Tesla's Optimus Robot and Stock Performance: A Comprehensive Analysis

As A Skeptic, I Drank The Tesla Robot Kool-Aid And Liked It (NASDAQ:TSLA)

Years ago, I was a Tesla, Inc. (NASDAQ:TSLA) skeptic. I remember talking to a buddy of mine who owns Tesla stock and drives a Tesla. My argument to him was, "How is Tesla going to compete once all the large car companies get serious and enter the market?" Given the large market cap of Tesla (that was bigger than all the car companies combined), it did not make sense to me. Yes, I listened to his words and ideas, but I remained skeptical for years. My friend was patient with me and I kept listening to him. Eventually, I changed my mind and I watched Elon Musk push SpaceX forward, I watched him build a lithium refinery in Texas, I saw he also designs semiconductor processors for his cars. Now I understand, and I own Tesla stock. The difference is Mr. Musk is at the top as a dictator, able to quickly shift and plan, as opposed to legacy companies who have to contend with layer upon layer of corporate bureaucracy. Elon also has the planning, vision, and funding to make his aspirations reality. In this article, we are going to explore something that intrigues me: Tesla, Robots, and Lithium. AI, AI, AI. I find that misnomer distasteful. It might be because I have been in technology for so long that I have become somewhat of a semi-Luddite. Maybe it is just that I see so much hype being "AI" at the moment. That is not to imply that if you throw a trillion dollars at programming, you will not get some projects that work. You will, but you will also get many fly-by-night projects that go kaput once reality hits. Semi-Luddite or not, I can see some practical implications of a Tesla or Apple (AAPL) branded robot. Societal implications aside, I can see a future where the person driving the postal truck for the Post Office or FedEx (FDX) or United Parcel Service, Inc. (UPS) is replaced by a Tesla robot. A repetitive job like driving a heavy ore truck in out and of a dangerous open pit mine could be replaced with a robot who would have the flexibility to operate other equipment, too. Let's explore what we know about Tesla's robotic efforts so far, and then we will explore how this ties into Mr. Musk's lithium aspirations in Texas. Robots are nothing new. We have had robots for decades, most of this has been limited to larger industrial applications or robotic vacuum cleaners. I do recall some medical technology involving robots. Boston Dynamics has robots too, however, Tesla's robots might bring the programming that offers the ability to solve tasks for businesses and the household. I wonder what Mr. Musk has to say on the subject, but first we need to look at the health of Tesla as a company, and then we can ponder robots further. During the annual shareholder video at the 1-hour mark, we can see Tesla is still ahead of all legacy automakers by a large margin in sales and the Supercharger network is growing. "Our Supercharge network is continuing to grow. Rumors of the death of the supercharge are greatly exaggerated. We are in fact continuing to grow the supercharge network significantly. In fact, this year, I think we will put more, deploy more superchargers this year that are actually working than the rest of the Industry combined." "Even for the remainder of the year we expect to spend about half a billion dollars on supercharge deployment. So it's, it's very significant, it is well spent, half a billion." Elon then goes on to talk about international expansion into new markets at the 1 hour 9 min mark. Per Elon: This is actually not showing a bunch of new markets that will be opening up later this year and next. So we're, obviously, we want Tesla to be worldwide and there's still a lot of countries that we, you know, have zero to very few Tesla's and we obviously, we want Tesla everywhere so there are a lot of new markets that we're going to open up later this year and next." "We seem to be tracking to a sort of 200% to 300% year-over-year growth in energy storage deployment and stationary pack so it's giant. The limiting factor really is being able to build more Mega packs and build more power walls. So we're ramping up production of the power wall 3 which is really a game changer." Tesla Service profits are growing. I find that to be a very impressive, as back in 2018-2019, Tesla was losing about $500 million on services. A few years later and that number has inverted to Tesla making a $500 million gross profit. We can also see that Tesla is generating profits. Do they justify that high P/E ratio? It is arguable but given potential growth I see no reason not to take a small position in the company. "I think we've got kind of like one major hardware revision, which should be done by the end of this year or early next. Then we'll move into a limited production next year of Optimus. Limited production for use in our factories where we'll test out the product." My prediction is next year we'll have over a thousand, maybe a few thousand Optimus robots working at Tesla. And things are going to scale up very rapidly from there." What could Optimus change? Maybe a lot. If you can teach it things just by showing it a task, I see no reason why it could not engage in dangerous mining or military applications. Granted, they might be mission limited to the military for some time, but kicking a few hundred out of the back of a cargo plane could sow some chaos in an area or improve Taiwan's coastal defense. It will be most interesting to watch the nature of warfare shift, but these military ponderings are ideas that are not investible at the moment. The reality is, Optimus could be good at simple tasks such as driving a loader at a mining site, stocking shelves, or engaging in repetitive tasks. Mr. Musk has spoken about possibly using the computing power of Tesla cars as a sort of distributed computing platform. Owners of the cars would get paid, Tesla would make a profit, and computing problems would be tackled. I'm in favor of it. Frankly, the Tesla is a computer with wheels. In the future, if the car owner does not have it out and about as a Robotaxi, I see no reason not to let the car join the Tesla cloud service while not in use and get paid for it. Let's warp forward 5 years and pretend that Optimus has found a role in society and is successful. We might assume that Optimus is powered by lithium batteries and with that Tesla has a lithium refining facility in Texas. It might make some sense if Tesla were to acquire a lithium mining operation. When thinking of Optimus robots, though, we really have no way to gauge what that market might look like. We can, however, look at some speculative guesswork. If we look at today's numbers for P/E ratios and the like, then yes, they are overvalued. However, metrics such as these fail to capture investor excitement, in my opinion. I used to look at Nvidia (NVDA) years back when the PEG ratio was several multiples over the base number of 1. It makes little sense to overpay for growth, but occasionally, you have to pay a premium for growth. In this case, if Tesla Robotaxi pans out, it could be a game changer for the planet. Granted, I am skeptical of self-driving cars, but it does not mean it could not happen. What interests me more though is EV growth, Tesla lithium refining, Optimus, and lastly using the massive consumer base of Tesla cars as a distributing computing platform. Note: Some call this distributed inference. Tesla is a very successful software and semiconductor design company that makes cars, but the most impressive attribute is that Tesla offers a complete EV ecosystem such as: The scope is really remarkable when you consider it (and given Tesla's ability to pivot when necessary) it makes me believe that Optimus could be successful. With that, I have a small position in Tesla that I am expanding.

Tesla Stock Earnings Preview: Is It A Buy Now Or Later?

Tesla stock dynamics are not dictated by its fundamentals or valuation analysis. What truly drives the stock is the promise of a future filled with autonomous electric vehicles. Tesla stock's volatility runs as deep as the eccentricities of its CEO Elon Musk. From leading the decade's vehicle electrification efforts to becoming fodder for memes, Elon Musk appears to have seen it all. Tesla stock has been through an equally wild ride, especially in the year-to-date period. From opening the year at around $250 levels, and hitting a nadir at $138.80 in April, Tesla shares have staged a nice recovery back to price levels at the beginning of the year. As the market braces for Tesla's upcoming second-quarter earnings report, is the Tesla stock a buy? Despite more than a 40% gain in the past month, Tesla stock is just barely in the positive territory in the year-to-date period after snapping a recent 11-day winning streak that helped the stock recoup the year's losses. The strong gains were reflective of investor optimism surrounding Tesla's better-than-expected vehicle deliveries for the second quarter, and the robotaxi event. But, Tesla postponed its robotaxi unveiling to October from an original schedule of August 8 and the stock fell 8% on Thursday but bounced back in the next two sessions. Yet, the Tesla stock has significantly underperformed the S&P's 18% gains in the same year-to-date timeframe. Tesla delivered 443,956 electric vehicles in the second quarter, outpacing the 439,302 projected by analysts, but nearly 5% below year-ago delivery numbers of 466,140. However, the numbers were well ahead of the first quarter's 386,810, and this boosted Tesla shares. The delivery numbers are the closest proxy for sales disclosed by Tesla. These deliveries are categorized as "Model 3/Y vehicles" and "other vehicles." However, Tesla does not break down specific numbers for individual models or deliveries by region. Revenue: Tesla reports revenues under two segments-automotive, and energy generation and storage revenues. Automotive sales and services constitute a major chunk of its revenues. Tesla's automotive revenue declined 13% year over year to $17.4 billion in the first quarter of 2024, following a 9% drop in deliveries and reduced average selling prices. This also contributed to a 9% decline in total revenues to $21.3 billion. Tesla additionally cited seasonality, macroeconomic headwinds, factory shutdowns in Germany and supply disruptions due to Red Sea conflicts, but said, "the second quarter will be a lot better." With deliveries improving in the second quarter sequentially, there is a likelihood that revenues may improve from the first quarter but see a year-over-year decline. Strong and rising energy demand amid the artificial intelligence boom bodes well for Tesla's energy business, which represented 7% of first-quarter revenues. The business reported record profit margins of 24.6% with energy storage deployments, the Megapack in particular, reaching an all-time high in the first quarter. Megapack is Tesla's energy storage solution for commercial, industrial, utility and energy generation customers. In the second quarter, Tesla's storage deployments rose to a record 9.4 GWh (gigawatt hour), more than 2x from the previous quarter. With more than 20% gross margin in the last three quarters, this high-margin business is expected to be a future growth engine for Tesla. Energy storage deployments and gross margins will be key metrics to watch for this business in the second quarter. Tesla reported negative free cash flow in the first quarter, but expects to return to positive free cash flow as it expects its inventory build to reverse in the second quarter. The savings generated from its 10% headcount reduction should well exceed $1 billion on an annual run rate basis. This alongside capex efficiency should improve profitability. Tesla's price cuts for combating slumping EV (electric vehicle) sales amid industry-wide slowdown, has eroded its margins. Operating margins for first-quarter 2024 more than halved to 5.5% from year-ago 11.4%. This would be a key metric to watch in the second quarter. Second quarter can provide more clues to some questions like: Tesla's U.S. EV market share fell to 49.7% for the second quarter from year-ago 59.3% primarily because of intense competition. In an increasingly competitive global EV market, Tesla's models are perceived as aging, vs. rivals' offerings. Tesla still derives a major chunk of its automotive sales from its Model Y sports utility vehicle and the Model 3 sedan EVs. Hyundai Kia and General Motors offer long-range EVs with a travel capacity of 300 miles on a single charge, while China's EV makers offer low-cost options as low as $10,000 with more features. GM expects its next-gen Chevy Bolt EV to be the most affordable vehicle on the market by 2025. As of the first quarter of 2024, the most affordable EV in the U.S. market is the Nissan LEAF priced at around $28,000. Tesla plans to start production on affordable EVS later this year or early next year, pulling forward a prior timeline of mid-2025. Current production lines are expected to meet this capacity without requiring any new manufacturing facility. Tesla also tempered its short-term growth projections, suggesting that deliveries might fall short of last year's figures. While it works on the launch of next generation vehicles and other products, Tesla sees its vehicle volume growth rate in 2024 notably lower than the growth rate achieved in 2023. BYD is making steady inroads into international markets outside of China with its low-cost offerings. Global technology research firm Counterpoint estimates that BYD's battery electric vehicle (BEV) sales will overtake Tesla's in 2024. BYD sold a record 986,720 electric vehicles in the second quarter, surpassing its own first quarter sales numbers by more than 50%. BYD sells battery electric vehicles, or more commonly EVs, and plug-in hybrids, (PHEVs). Even with Europe slapping additional tariffs on Chinese EV makers to protect its homegrown EV market from cheaply priced Chinese imports, there is nothing preventing the China-based automakers from taking their business to emerging markets outside of Europe. BYD appears determined to not let Western tariffs dampen its international expansion plans. BYD's recent inking of a deal to open a $1 billion electric-vehicle factory in Turkey, which is not an EU member, will help it sidestep some effects of the new European tariffs and would allow it to avoid the 40% tariffs imposed by Turkey on imported EVs from China. BYD has also opened a first EV plant in Thailand, looking to revitalize a former Ford plant in Brazil and in negotiations to finalize a factory location in Mexico. Warren Buffett's Berkshire Hathaway is an early investor in BYD, a bet that has paid off handsomely amid the stellar growth of the EV market in China. Most recent filings show that Berkshire holds a 6.9% stake in the Hong Kong-listed shares of BYD. Tesla expects its energy storage deployments to grow at least 75% higher in 2024 from 2023, although fluctuating quarter over quarter. In 2024, the growth rates of energy storage deployments and revenue in its Energy Generation and Storage business are expected to outpace the Automotive business. Tesla touts this business to be a future profit driver. Morgan Stanley estimates that a fully operational energy mega-factory that manufactures large storage batteries could generate profits equal to selling 1 million Tesla cars. With 50,000-plus superchargers, located on major routes, Tesla owns and operates the largest global, fast charging network. The direct current fast charging (DCFC) superchargers use direct current to charge EVs in under an hour, while alternating current (AC) takes several hours. Tesla is opening up its fast-charging network to more automakers moving their EVs to Tesla's North American charging standard (NACS) from the not-so-efficient, federally-backed combined charging system (CCS). By opening up its supercharger networks to CCS-compatible EVs, Tesla may be forfeiting its supercharging advantage, but is also gaining access to subsidies and getting to retrofit its existing fleet. Clearly, the enticement here is the Biden administration's $7.5 billion in EV-charging grants, which will fund the building of charging stations contingent upon CCS charging plugs being included at the stations. For a company that professes to be against subsidies and grants, Tesla has been granted at least $2.8 billion in subsidies over the years. The other obvious benefit is the new stream of revenues from the use of Superchargers by non-Tesla EVs. Tesla's network of Superchargers generated an estimated $1.7 billion of revenue in 2023 alone. So, opening up Superchargers to non-Tesla EVs can become a significant revenue driver. Investing in Tesla stock will continue to remain a hotly debated topic, because of the idiosyncrasies of its founder Elon Musk. Of late, there are some worries about his impulsive persona and controversial political rants impacting Tesla's brand image negatively. His promised-but-not delivered timelines are yet another area of frustration for investors. The latest being the postponement of the rRobotaxi unveiling that erased $70 billion in market cap in a single day. When engaged in ambitious projects, such as humanoid Optimus robots, new vehicle models and advancing full self-driving (FSD) technology, it is not unusual for any company to miss timelines. However, Tesla could probably save itself the backlash by refraining from announcing overly optimistic timelines for project completions. Tesla believes it has the superior technology, research and wherewithal to solve autonomy for vehicles, and it's hard to argue with that. Tesla's FSD Version 12, which is pure AI-based self-driving, has seen more than 300 billion miles of driving. It must be noted that Tesla is still the top seller of EVs. Tesla Model Y was the world's best-selling car in 2023 and Tesla Model 3 was the third best seller. Tesla still represented 49.7% of U.S. EV sales from April through June, although it dropped from 59.3% in the year-ago period. But, it's crucial to acknowledge that the rest of its intriguing pipeline remains just a promise for now and in the R&D stage. Before these innovations can be realized and scaled for commercialization, Tesla has miles to go. If you are the kind of investor who thrives on volatility, this may be your type of investment. Elon Musk insists that Tesla is not an auto company and should not be valued as one. It must be looked at as an AI or robotics company and valued accordingly. Here's Elon Musk's advice before investing in Tesla stock: "So, I mean, if somebody doesn't believe Tesla is going to solve autonomy, I think they should not be an investor in the company." Analysts are divided on the Tesla stock with almost equal "Sell" and "Buy" ratings, and mostly "Hold" ratings. While Tesla's substantial progress in FSD is acknowledged, Musk's promises of "over 1,000, or a few thousand, Optimus robots working at Tesla" in 2025 are dismissed as far-fetched. Tesla is targeting limited production of Optimus and intends to begin testing humanoid robots in its own factories later this year and sell it externally by end of next year. Elon Musk believes that Optimus could take Tesla's value to $25 trillion some time in the future. This is more than half of the current value of the S&P 500's $45.8 trillion as of June 30, 2024. Tesla has proven its prowess in vehicle electrification, and Elon Musk, as mired in controversies as he is, remains a very shrewd and successful entrepreneur. His shareholders appear to have faith in the Tesla leader's commitment to achieving vehicle autonomy. The faith is evident in their willingness to approve his $56 billion remuneration package for a second time, even after it was previously invalidated by a Delaware court. There's nothing stopping this EV maker from debunking the claims of naysayers. But the million-dollar question is whether investors will have the patience to see Tesla's goals materialize vs. seeking more profitable and less contentious investment opportunities elsewhere in the wider stock universe. TSLA stock is definitely not for the faint hearted. For investors who can ride the volatility and continue to have faith in Tesla's vehicle autonomy promise and Elon Musk's leadership, it may be the right type of investment. For the rest, the stock market is not made up of this one stock. There are plenty of opportunities elsewhere in the broader stock universe. TSLA offers good opportunities for traders and swing traders.