5% upside to fair intrinsic value from where the stock is trading today. As I can't tell that story with any confidence, I don't find the risk/reward to be appealing enough. It is important to remember that valuations are not static, they are only a representation of our most accurate projections given what we currently know. Elon Musk has been very adamant for several quarters in a row that we should not invest in the business unless we believe that Tesla will solve autonomy. In that case, he sees the business being worth more than $5 trillion in the future. Here are two excerpts from the Q2 2024 earnings call: the value of Tesla overwhelmingly is autonomy. These other things are in the noise relative to autonomy. So I recommend anyone who doesn't believe that Tesla will solve vehicle autonomy should not hold Tesla stock. They should sell their Tesla stock. You should believe Tesla will solve autonomy, you should buy Tesla stock. And all these other questions are in the noise. That's why my rough estimate long-term is in accordance with the ARK [ph] Invest analysis of market cap on the order of $5 trillion for -- maybe more for autonomous transport, and it's several times that number for general purpose humanoid robots. I mean, at that point, I'm not sure what money even means, but in the benign AI scenario, we are headed for an age of abundance where there is no shortage of goods and services. Anyone can have pretty much anything they want. It's a wild -- very wild future we're heading for. I am excited about Tesla's future, but I am still an investor. As such, I believe it is essential to keep grounded. Tesla may be worth several times $5 trillion in the future, but until I can tell the story, I can't invest with such a perspective. After reviewing two additional quarters from Tesla after the publication of my initial coverage, I still believe the business is largely on track in accordance with my first article. However, while the story may be intact from my perspective, Tesla, Inc. stock has already appreciated to such a degree that it exceeds my base projections. At the time of writing my first article, I received the intangible parts of the business (namely Robotaxis, robotics, and the supercharger network monopoly) for free as a form of optionality. Until we see further development and clarity in those segments, I can't justify paying for them and, as such, downgrade the stock to a hold rating.