Tesla is too expensive on PEG (about 4.7, roughly 2.2x warranted), with fair value nearer $170 than $375; it is unlikely to fall there soon because SpaceX may buy Tesla at a premium (a put option, not guaranteed). Long-term case is exciting on Optimus/FSD and 5 million vehicles by 2030.

Elon Musk and Tesla have done it again. They smashed the numbers and exceeded profit expectations, then the stock declined in after-hours trading . Although I shouldn't say retreat.

It has decreased by only 2.4% . But the reason is what really matters. This concerns some reservations about the "Optimus" robot, along with other updates.

But I must say, this earnings call and earnings report were generally positive for many reasons. If there is any temporary sale of Tesla shares, it is probably because Elon secretly wants to buy those shares back at a slightly cheaper price .

Because ultimately, you had Brad, who apparently was on the special committee to determine the price at which SpaceX was supposed to acquire Tesla, suggesting that the acquisition price could range from $420 to $550 per share to incentivize Tesla shareholders with a premium over the current price, even though Tesla's valuation already contained a huge premium .

This is great for Tesla shareholders, and perhaps not so great for SpaceX shareholders.

But I will say, there is a lot to be excited about when it comes to Tesla. I'm very excited about the long term here. The first thing is that Elon makes it very clear that he sees no competition for the Optimus robot.

He says that building robots is extremely difficult, especially because of those damned hands. They are, as you know, hands that resemble human hands. It heals itself . Robot hands, however, cannot heal themselves.

And you have all these tiny motors that should be able to pick things up gently, and have power in those hands. This presents a significant challenge. Therefore, he doesn't actually believe that anyone comes close to what Tesla is doing with Optimus.

Others cannot implement artificial intelligence in robots as we will be able to, and we expect to reach one million "Optimus" humanoid robots within a year or slightly more. That's equivalent to producing 20,000 humanoid robots per week.

But we still have some work to do. And it was precisely here that the stock's performance turned from positive to negative when Elon, in my opinion, started to look a bit modest about this process,

In any case, Elon indicated that Optimus' growth curve would be very slow at first, then it would start to climb. The reason for this, he says, is that they will need to be placed in something resembling a self-learning arena.

They will have to make about 10,000 to 20,000 "Optimus" robots and then let them interact with each other until they learn , "Oh, that's how I learn things." The idea is somewhat similar to exercising.

You can watch golf all day, but if you don't hold a golf club, you won't become proficient at the game. You may have good concepts, but you will only improve when you actually do it, and then you can start to gradually improve the robots.

Elon believes this process will likely take between one and one and a half years.

Actually, I think that's still a bit optimistic. I still believe that robotics will be a project of the 2030s because I think there are many things that need to be resolved. But I will say, although I originally said 2035, it may end a little sooner because I think we are starting to see improvement rates accelerating faster than I initially thought,

Tesla did not mention that. Tesla stated: "The downside is that we don't have the training data, so we want a robotics arena to work to help us get it, and that will take time."

But we expect to eventually reach a production of 20,000 units per week, which of course means reaching an annual production rate of about one million units per year. That's really great.

So, 20,000 a week, and a million a year, that 's the goal. Elon's timeframe ranges from one year to perhaps 18 months. I will double this period, and say 3 years. So, put me in camp by 2030 as the actual date for producing one million units of these devices. We'll see what happens.

Elon says they will start with somewhat dangerous tasks, jobs that require round-the- clock execution. So, we'll wait and see . Perhaps, as you know, it's work similar to working in factories. who knows?

During the earnings call, we heard some talk about how demand for and adoption of self-driving technology is rising. We saw this in the actual earnings report as well. So, I was very excited about this .

I saw that active subscriptions to the Full Self-Driving System (FSD) increased by about 170,000, which is a very good number and higher than expected. Approximately 75% of new vehicle deliveries included a fully autonomous driving system.

Then Pierre, you know, that French guy, came in and said, "Hey guys, how much should we assume you're making right now from the self-driving system?" "Looks like you're approaching a billion dollars in recurring annual revenue, don't you ?"

This represents a very high profit margin, keep that in mind.

Their team responded on the investor relations call, saying, "Yes, yes, those numbers are correct." I said, " Oh, wow." They didn't just say it was almost true . They simply said, "Yes, that's true."

So I said to myself, "Okay, that's very good." "Especially if the demand increases. Remember, you ca n't buy lifetime access to a Full Self-Driving System (FSD) anymore. So, you pay $99 a month,

and then there was a question like, ' Oh, but what if competitors come up with more Level 2 solutions?'" Will this lead to a decrease in the pricing of a fully autonomous driving system?

They replied, " My friend, no one is coming near us." And frankly, I give them some credit for that. Truly, no one comes close to Tesla.

Nobody has what Tesla has with Full Self-Driving (FSD). Every time I get into a car, I try to do a maneuver like the one in the Model X, and then I'm like, " Wow." Or when you get into a Sprinter and suddenly remember, "Ah, right ."

It doesn't have FSD . Once you start using it, it's like an addiction. It's like an addictive trait. You just can't put it down . It's cool. But it's a really cool trait.

I think fuel prices have contributed to the biggest backlog of demand for their vehicles in four years. They also mentioned that the limiting factor right now for manufacturing more vehicles is battery capacity.

I think part of that is because they're trying to reduce their reliance on China. They've already started manufacturing lithium- ion phosphate batteries in Austin for Mega Packs and home storage, and that means it's possible It's exciting to get lithium...you know, the batteries we use when installing Powerwalls, because I'm a big fan of battery packs with solar.

So, that's the benchmark I usually use before even thinking about solar. But it does mean we might have that in the future. That's good because it increases the availability of batteries they can sell, which have historically had high profit margins, and I think they want to share that with China less and reduce their dependence on them, which is something Elon has always said.

They also mentioned that data centers are clamoring for Megapacks. That was said on the earnings call, which is also a positive sign for all of this. The clean energy boom. I think that regardless of whether the Democrats sweep the 2028 election or not, green energy is going to make a strong comeback, and Tesla is part of that, whether through batteries or solar power. Tesla is part of that deal.

Okay, let's look at some of the other numbers we have here. They reported that their car revenue fell by 3%. But gross profit rose by 9%. So, they're able to achieve a slightly higher profit margin .

Their gross margin, EPS, and revenue all came in better than expected. However, if you look at the company's operating margin, it's less than half of what it was last year. The operating margin is only 2.6% .

And if you look at EPS, I mean, you're getting a 22-cent decrease according to GAAP . If you look at net income, according to GAAP, it's $787 million . Dividing 787 by 2,560 , you get a net profit of approximately 3.8%.

And this What you're looking at as net income according to accounting standards. So, it's a bit tricky in terms of the question: how much net profit are we actually making here?

How much are we contributing to the valuation? We can see a lot of subtraction marks here.

In fact, I think what's happened is that when we analyze the income statement , we can see that a large part of the struggle comes from increased R&D costs. So, going over here, you get a simple analysis.

Look at this. R&D costs have increased by 69.3%. This means a lot of hiring, not just on the AI team or the Optimus team or others. This is very similar to a giant robotics and truck startup entering production, as well as providing a fast truck shipping network.

There are a lot of expenses being incurred, and therefore their profit margins are affected here.

They also saw a 15.6% drop in sales in the energy and storage segment. Arguably, part of that is due to the tariff reimbursements they had to make, but part of it may also be due to higher interest rates.

also be due to higher interest rates. So, despite a lot of optimism about the company and its products—the flying car— And with the Optimus robot and CyberCub, there's still some realism regarding the timeline.

As for CyberCub, we also got some additional details. Let's look at some notes from the earnings call. Next month, we'll have what appears to be a CyberCub launch in Dallas. Well, they originally started the Model Y launch on April 18, 2026.

So, if they end up launching that in November, it'll be about seven months from the Model Y launch to the actual CyberCub launch , which is less than the twelve months it took, but more than twelve.

It took about fourteen months in Austin. So, you're seeing an improvement in the speed at which CyberCubs are getting started, but it shows that it's not fast. It's not like we said, "Okay, after we finish Austin , we can launch CyberCub in a new city in 30 days, right?"

It's still a process that takes several months . And they're expanding the testing to include Different capabilities for handling weather on highways. They're trying to reach 2 a.m. for self-driving robo-taxi (FSD) trips in Austin, Texas.

They're trying to scale slowly. They're being very careful about risks, that's how they talk about it.

Now, we've talked a bit about Optimus, so let's talk about CyberCab . We know that narrowing down that timeframe is a big motivator. We've talked about Optimus and what the Optimus Academy is like .

That's self-play. We need Optimus to play at scale to be really good in the real world, more than just watching a video. They say they want to get to a point in the second quarter where people can add their own cars to the robo-taxi fleet.

I think that's just hype. I don't think it's going to happen. So, I wrote that I highly doubt it.

They also think they'll be able to release some CyberCab vehicles to customers. Actually, I think they said the end of the year. I wrote 2027, but if I remember correctly, they said the end of the year.

So, I guess that's , oh, not true. Here we go. So, that was actually the end of 2026. I don't see that happening, but oh well, that's what they said.

They say they see the CyberCab mostly as a transportation service as a product, rather than people actually owning it. Elon comes along and says, "Look, you'd want to own a Model 3 or a Y, not a CyberCab."

They mentioned that the CyberCab has 50% fewer parts than other Teslas. I think that's really impressive from a margin standpoint, but I guess that's why they say you don't really want to own it.

Maybe it's because it doesn't have heated seats. It lacks some of the luxuries you'd expect in a car you drive, and it feels like you're sitting in the back seat of a police car, you know, it's just a basic shell with virtually no extras.

Okay, maybe that's a bit of an exaggeration, but anyway,

those were some of the notes we took during the earnings call. They did mention that they have a plan to get to the running costs To 30 cents per mile. They say they haven't reached that point yet.

We also got some clarification on the expected cost of the Optimus robot, which I found very interesting. They stated that the cost would be close to that of the Cybertruck. Now, my estimate is that the Cybertruck will cost between $30,000 and $35,000 to build.

That's just the manufacturing cost. Then you need to add a profit margin of 25 to 30 percent, or maybe 20 percent, it depends. This means that the Cybertruck will likely sell for between $35,000 and $40,000, and if Optimus is close to that price, you're probably talking about $40,000 per robot.

However, you can still calculate the return on investment for a robot that operates 24/7. What difference does it make if you have a robot that costs $25,000 or one that's available for $40,000?

The important thing is that you have the robot, right? It doesn't matter that much. For business, you just do the math and see if the numbers make sense. But this is the first time I've heard them talk about potential costs and how similar Cybertruck is to Optimus, and I find it very interesting that they see Optimus costing similarly to Cybertruck.

That kind of surprised me. I thought Optimus would end up being much cheaper.

Anyway, they also mentioned regarding the TerraFab project that how SpaceX and Tesla will split the costs is still being worked out, probably because they'll end up building it together when the two companies merge.

So, maybe that's why they haven't finalized it yet.

Okay. What other small observations have we made here? We've noticed that the number of active Full Self-Driving (FSD) subscriptions here has now reached 1.74 million. Keep in mind, though, that about 750,000 of those subscriptions have already paid for lifetime access to FSD.

So, you know, There's no recurring annual revenue from it. It was a very good initial capital that the company was able to raise to help fund some of its development plans and other things.

But the company isn't getting any recurring annual revenue from it. That's why they switched to this monthly model, because now, just like cybersecurity services, they can get recurring monthly revenue and scale the business much faster.

So, I understand what Tesla is doing because we see it in exactly the same way. Anyway, having said that, take a look at this. Deployed storage, we can see that deployed storage is up about 10%, but that storage revenue hasn't come close to that kind of growth, has it?

We've actually seen a pullback there. Again, probably because of those tariff rollbacks. We've seen that vehicle inventory has dropped. They're blaming the limiting factor of batteries.

Some people are saying, "Oh, demand for cars is going crazy." I'll say they got rid of the $7,500 tax credit, and yet they're almost on par with the number of vehicles they delivered in the third quarter of last year.

That's really impressive. Now, other countries have helped step in. Sales in the US haven't made up for all of that. So, you know, the loss That tax credit last year was still a hit for Tesla.

Hmm, you could even mention that you can see the signs here. Record delivery numbers in Canada, Australia, Japan, Taiwan, etc., etc., etc.

Now, we also have some notes here, let's see. What did we write here? Ah, yes. Computing. So, they have a pilot factory in Austin, where they plan to start "running the equipment."

They were more candid on the earnings call, simply saying, "Hey, we still have to figure out how to use this equipment." In other words, they've spent a lot of money on expensive chip-making equipment, and they don't really know what they're doing.

They're kind of transparent about that, which I think is great. But for their pilot factory, Elon thinks they don't really expect to print usable chips until the end of 2028 or basically 2029.

So, I think it could take a little longer than that. It could be a 30s bet, too. They could go through a full-blown recession between now and then.

But anyway, Tesla currently has 400 megawatts of AI-training computing. Artificial intelligence. And excuse me, but they expect to reach 400 megawatts of training computing by the end of the year.

Okay, back to Tesla's remarks here. We now have LFP cells in Nevada for Energy Products. We shipped our first Mega Pack units that are made entirely of our own LFP cells. That's cool.

Historically, this remark suggests they were only buying from China. Now they're making their own cells, which is great.

We have the auto margins. The auto margins were really impressive. We'll be able to see that regulatory credit down here. Here it is. Gross auto margins, excluding regulatory credits, were 18.1%.

I mean, it's not like the high 20% levels we saw in the past during the COVID days, is it? But it's definitely better than the previous quarter. And it's also better than last year, which is remarkable because you had some very large credits back then. I think you can balance that out somehow.

But also look at this: in the last quarter, they had to acknowledge a loss on investments SpaceX. This quarter, they actually managed to record gains of about $100 million from their SpaceX stock.

You can see here that they didn't get any additional funding. They basically paid off a bill, paid off some debt, and refinanced a little bit. Oh, that's not right. They got, sorry.

Yes, no, no, here are the numbers. Yes, they paid off a bill, they got $1.1 billion, basically the same thing.

Capital expenditure was expected to be negative, but it actually came in positive on a free cash flow basis. So, they had $6.2 billion in cash flow. And they spent $4.7 billion.

But part of that was a little strange. Their accounts payable, i.e., bills to pay, went up by $2 billion, and their deferred revenue went up by $1 billion. So, someone prepaid for some stuff at Tesla.

You know, maybe a Semi truck or something. I don't have all the details on that. Maybe the 10-K report will clarify that when it comes out. Within a few days. But that was definitely the reason they didn't have negative free cash flow, because that's $3 billion there.

If you subtracted that $3 billion from their cash flow here, they'd have negative free cash flow of about $1.5 billion, just like last quarter. So, there's something fishy going on with the timing, which I don't really care about.

I just, you know, don't think it's something to be hailed as positive.

They have about $50 billion in cash and receivables, but remember they have $36 billion in outstanding bills, which leaves them with about $14 billion in free cash, which is nowhere near what they need to fund the TerraFab project, the Optimus expansion, the CyberTrack expansion, and all their big chip-making ambitions, which means a lot of bad news is coming.

And the market is going to have to digest all that bad news.

But, in response to that, or as thanks for digesting all that bad news, here are some beautiful pictures of Tesla Semi trucks. Here are some beautiful pictures Here's the Christmas-themed CyberCab.

Here's the front view. Here are some beautiful pictures of the CyberCab with LED lighting. Here's a car flying above a whole lineup of other Teslas. And here's a jet-powered flying car.

And there you have it. This should make you feel better about all the bad things that are about to happen. Yes, they're going to have to raise a lot of money.

Tesla Semi trucks. Here's the Christmas-themed CyberCab . Here's the front view. Here are some beautiful pictures of the CyberCab with LED lighting.

Here's a car flying above a whole lineup of other Teslas. And here's a jet-powered flying car .

So, we have a complete breakdown of what's happened with Tesla. Clearly, head over to reinvest1.com. We'd love for you to join us there. We have a live stream for course members every day the market opens, almost every day.

We analyze the portfolio, we look at the fundamental analysis of stocks, and the technical analysis. We do this almost every day with our Alpha Report. We'd love for you to be there with us.

If you like this insight, consider joining us. Get lifetime access.

As for Tesla, there's one more thing to add, and it was a big one, which is that Tesla stated it should be able to produce 5 million vehicles by the end of 2030. My prediction was 4 million by the end of 2030. 2030 is in my spreadsheet, so this boosts our spreadsheet a bit.

I'm a little excited about the spreadsheet. It's going to get complicated when companies merge, of course, but I would say Tesla's stock price is way too high based on its price-to-earnings-to-growth (PEG) ratio.

But if you look at Tesla's Project 2030 analysis, I get a little excited. So, if you just go into Tesla's spreadsheet and raise that number from 4 million vehicles to 5 million vehicles, man, I get a little excited.

Because you have to keep in mind that I have some big profit margins here, okay? So, I put the operating income at 30% because of the Cybertruck profit margins. Honestly, let's bring that down a bit because we don't want to be too optimistic here.

Let's bring that down to 25 quickly, okay? We're going to reduce the operating income for these vehicles to about 25%. And that comes from the vehicles. Okay, we still have some operating income margins that will offset some of the selling, administrative, general, and R&D expenses for the other components.

But, if we get to Around 25% of operating income comes from those 5 million vehicle sales. The numbers start to get a little crazy, in a positive way. This could lead to a

Because you have to keep in mind that I have some big profit margins here, okay? So, I put the operating income at 30% because of the Cybertruck profit margins . Honestly, let's bring that down a bit because we do n't want to be too optimistic here. Let's bring that down to 25 quickly, okay?

We're going to reduce the operating income for these vehicles to about 25%. And that comes from the vehicles . Okay, we still have some operating income margins that will offset some of the selling, administrative, general, and R&D expenses for the other components.

But , if we get to Around 25% of operating income comes from those 5 million vehicle sales. The numbers start to get a little crazy , in a positive way. This could lead to a future value of around $854, which is incredible.

So, you need those margins to keep growing , and the idea is that Cybertruck, with 50% fewer parts and mass production, will be able to get you there .

Keep in mind that this spreadsheet projects around $200 million in operating income from insurance, $4.2 billion in operating income from pickup trucks, and just $1.5 billion from sales of 200,000 robots by 2030.

They want to reach 1 million robots by The year is 2030.

So, I think I've taken a bit of a conservative approach here, and although those margins may be very high, they illustrate how things could develop. Even if you reduce this margin to 20%, i.e. we get to 20 here, and leave everything else as it is, we will still reach a target price of around $740.

At a purchase price of $375 per share, that gives you a return rate of 17% . The problem is that many of these things are much more optimistic than Wall Street's expectations for Tesla.

Wall Street's current forecast for Tesla puts this stock at, let's see, 386 divided by 1.72, which puts me at around 244 as a price-to-earnings ratio, right? 244. The growth rate is expected to be divided by four, i.e., 47% annually.

This puts me at a PEG ratio of around 4.7, which means that, according to today's assessment, we are probably 2.2 times higher than we should be.

This means we should probably be closer to a price that makes it worth buying in bulk at around $170, right? But, I mean, the price isn't there. It's unlikely to get there anytime soon because SpaceX is about to acquire it, probably at a price premium.

This is exactly where Tesla's stock makes sense compared to these other companies. Currently, it appears that there is a "put option" built into it because SpaceX will buy it at a premium, my friend.

Most likely, at least. We don't know . This is not a guarantee.

In any case, this gives us more clarity regarding Tesla's price.