Tesla (TSLA) buyers are as soon as once more caught between near-term realities and Elon Musk’s far-reaching imaginative and prescient for the longer term. The corporate’s third-quarter earnings report painted a blended image—file car gross sales however sharply weaker profitability. Nonetheless, at the same time as uncertainty grows round Tesla’s core EV enterprise, Musk continues to look years forward. His message to buyers was clear: the way forward for Tesla isn’t nearly electrical autos (EVs)—it’s about robots.
In the course of the firm’s current earnings name, Musk described the Optimus humanoid robotic as an “infinite cash glitch” as soon as produced at scale and even went as far as to say it may turn into “the largest product of all time.” It’s not the primary time Musk has framed Tesla as a synthetic intelligence and robotics firm quite than a conventional automaker, however this time, the conviction appeared stronger than ever. Optimus was talked about 36 occasions throughout the name, making it a serious subject.
With Musk doubling down on his robotics imaginative and prescient whereas Tesla contends with short-term headwinds—falling earnings, intensifying EV competitors, and his personal consideration stretched throughout a number of ventures—buyers face a troublesome query: Does the long-term promise of Optimus make TSLA inventory value shopping for proper now? Let’s break down what’s driving each the hype and the hesitation.
With a market cap of $1.44 trillion, Tesla is a outstanding innovator devoted to accelerating the worldwide transition to sustainable vitality. The Elon Musk-led powerhouse designs, develops, manufactures, leases, and sells high-performance absolutely electrical autos, photo voltaic vitality era programs, and vitality storage merchandise. It additionally provides upkeep, set up, operation, charging, insurance coverage, monetary, and numerous different providers associated to its merchandise. As well as, the corporate is more and more specializing in services and products centered round AI, robotics, and automation.
Shares of the EV maker have gained 9.7%on a year-to-date (YTD) foundation. TSLA inventory initially dropped final Thursday following an earnings miss however in the end closed greater, supported by energy within the broader market. Nonetheless, the inventory dropped 3.4% on Friday as buyers continued to digest the corporate’s weak outcomes.
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Elon Musk typically emphasizes that Tesla is extra of an AI and robotics firm than a conventional carmaker. And the newest earnings name underscored that time even additional. Musk reiterated his perception that Optimus, the corporate’s AI-trained humanoid robotic below improvement, may turn into the largest product of all time. He referred to Optimus as an “infinite cash glitch” as soon as produced at scale and has beforehand said that gross sales may ultimately make up 80% of Tesla’s worth. Notably, Optimus was talked about 36 occasions on the decision, making it a serious subject.
Musk’s pitch for Tesla’s robotics imaginative and prescient represents a much-needed new route for the corporate. Tesla’s earnings declined in Q3 regardless of file car gross sales, which have been boosted by a surge in purchases forward of the expiration of a federal tax credit score (we’ll dive into its Q3 outcomes a bit later). And a extremely aggressive EV market is elevating the stakes for Tesla’s success in its robotaxi and AI initiatives. “We’re at a essential inflection level for Tesla. It’s actually going to be like a shock wave,” Musk stated on the earnings name.
Essentially the most fascinating half is that extra analysts and top-level executives are starting to talk significantly about robotics. Nvidia CEO Jensen Huang is keen to leverage his success in AI chips to broaden into robotics. In early June, TSMC (TSM) Chairperson C.C. Wei famous that demand for chips powering humanoid robots is growing quickly. TSMC forecasts that by 2030, round 1.3 billion AI-powered robots will likely be deployed, making a market value $35 billion. And humanoid robotics is projected to turn into a key development driver for TSMC between 2030 and 2040.
In the meantime, Morgan Stanley Analysis estimates that the humanoid robotics market may attain $5 trillion by 2050. “Adoption ought to be comparatively gradual till the mid-2030s, accelerating within the late 2030s and 2040s,” in accordance with Adam Jonas, Morgan Stanley’s Head of World Autos and Shared Mobility Analysis.
Now, let’s flip again to a few of the further insights Musk shared about Optimus. He stated {that a} prototype designed for quantity manufacturing is anticipated to be prepared for demonstration by March. Analysts are wanting to get a better take a look at Optimus, though it isn’t anticipated to generate income within the close to future. The chief govt additionally famous that “first era manufacturing strains for Optimus are being put in in anticipation of quantity manufacturing.” Nevertheless, Musk didn’t specify when manufacturing may start.
In the meantime, throughout the earnings name, Musk additionally said that with Optimus and self-driving know-how, Tesla may assist create a world with out poverty, the place everybody has entry to top-quality medical care. He instructed that Optimus may, as an example, turn into an exceptionally expert surgeon. Musk has said that Tesla may produce as much as 1 million robots per yr by the tip of the last decade.
However let’s return to actuality—there are quite a few challenges to beat earlier than Optimus can attain mass manufacturing. The corporate has been working via design challenges involving the robots’ fingers and forearms. Musk stated that the Optimus hand and forearm are an especially complicated engineering problem. He emphasised that making a extremely succesful hand is important for growing a very helpful general-purpose robotic. One other problem lies within the lack of an current provide chain for humanoid robots, forcing Tesla to be extremely vertically built-in and deal with a lot of the manufacturing internally. It’s also possible to try my earlier article on TSLA to learn what skeptics have stated about Optimus.
Tesla launched its third-quarter outcomes final week, changing into the primary of the Magnificent Seven firms to take action. Let’s take a fast take a look at the positives from the report. First, complete income rose 11.6% year-over-year (YoY) to $28.09 billion, beating Wall Avenue estimates by $1.39 billion. The income enhance got here after two consecutive quarters of declines, pushed by a surge in demand forward of the expiration of EV tax credit. Because of this, Tesla’s complete automotive revenues grew 6% YoY to $21.2 billion. Whereas this was a constructive, it didn’t come as a lot of a shock to buyers, as file supply figures launched in early October had already signaled it. One more reason buyers didn’t cheer the robust beat is that U.S. EV gross sales are extensively anticipated to tumble within the present quarter, as many patrons who would have bought later within the yr rushed to make the most of the expiring tax credit score. Notably, almost half of Tesla’s income comes from U.S. clients.
However let’s return to the positives. One other robust level from the report was Tesla’s vitality enterprise, which achieved file storage deployment ranges. This resulted in phase income of $3.4 billion, up 44% YoY. In the course of the quarter, Tesla launched its “Megablock” vitality storage product, a pre-engineered, medium-voltage battery that mixes 4 Megapack 3s. Musk additionally talked about that Tesla has formidable plans for MegaPack 4, which will likely be able to delivering roughly 35 kilovolts immediately, eradicating the necessity for a 35 kV substation. Baird analysts famous that Tesla’s new vitality merchandise are a giant deal, with the potential to broaden the corporate’s margins and complete addressable market. The providers and different phase additionally carried out properly, with income rising 25% YoY to $3.5 billion.
Relating to the negatives, the principle disappointment in Tesla’s report got here on the profitability entrance. Tesla’s margins fell throughout the board, with complete GAAP gross margin declining 185 foundation factors YoY to 18%. The corporate’s working revenue dropped 40% YoY to $1.6 billion. Its adjusted EPS stood at $0.50, down 31% YoY and lacking expectations by $0.06. With that, Tesla’s profitability continues to wrestle within the present market surroundings, as price pressures, partly pushed by tariffs, have considerably weighed on the underside line. CFO Vaibhav Taneja stated that Tesla incurred roughly $400 million in tariff-related prices throughout the quarter, divided between its automotive and vitality segments. It’s additionally value noting that the corporate’s backside line was hit by decrease regulatory credit score income after the Trump administration formally phased out the emissions credit score market earlier this yr.
Relating to the outlook, Tesla stated that forecasting volumes is troublesome amid shifting EV insurance policies and ongoing geopolitical uncertainty.
Wall Avenue analysts stay cut up on Tesla, as evidenced within the inventory’s consensus “Maintain” ranking. Of the 42 analysts masking Tesla, 14 assign it a “Robust Purchase” ranking and two a “Average Purchase,” whereas 17 advocate holding and 9 give it a “Robust Promote” ranking. Tesla bulls stay optimistic resulting from Musk’s daring guarantees in AI, robotics, and self-driving know-how, whereas bears level to profitability struggles with extra weakening forward, an unjustified valuation (263.30x ahead non-GAAP P/E), and a broken model picture. Notably, the inventory presently trades at a premium to its imply worth goal of $376.37.
Placing all of it collectively, it’s troublesome and really speculative to evaluate the Optimus challenge’s potential in the mean time, because it stays years away from producing income, and the timeline may very well be prolonged even additional as a result of challenges talked about earlier. So, I don’t assume shopping for TSLA inventory proper now purely on optimism surrounding Optimus is a smart transfer. I imagine a wait-and-see method is the very best plan of action right here, particularly as Tesla’s core enterprise faces “near-term uncertainty from shifting commerce, tariff, and financial coverage.”
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On the date of publication, Oleksandr Pylypenko didn’t have (both immediately or not directly) positions in any of the securities talked about on this article. All info and information on this article is solely for informational functions. This text was initially revealed on Barchart.com
