Tesla after a strong start to the year didn't raise its vehicle delivery guidance from 1.8 million is that the only thing Weighing on the stock look what we saw last night in results was emblematic of a company that's investing to create long-term durable growth and they're doing that in multiple ways right so first they cut prices which you referred to earlier in the year and that's seeding the market with units and with those units over time they hope to basically penetrate uh FSD software that will create margin upside over time they're also spending a lot in Opex they're doing that to beef up their AI infrastructure to enhance that FSD offering maybe even sell they alluded to this yesterday on yesterday's call uh to sell more FSD software to other oems so George I want to jump in FSD is full self-driving I want to make sure the audience is on the same page yes sorry yes both self-driving software for its own vehicles and potentially to other oems they're also investing in Battery Technology with 4680 cells they're also investing in robotics right the Tesla bot could create long-term durable growth you know for later on in the decade into the 2030. so this is a company that despite neurotic macroeconomic environment is still putting the pedal to the metal and investing in projects that should create growth for the long term absolutely I think Elon Musk kind of highlighted they want to retool some facilities some production facilities to get ready for the second half of the Year and that may slow down production so let's talk about margin um Tesla itself has engaged in a price War that's hit margins do you believe this might be the bottom when it comes to its margin story yes so that's that's Lee issues in yesterday's call the company wouldn't commit they're very non-committal about seeing a bottoming in margins we think we're there you know so whether it's this quarter or next quarter they broke this 20 pure gross margin guidance and right now they're in about the 17 percent range and I think that's probably why they don't want to commit to this being a bottom but if you look forward into Q4 into 2024 we have the Cyber truck ramping we have additional volumes helping growth we have 46 80 cells ramping so we think that this particular level probably represents the bottoming process for gross margins so George I'm going to ask you a complicated question hoping to get a short answer out of you though um is Tesla possibly undervalued heard a lot of people talking about it's actually an AI play that people don't fully realize full self-driving FSD as you mentioned that's actually AI correct you know we call Tesla the AI and sustainability Behemoth you know we have close to ten dollars in earnings for 2025 and if you look at that relative to other large cap tech stocks it's relatively undervalued it's growing faster from a revenue perspective it's growing faster from an earnings perspective and all the stuff that we just talked about create visibility to long-term sustainable growth so yes relative to those stocks particularly we think it's undervalued and underappreciated all right George with that in mind give us your price Target and your rating it's 293 price Target buyer rated that's a 12 month price Target but we think that our multiple which is 30 times 20 25 earnings is relatively conservative conservative particularly given the fact that this group of large cap tech stocks what we call the Man Group as trading at 26 times and when you look at the growth for revenues it's probably three times higher for earnings it's a little bit higher than that so we think this is a relatively undervalued stock
