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07-12

UBS Cuts Tesla to Sell on Concern Over AI-Driven Share Rally; Raises Target Price to $197 From $147

06-07

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Shopify: Beyond The Short-Term Noise, A Long-Term Growth Story, Buy

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Weekly Hottest Sector｜Roaring Kitty Is Back but FFIE is This Time Meme Frenzy's Biggest Winner

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2023-11-08

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Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"idStr":"4119166036703922","authorIdStr":"4119166036703922"},"themes":[],"htmlText":"&nbsp;","listText":"&nbsp;","text":"","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/326650471809104","repostId":"1195381387","repostType":2,"repost":{"id":"1195381387","weMediaInfo":{"introduction":"Providing stock market headlines, business news, financials and earnings ","home_visible":1,"media_name":"Tiger Newspress","id":"1079075236","head_image":"https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba"},"pubTimestamp":1720772009,"share":"https://ttm.financial/m/news/1195381387?lang=&edition=fundamental","pubTime":"2024-07-12 16:13","market":"us","language":"en","title":"UBS Cuts Tesla to Sell on Concern Over AI-Driven Share Rally; Raises Target Price to $197 From $147","url":"https://stock-news.laohu8.com/highlight/detail?id=1195381387","media":"Tiger Newspress","summary":"1) TSLA price disconnecting from fundamentals has occurred in the past and can persist for a while. 2) 2Q24 results may be above expectations, causing positive revisions to 25/26F helping to sustain momentum. 3) Investor tepidness to be negative into “robo-taxi” day, and/or there is a true upside surprise at the event. In our view, we believe TSLA is making good technological progress, but the challenge is hard and may face operational challenges . More meaningful than robo-taxi is showing the n","content":"<html><head></head><body><ul style=\"\"><li><p>Tesla Inc.’s stock is downgraded by UBS Group, on concerns that the US electric carmaker’s shares have risen “too much, too soon” on optimism over its artificial intelligence plans. </p></li></ul><p><strong>Increasingly difficult to justify valuation</strong></p><p>UBS downgrades TSLA from Neutral to Sell. TSLA is more than just an auto company, and there are some positive developments (e.g. Energy, FSD) that add additional support. This is increasingly important as expectations for the core Auto business deteriorate. TSLA has always had a premium attached to it for other, future, growth initiatives. Properly valuing that optionality is difficult. This premium has widened of late, we believe, on AI enthusiasm. After going through the different businesses we can more substantially value, at current levels, we are still left with a &gt;$500bn “stub” for that future growth. Even if we give that “stub” a 5-year time horizon, that implies a 5-year future value of $1T. And this is just to justify current levels; one would need to see an even larger opportunity to justify a Buy rating. While TSLA is investing heavily in AI and the tech is making progress, investment is costly, pace of improvement may slow and the payoff is long dated. If market enthusiasm for AI diminishes, this may impact TSLA&#39;s multiple. Given the lack of visibility and the risk that growth opportunities materialize on a longer time horizon (or not at all), with the stock at 86x NTM P/E, downgrade to Sell.</p><p><strong>When ex-auto contribution to price nears the highs, good opportunity to sell</strong></p><p>Our valuation attribution analysis shows that the market has (fairly consistently) valued TSLA’s core auto business between $60-$90/share. The “other attribution” has been volatile but past 2 year average is ~$140/share. With the recent rally, it’s now nearly ~$175/share. Fig. 3 shows when other becomes larger contributor to price, stock starts to trend down. O ur SOTP view values auto at ~$57, Energy, which has shown recent strong growth (and higher margin) is worth ~$18. We estimate FSD/robo-taxi could be ~$18 (see UBS Evidence Lab FSD survey inside), but that&#39;s only ~$93 of the more easily identifiable value, implying a premium/future option value that is ~61% of today’s price.</p><p><strong>Where could we be wrong?</strong> 1) TSLA price disconnecting from fundamentals has occurred in the past and can persist for a while. 2) 2Q24 results may be above expectations, causing positive revisions to 25/26F helping to sustain momentum. 3) Investor tepidness to be negative into “robo-taxi” day, and/or there is a true upside surprise at the event. In our view, we believe TSLA is making good technological progress, but the challenge is hard and may face operational challenges (regulatory, etc.). More meaningful than robo-taxi is showing the new vehicle, as that could change 25/26F numbers. But consensus already considers higher units, and we believe the vehicle could pressure auto margins.</p><p><strong>Valuation: PT to $ 197 from $147 based on 55x P/E (45x prior)</strong></p><p>55x is at the high end of the past 2-year range and is supported by our SOTP analysis.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/45954af4dbf44b11676fefa1e474d3bb\" title=\"\" tg-width=\"772\" tg-height=\"226\"/></p><h3 id=\"id_1093952194\">Pivotal Questions</h3><p><strong>Q: Can TSLA get to &gt;5mm v ehicle deliveries by 2030?</strong></p><p>No. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for the current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving &gt;3mm units for delivery when max capacity may be ~3mm could be challenging.</p><p><strong>Q: Can Energy grow at a ~30% CAGR through 2030?</strong></p><p>Potentially. TSLA Energy has grown impressively of late, and importantly, this is currently a high margin business for the company. However, we caution that energy storage deployments can be lumpy. Looking ahead, the opportunity for stationary storage is large, so a ~30% CAGR through 2030 to get to ~$42bn in 2030 revenue is possible. However, more capacity investment would be needed, the timing of which isn&#39;t clear, and the law of large numbers may come into play as we move through the decade. We model a ~22% CAGR through 2030E.</p><p><strong>UBS VIEW</strong></p><p>We are Sell rated on TSLA. TSLA is more than just an auto company, and there are some positive developments in other areas such as Energy and FSD. Further, TSLA has always traded with a premium attached to it for other, future growth initiatives. Properly valuing that optionality is difficult. However, at current levels, we believe that unidentifiable premium is too significant. Given the lack of visibility and the risk that these growth opportunities materialize on a longer time horizon (or don’t materialize at all), we rate the stock Sell.</p><p><strong>EVIDENCE</strong></p><p>We created a proprietary valuation attribution analysis to better understand TSLA valuation. We took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla&#39;s perception in China. We also utilized a UBS Evidence Lab survey to help us better understand the FSD opportunity.</p><p><strong>WHAT´S PRICED IN?</strong></p><p>Tesla has many factors driving its price action, but at current levels and all else equal, we believe 2030 auto units deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/07f529112d054be2170f604f3a3e20e7\" title=\"\" tg-width=\"595\" tg-height=\"312\"/></p><p><strong>Company Description</strong></p><p>Tesla, Inc. manufactures and sells fully electric vehicles and energy generation and storage systems, and related services. The company&#39;s mission is to accelerate the world’s transition to sustainable energy. T he company is also working on automated driving technology and Optimus, a robotic humanoid.</p><h2 id=\"id_3819601884\">More than an auto company, but how much more?</h2><p>TSLA is often labeled “not an auto company” or “more than an auto company”. We are more inclined to agree with the latter considering the vast majority of today’s revenue/profits are related to the manufacturing and selling of vehicles. This makes valuing TSLA stock challenging at times. We are not here to say that TSLA should be valued as an auto company as there are other initiatives. Some of these initiatives may have payoffs way out in the future. TSLA stock price been sensitive to future businesses, opportunities and TAMs (i.e. the potential of what TSLA could become). Some premium for this potential is fair, but we do believe investors should be cognizant of how much the auto business and other more readily valuable businesses contributes to the stock price to help ground the valuation and select entry and exit points.</p><h2 id=\"id_3099312274\">UBS&#39; TSLA valuation attribution analysis</h2><p>Below, we took a look at the historical contribution of TSLA’s automotive business to TSLA’s total market value. We specifically focus on auto only for this analysis as for a large period of time, this has been, and remains, the company&#39;s primary driver. A uto also has the richest data for historical consensus expectations. For this analysis, we took consensus 2030 auto delivery expectations (at that time) and consistently applied a $40k ASP, a normalized Auto EBIT margin of 15% and 20x forward P/E multiple. Yes, some will quibble with our assumptions, particularly the multiple considering legacy OEMs trade at single-digit P/Es and Toyota, as a best in class OEM, historically may trade closer to~10x. However, we’d a) argue that TSLA&#39;s auto business still has more growth potential ahead vs. a more mature Toyota and b) we believe we are being somewhat generous to auto for this analysis. We then discount that nominal auto value at the cost of equity (at that time) to that period. We then compare the implied auto contribution to the total market capitalization of TSLA at that time.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/5c1da45256b06a41729fadf0b64bf3d9\" title=\"\" tg-width=\"634\" tg-height=\"403\"/></p><p>A few things from this analysis surprised us:</p><ul style=\"\"><li><p>The market value attributable to auto was more consistent than we expected. It has generally been between $200-$300bn since 2021 or ~$60-$90 in per share terms. This surprised us because consensus 2030 deliveries used to be &gt;7mm and now stand &gt;30% lower at ~4.8mm units. Mitigating the impact of this negative revision is the discounting (i.e. we are now closer to 2030). Bears may argue even current 2030 expectations are too high, which may be warranted (UBS is at ~3.9mm). However, we felt using consensus expectations to figure out market expectations was more appropriate.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/824940f43a694f9bbfbd3094c34acda4\" title=\"\" tg-width=\"634\" tg-height=\"406\"/></p><ul style=\"\"><li><p>How much of TSLA&#39;s valuation is attributable to “other” initiatives? Over the past 4 years, on average only ~30% of TSLA’s stock price is attributable to core auto, again using our assumptions from above (less if one were to assume a lower margin or multiple). Over the past two years, this has been closer to ~36%. At TSLA’s current price, only 28% of TSLA’s current value is attributable to core auto, an 8pp swing since the end of June and at the lows over the past 2 years.</p></li></ul><p>While valuation disconnections from more tangible fundamentals have occurred in TSLA’s history, and it can persist for extended periods of times, we believe that when these hopes get elevated, it is not a good time to initiate or add to positions. Rather, it’s a time to sell. Over the past two years, when the percent of the stock price that our analysis shows is attributable to auto dips below the 30% average, the stock has entered downward trend channels (see 6/22 and 6/23).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/91e873407ad615e28f97130ffdfe1f69\" title=\"\" tg-width=\"654\" tg-height=\"466\"/></p><h2 id=\"id_3206630880\">What about TSLA’s other endeavors?</h2><p>With our attribution analysis showing less than 30% of the current stock price is attributable to core auto, we asked ourselves, did something change? While the recent 2Q24 auto deliveries of ~444k was better than expectations, it was still down -5% y/y and was likely supported by some promotional activity. Further, in our view, quarterly deliveries coming in 20-25k (~5%) better doesn’t warrant a 15% rally since the delivery print (and a ~22% rally over the past 10 days). So, is there reason to be more optimistic on some of TSLA’s other initiatives?</p><h3 id=\"id_2406147011\">Tesla Energy</h3><p>One area that the market may have gotten more excited about, that also came out with the deliveries release, is Tesla Energy, which reported 9.4 GWh of energy storage product deployment in the quarter (+157% y/y and +132% q/q). At their annual meeting, Elon Musk also indicated the company was tracking towards 200-300% y/y growth in energy storage. This is important since Energy is currently higher gross margin than Auto (Energy was 24.6% in 1Q24), so this could help stem negative revisions from the pricing/promotion actions taken to stimulate auto demand. While we are more positive on Energy and raise our Energy sales forecasts, we caution that Energy sales tend to be lumpy.</p><p>Tesla currently has their Megafactory in Lathrop, California, which has an annual capacity to build 10,000 Megapacks or ~40 GWh of storage. During 1Q24 earnings, TSLA announced that they had commissioned their second general assembly line as they look to ramp Lathrop to full capacity. TSLA is also opening their Megafactory in Shanghai which will add an additional 40 GWh of energy storage capacity. We expect this facility to be operational in 1H25. We now forecast TSLA will deploy ~27 GWh of storage this year, and ramp to ~37 GWh next year.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/2235a9dce09f3858e83800a2c8b54fef\" title=\"\" tg-width=\"778\" tg-height=\"712\"/></p><h3 id=\"id_1152913170\">AI</h3><p>Tesla is investing heavily in AI. Earlier this year, Musk announced that TSLA had installed and commissioned 35k Nvidia H100 GPUs and are aiming for 85k GPUs by the end of the year. Musk has also talked about spending ~$10bn on combined training and inference AI this year, the latter being primarily in the car. Tesla is also is developing their own silicon for their Dojo supercomputer, though in January 2024, Musk stated Dojo was “a long shot worth taking because the payoff is potentially very high. But it&#39;s not something that is a high probability.&#34;</p><p>The fruits of AI investment at Tesla would be related to Full Self Driving (FSD), which is their current advanced driving assistant, their robo-taxi initiative (planned robo-taxi day, now reportedly postponed to October), and Optimus, their humanoid robot initiative.</p><p>We believe TSLA stock price has gotten caught up in the AI trade/phenomenon. While we don’t doubt Tesla is making very good progress on such initiatives, aside from FSD (we were impressed by recent improvement), the other initiatives are purely R&amp;D. Large TAMs for sure, and we have more confidence in Tesla being able to manifest the power of AI in the physical world than we do for other companies. But, these are complex issues, that will take a long time to play out and success is not a certainty. As AI enthusiasm fades, we believe this can impact TSLA&#39;s multiple.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c5d81786f308252683379c4c0c26fe48\" title=\"\" tg-width=\"450\" tg-height=\"310\"/></p><h3 id=\"id_3277089746\">Full Self Driving (FSD)</h3><p>Of large debate is Tesla’s ability to charge, on a monthly recurring basis, for their advanced driver assistance system: FSD (supervised). Earlier this year, Tesla started rolling out the new version of FSD based on an end-to-end AI learning system. Tesla offered a 1-month free trial to all US Tesla vehicles with the proper hardware. They then lowered the monthly subscription cost to $99/month from $199/month.</p><p>We conducted a survey on 306 Tesla owners, ran over June 10-28th, to gauge customer reception and perception to FSD. Key points:</p><ul style=\"\"><li><p>A caveat, we believe our survey skews high to consumers that currently have (pay for) FSD vs. the reality of the marketplace. T his in part may be driven by ~53% of our respondents indicated that a Model S/X was their primary Tesla vs. S/X making up only ~6% of Tesla&#39;s 2023 US sales. S till, we are able to gather some insights from looking only at 3/Y owners and, in particular, respondents who don&#39;t currently own/subscribe to FSD to see what future &#34;take rates&#34; might be (though admittedly this is a smaller sample size).</p></li><li><p>Overall, we would say consumers are satisfied with FSD functionality (62% very satisfied) and feel safe using it (64% completely safe).</p></li><li><p>Of those that are not currently paying for FSD (so either free trial is over or still on free trial) 17% indicated they were likely to pay for FSD over the next 6 months, while 33% said somewhat likely.</p></li><li><p>However, our respondents did over-index to Model S/X vs. 3/Y when in reality, 3/Y is a significantly larger pool (and given the price point of the vehicle, points to a different willingness to pay, in our view). <strong>So, when we look only at respondents who said their main vehicle was a 3 or Y, very likely to pay for FSD over next 6 months dropped to 9% and Net Likely vs. Unlikely is only +3% (Figure 15).</strong></p></li><li><p>At the current $99/month level, 43% of Tesla customers surveyed (that indicated they are likely to continue to pay or will be likely to pay for FSD) indicated they would be willing to pay around this price ($76-$100/month). This dropped to 35% when only looking at Model 3/Y users. To us, this suggests that significantly higher adoption levels may need further price reductions.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b5d55bb0563a4f66a132b16a8deab211\" title=\"\" tg-width=\"793\" tg-height=\"601\"/></p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/af47480c103d4f6e2b0af57737985d8d\" title=\"\" tg-width=\"799\" tg-height=\"274\"/></p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/325c4b93ce1fca3b093525dc33bb296b\" title=\"\" tg-width=\"804\" tg-height=\"639\"/></p><p>The willingness (and ability) to pay for FSD matters to us as we think about future, low cost Tesla models. These new lower cost models will have a less expensive monthly vehicle payment. But, that also means that adding an additional $99/month to that payment for FSD will be a significant increase.</p><p>In China, while Tesla is making a push to be able to make FSD available, we have doubts over Tesla&#39;s ability to charge for FSD given many competitors already offer an autonomous solution without charging a monthly fee (or some even an upfront fee). Rather, we view FSD in China as almost a necessity to remain competitive with domestic Chinese offerings that have similar functionality.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b17104146f0628867d84b93db9210fa2\" title=\"\" tg-width=\"783\" tg-height=\"163\"/></p><h3 id=\"id_1267251312\">Robo-taxi</h3><p>We believe robo-taxis are a difficult technological endeavor and the business model also may face regulatory hurdles as well as questions around consumer adoption. Thus, we believe a meaningful r obo-taxi operation in the US is further out (not this decade). Tesla reportedly/recently pushed the planned 8/8 robo-taxi day to October. A subtle reminder that Tesla has had difficulty meeting timelines.</p><p>On the technology side, TSLA&#39;s move to an end-to-end (GenAI) approach has allowed for meaningful improvement in the FSD product. But the FSD product is a very good advanced driving assistant system (L2+). To move to a robo-taxi solution, the march of 9s must continue to be able to operate in all conditions within the operational design domain (ODD). We believe the end-to-end approach, on it&#39;s own, will eventually start to show slowing improvement and diminishing returns. Further, the cost for this improvement can be high. More, unique data is needed to continue the system improvement. TSLA does have access to a lot of data from their fleet, and they employ simulation. But, we believe that, similar to what is seen in GenAI with large language models (LLMs), progress can slow, and each additional improvement to the model can become increasingly more expensive to take (obtaining that new data to get the improvement and the compute to process it).</p><p>The other challenge with an end-to-end approach could be a regulatory one. There will inevitably be accidents and with an end-to-end approach without guard rails, it is difficult to understand why the system made a decision it did, thus difficult to correct for the problem (as rare as the specific event might be). We recently held an expert call on Gen AI for autonomous driving that highlighted the issue regulators may have with the lack of traceability and transparency that comes with an end-to-end approach that TSLA currently utilizes. Further, in certain geographies,TSLA still needs to test their robo-taxi with a driver before being permitted to test autonomously and then to offer driverless rides (see Waymo and Cruise).</p><h3 id=\"id_2212439252\">Optimus</h3><p>While we are excited about the progress Tesla is making on their humanoid robot, we believe this opportunity is much further out. At their annual shareholder meeting, Elon Musk helped frame the long-term opportunity. H e mentioned there could be, one day, 10bn humanoid robots, so if TSLA gets 10% share, that is 100mm Optimus units a year, and if sold for $20k, suggests a $2T revenue opportunity, $1T profit opportunity and a $20T market value opportunity (20x). However, we have difficulty underwriting significant (or specific) value to this opportunity today given the many uncertain variables, the probability of success and the unknown time frame.</p><h2 id=\"id_1024744650\">Sum-of-the-parts</h2><p>Below we take a look at a sum-of-the-parts (SOTP) for TSLA to support our P/E based valuation. We also show an upside and downside scenario.</p><ul style=\"\"><li><p><strong>Auto.</strong> We forecast 2030 units at 3.9mm units and ~$146bn in auto revenue. Applying a 15% “normalized” EBIT margin, applying a 20x P/E multiple and discounting that back to a year from now (mid-2025E) at ~13% cost of equity gives us $57/share value. 20x is above traditional OEMs in the mid-single-digits P/E and Toyota at ~10x but warranted given Tesla would still have more room for growth and the &#34;normalized&#34; Auto EBIT margins for TSLA (especially relative to legacy OEMs) could be higher.</p></li><li><p><strong>Energy.</strong> We forecast 113 GWh storage deployment and ~$28bn in Energy revenue (22% 2024-2030E CAGR). Applying a 20% “normalized” EBIT margin, applying a near-market multiple of 25x P/E multiple and discounting that back to a year from now (mid-2025E) gives us $18/share value.</p></li><li><p><strong>FSD.</strong> We forecast ~$1.5bn in 2030 revenue, which equates to ~$0.33 in EPS, and apply a software like 50x multiple, which discounted back to a year from now (mid-2025E) gives us a $9/share value.</p></li></ul><ul style=\"\"><li><p><strong>Robo-taxi.</strong> According to CNBC, Waymo, which actually gives driverless rides/operates a robo-taxi service today, latest valuation (2020) was $30bn. GM’s Cruise similarly once had a $30bn valuation, though we believe a current mark could be lower. In our base case, we apply the latest Waymo valuation of $30bn or $9/share. Our upside case more than triples the Waymo valuation to ~$100bn (we&#39;d also note that Uber has a ~$144bn market value). Our downside case assumes no value. We note that Baidu has recently been in the news as their Apollo Go robotaxi autonomous ride-hailing platform has been gaining attention and is piloting in areas such as Wuhan. However, we note that the entire Baidu market cap is ~$35bn. T he stock has rallied of late (~14%) on some of this robotaxi optimism, but that rally only contributed ~$4bn to the market cap.</p></li><li><p><strong>The TSLA Premium (AI, Optimus, other initiatives).</strong> These are difficult to value given they are, at best, R&amp;D today. Here, we are relying on the &#34;collective wisdom of markets&#34;. Going back to our earlier TSLA valuation attribution analysis, on average over the past 2-years, the market has assigned ~$490bn of value (~$141/share) to ex-auto initiatives. Between Energy, FSD and robo-taxi, we only identified $36/share of that, leaving the TSLA premium at $105/share. Note, that assuming the 13% cost of equity, the 5-year future value of that premium is $672bn and the 10-year future value is $1.2T. Given that many of these initiatives are likely to take time to materialize, we believe this seems more than fair. In our upside case, we use the more recent (high) level from our valuation attribution analysis while our downside case assumes no premium, which is closer to the minimum we&#39;ve seen vs identifiable valuations.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3618826a24dbabcfdf1557a12da5e9f1\" title=\"\" tg-width=\"574\" tg-height=\"708\"/></p><h2 id=\"id_3243539219\">VALUATION</h2><p>We value TSLA shares using a 55x P/E multiple and apply that to our current 3Q25-2Q26 TSLA EPS forecast. This yields our new $197 price target. 55x (45x prior) is at the high-end of the NTM P/E valuation range over the past 2-years but is supported by our SOTP work above.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/6a53beb83537bb6c04d35aab5ff5521b\" title=\"\" tg-width=\"421\" tg-height=\"270\"/></p><h2 id=\"id_3010455971\">Pivotal Questions</h2><h3 id=\"id_1253584077\">Q: Can TSLA get to &gt;5mm vehicle deliveries by 2030?</h3><p><strong>UBS VIEW</strong></p><p>No. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving &gt;3mm units for delivery when max capacity may be ~3mm could be challenging.</p><p><strong>EVIDENCE</strong></p><p>We took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla&#39;s perception in China.</p><p><strong>WHAT´S PRICED IN?</strong></p><p>At current levels, all else equal, we believe 2030 deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.</p><h2 id=\"id_2646094200\">How impactful will the &#39;Model 2.5&#39; be?</h2><p>Tesla’s eventful robo-taxi day may get most of the fanfare, focusing on AI and a robo-taxi service. However, in our view, a robo-taxi and other AI initiatives are still much further out. That is why we are focused on the “new” vehicle that Tesla plans to introduce, which we dub the &#39;Model 2.5&#39;. To us, this new vehicle could be the only data point to come out of the event (now expected in Oct) that can materially get investors to revise 2025/26 estimates.</p><p>Recall, Tesla scrapped the Model 2, which was expected to use a brand new unboxed manufacturing process to significantly lower the cost to produce the vehicle and offer a “$25k EV”. In their 1Q24 earnings release, Tesla indicated they plan to launch new vehicles, including more affordable models that utilize aspects of that next generation platform as well as aspects of their existing platform and will be able to be produced on the same manufacturing lines as Tesla’s current vehicle line-up.</p><p>We expect the Model 2.5 to look meaningfully different from the Model 3/Y silhouette as to differentiate the vehicle from potential Model 3/Y buyers. We also expect the starting price to be materially lower, potentially down to $25k (though we’d expect few variants to actually transact at that price).</p><p>What is the opportunity for the Model 2.5? In the US, the small standard car category (featuring the likes of the Toyota Corolla and Honda Civic) has accounted for ~7% of total sales over the past 5 years, or ~1mm units, on average. The Toyota Corolla is the current segment leader at ~23% share.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/756bc5e5ecd7afbf233418072962ec34\" title=\"\" tg-width=\"784\" tg-height=\"369\"/></p><p>When we look at the Model 3/Y and their segments, small premium II car and small premium II SUV, respectively, these Tesla models have been able to garner 40-50% share of those segments over time. If Tesla were able to garner similar share in the small standard car category, that would yield a ~450k annual sales opportunity for the Model 2.5 in the US. However, appealing to a lower tier consumer may yield additional challenges for that consumer to go electric. For instance, access to at home charging may be more limited for lower income buyers.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4adab9bc7ccdb9925ee45a4524dd4f28\" title=\"\" tg-width=\"787\" tg-height=\"316\"/></p><p>In Europe and China, smaller entry vehicles may appeal to those consumers relative to the US. I n 2023, European sales of small entry level cars was ~1.1mm or ~6% of sales. However, Eastern &amp; Central Europe made up about ~600k of that figure. W e believe these regions are likely to lag Western Europe on electrification. The Model 2.5 is also likely to face more competition in Europe as legacy OEMs look to electrify their small, affordable vehicle offerings. Further, smaller EVs from China are likely to enter the European market.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3e4fddc5de56a38ee01de16ee69e36d5\" title=\"\" tg-width=\"792\" tg-height=\"310\"/></p><p>In 2023, the Chinese affordable entry car market was ~1.7mm units, or ~6% of sales. However, t he Model 2.5 is likely to face intense competition as well, as even today, competitors for a low cost BEVs in China exist.</p><p>To further show the competitive challenge Tesla has in China, we looked to UBS Evidence Lab and China 360, who recently published a brand perception survey which surveyed 1,800 Chinese customers. In regards to Autos, the survey highlighted that the top 5 factors of importance for Chinese customers are safety, trustworthiness, high quality, value for money and versatility. T he survey highlighted that Chinese customers view Tesla&#39;s brand image as one more of p remiumness, trendiness and innovation. On the top 5 factors, Tesla only screened well on high quality.</p><h2 id=\"id_2997648751\">Guided by capacity</h2><p>While the market opportunity may be there globally, we must always keep in mind that production and deliveries must be guided by capacity. We currently forecast TSLA 2024 production at 1.78mm and deliveries at 1.69mm. As of 1Q24, Tesla’s stated installed capacity is 2.35mm units. Tesla has indicated that the move to utilize the same manufacturing lines as their current vehicle lineup would enable them to fully utilize their expected maximum capacity of close to 3mm units. We believe this means utilizing more of the space at their Austin and Berlin facilities. We note Tesla recently received approval to expand capacity in Berlin to increase manufacturing capacity to ~1mm units. Europe imported ~170k TSLA vehicles from China last year, but in light of potential tariffs on EVs made in China, this could make manufacturing more vehicles in Europe more attractive. TSLA produced ~200k vehicles in Germany last year according to S&amp;P Mobility. We believe Tesla may eventually explore expanded capacity at Shanghai, but for now, we believe that facility is operating at max capacity.</p><p>Tesla indicated that they will utilize that ~3mm of capacity before investing in new manufacturing lines. We would assume this means new manufacturing facilities as well. Consensus is currently looking for ~3.1mm unit deliveries in 2027, which likely means production has to be higher than that. Further, operating at 100% utilization is very difficult. So, we see risk to current unit expectations over the coming years.</p><h2 id=\"id_2569836359\">New models important as current demand stagnates</h2><p>The reason why the new model is so critical to TSLA growth is that demand looks more challenging in Tesla’s major regions of the US, China and Europe.</p><h3 id=\"id_2364838120\">US - Is Tesla demand saturated?</h3><p>In the US, YTD BEV penetration is 7.7%, up from 7.6% in 2023. TSLA&#39;s current share of the BEV market in the US is ~51%, which has come down from ~56% in 2023.</p><p>In the US, even recent levels of demand for TSLA vehicles seems to be driven by pricing actions. This is not just price cuts but now also financing actions. In May, TSLA lowered the APR for the Model Y to 0.99% (from a market rate of closer to 6.39%) and lowered the monthly lease payment for the Model 3 to $299 from $329.</p><h3 id=\"id_2405590704\">Europe - demand lower y/y</h3><p>In Europe, BEV penetration YTD is 12.1% (fairly flat y/y), and TSLA has ~17% share, which is down from ~19% last year while penetration has remained relatively flat. This is driven primarily by falling demand in Germany, France and Norway. We believe BEV penetration has stalled, in part because there is no regulatory need for OEMs to push higher BEV mix this year. That should change next year, which could mean we see BEV penetration in Europe increase, but TSLA share decrease further.</p><h3 id=\"id_678076539\">China - A very competitive market</h3><p>In China, YTD NEV retail penetration is ~40%, TSLA&#39;s share of the NEV market being ~7%, with TSLA losing 100bps of share vs 2023. China remains a very competitive market with a multitude of new entrants and new models being brought to production a lot faster than in other parts of the world.</p><h2 id=\"id_3022804001\">Can the Model 2.5 deliver on margin expectations?</h2><p>This remains a key and open question, but the math seems difficult. For instance, if we assume that a Model Y sells for ~$45k and has 20% gross margins, then the COGS/unit is ~$36k. The Model 2 was expected to start at a $25k price point but was also supposed to use an unboxed manufacturing concept that was expected to reduce COGS by ~50% vs. Model 3/Y or call it ~$20k of COGS for the original Model 2 plan. If we assume the plan was for the Model 2 to have had similar gross margins to the Model Y, Model 2 COGS would need to be ~$20k. Part of this reduction is from a smaller battery, reduced content (i.e. no glass roof) as well as better integration and controller reduction, etc. However, we believe roughly 1/3rd was due to the new unboxed manufacturing process. This means Tesla would need to find an additional $5k in cost to get the targeted gross margins of the original Model 2 plan. If we assume Tesla were able to get half of the savings from the originally planned unboxed manufacturing benefit, then, that would imply a gross margin of 10%. Of course, pricing could be higher (and effective pricing will likely be higher from differing trims). However, the higher the price of the Model 2.5 goes and the closer it gets to Model 3/Y pricing, the differentiation and cannibalization problem gets larger.</p><h3 id=\"id_130370043\">Risk to the current share price is currently at 1:1.8 to the downside</h3><p><strong>UPSIDE ($338):</strong> Our upside case uses a 79x PE on our 3Q25-2Q26 EPS estimate of $4.29. This is supported by our SOTP analysis that attributes $106 to Auto, $30 to Energy, $13 to FSD, $29 to Robo-taxi and $160 as a Tesla premium for all other initiatives. This implies a value per share of $338.</p><p><strong>BASE ($197):</strong> Our valuation uses 55x PE on our 3Q25-2Q26 EPS estimate of $3.57. This is supported by our SOTP analysis that attributes $57 to Auto, $18 to Energy, $9 to FSD, $9 to Robo-taxi and a $105 TSLA premium for other initiatives in line with market implied average over past 2-years. This gets us to our $197 PT.</p><p><strong>DOWNSIDE ($67):</strong> Our downside case uses 23x PE on our 3Q25-2Q26 EPS estimate of $2.86. This is supported by our SOTP analysis that attributes $48 to Auto, $14 to Energy, $5 to FSD. In our downside we do not attribute value to Robo-taxi or include a TSLA premium in our valuation, which is closer to the minimum we&#39;ve seen vs identifiable value. This implies a value per share of $67.</p></body></html>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>UBS Cuts Tesla to Sell on Concern Over AI-Driven Share Rally; Raises Target Price to $197 From $147</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUBS Cuts Tesla to Sell on Concern Over AI-Driven Share Rally; Raises Target Price to $197 From $147\n</h2>\n\n<h4 class=\"meta\">\n\n\n<a class=\"head\" href=\"https://laohu8.com/wemedia/1079075236\">\n\n\n<div class=\"h-thumb\" style=\"background-image:url(https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba);background-size:cover;\"></div>\n\n<div class=\"h-content\">\n<p class=\"h-name\">Tiger Newspress </p>\n<p class=\"h-time\">2024-07-12 16:13</p>\n</div>\n\n</a>\n\n\n</h4>\n\n</header>\n<article>\n<html><head></head><body><ul style=\"\"><li><p>Tesla Inc.’s stock is downgraded by UBS Group, on concerns that the US electric carmaker’s shares have risen “too much, too soon” on optimism over its artificial intelligence plans. </p></li></ul><p><strong>Increasingly difficult to justify valuation</strong></p><p>UBS downgrades TSLA from Neutral to Sell. TSLA is more than just an auto company, and there are some positive developments (e.g. Energy, FSD) that add additional support. This is increasingly important as expectations for the core Auto business deteriorate. TSLA has always had a premium attached to it for other, future, growth initiatives. Properly valuing that optionality is difficult. This premium has widened of late, we believe, on AI enthusiasm. After going through the different businesses we can more substantially value, at current levels, we are still left with a &gt;$500bn “stub” for that future growth. Even if we give that “stub” a 5-year time horizon, that implies a 5-year future value of $1T. And this is just to justify current levels; one would need to see an even larger opportunity to justify a Buy rating. While TSLA is investing heavily in AI and the tech is making progress, investment is costly, pace of improvement may slow and the payoff is long dated. If market enthusiasm for AI diminishes, this may impact TSLA&#39;s multiple. Given the lack of visibility and the risk that growth opportunities materialize on a longer time horizon (or not at all), with the stock at 86x NTM P/E, downgrade to Sell.</p><p><strong>When ex-auto contribution to price nears the highs, good opportunity to sell</strong></p><p>Our valuation attribution analysis shows that the market has (fairly consistently) valued TSLA’s core auto business between $60-$90/share. The “other attribution” has been volatile but past 2 year average is ~$140/share. With the recent rally, it’s now nearly ~$175/share. Fig. 3 shows when other becomes larger contributor to price, stock starts to trend down. O ur SOTP view values auto at ~$57, Energy, which has shown recent strong growth (and higher margin) is worth ~$18. We estimate FSD/robo-taxi could be ~$18 (see UBS Evidence Lab FSD survey inside), but that&#39;s only ~$93 of the more easily identifiable value, implying a premium/future option value that is ~61% of today’s price.</p><p><strong>Where could we be wrong?</strong> 1) TSLA price disconnecting from fundamentals has occurred in the past and can persist for a while. 2) 2Q24 results may be above expectations, causing positive revisions to 25/26F helping to sustain momentum. 3) Investor tepidness to be negative into “robo-taxi” day, and/or there is a true upside surprise at the event. In our view, we believe TSLA is making good technological progress, but the challenge is hard and may face operational challenges (regulatory, etc.). More meaningful than robo-taxi is showing the new vehicle, as that could change 25/26F numbers. But consensus already considers higher units, and we believe the vehicle could pressure auto margins.</p><p><strong>Valuation: PT to $ 197 from $147 based on 55x P/E (45x prior)</strong></p><p>55x is at the high end of the past 2-year range and is supported by our SOTP analysis.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/45954af4dbf44b11676fefa1e474d3bb\" title=\"\" tg-width=\"772\" tg-height=\"226\"/></p><h3 id=\"id_1093952194\">Pivotal Questions</h3><p><strong>Q: Can TSLA get to &gt;5mm v ehicle deliveries by 2030?</strong></p><p>No. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for the current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving &gt;3mm units for delivery when max capacity may be ~3mm could be challenging.</p><p><strong>Q: Can Energy grow at a ~30% CAGR through 2030?</strong></p><p>Potentially. TSLA Energy has grown impressively of late, and importantly, this is currently a high margin business for the company. However, we caution that energy storage deployments can be lumpy. Looking ahead, the opportunity for stationary storage is large, so a ~30% CAGR through 2030 to get to ~$42bn in 2030 revenue is possible. However, more capacity investment would be needed, the timing of which isn&#39;t clear, and the law of large numbers may come into play as we move through the decade. We model a ~22% CAGR through 2030E.</p><p><strong>UBS VIEW</strong></p><p>We are Sell rated on TSLA. TSLA is more than just an auto company, and there are some positive developments in other areas such as Energy and FSD. Further, TSLA has always traded with a premium attached to it for other, future growth initiatives. Properly valuing that optionality is difficult. However, at current levels, we believe that unidentifiable premium is too significant. Given the lack of visibility and the risk that these growth opportunities materialize on a longer time horizon (or don’t materialize at all), we rate the stock Sell.</p><p><strong>EVIDENCE</strong></p><p>We created a proprietary valuation attribution analysis to better understand TSLA valuation. We took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla&#39;s perception in China. We also utilized a UBS Evidence Lab survey to help us better understand the FSD opportunity.</p><p><strong>WHAT´S PRICED IN?</strong></p><p>Tesla has many factors driving its price action, but at current levels and all else equal, we believe 2030 auto units deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/07f529112d054be2170f604f3a3e20e7\" title=\"\" tg-width=\"595\" tg-height=\"312\"/></p><p><strong>Company Description</strong></p><p>Tesla, Inc. manufactures and sells fully electric vehicles and energy generation and storage systems, and related services. The company&#39;s mission is to accelerate the world’s transition to sustainable energy. T he company is also working on automated driving technology and Optimus, a robotic humanoid.</p><h2 id=\"id_3819601884\">More than an auto company, but how much more?</h2><p>TSLA is often labeled “not an auto company” or “more than an auto company”. We are more inclined to agree with the latter considering the vast majority of today’s revenue/profits are related to the manufacturing and selling of vehicles. This makes valuing TSLA stock challenging at times. We are not here to say that TSLA should be valued as an auto company as there are other initiatives. Some of these initiatives may have payoffs way out in the future. TSLA stock price been sensitive to future businesses, opportunities and TAMs (i.e. the potential of what TSLA could become). Some premium for this potential is fair, but we do believe investors should be cognizant of how much the auto business and other more readily valuable businesses contributes to the stock price to help ground the valuation and select entry and exit points.</p><h2 id=\"id_3099312274\">UBS&#39; TSLA valuation attribution analysis</h2><p>Below, we took a look at the historical contribution of TSLA’s automotive business to TSLA’s total market value. We specifically focus on auto only for this analysis as for a large period of time, this has been, and remains, the company&#39;s primary driver. A uto also has the richest data for historical consensus expectations. For this analysis, we took consensus 2030 auto delivery expectations (at that time) and consistently applied a $40k ASP, a normalized Auto EBIT margin of 15% and 20x forward P/E multiple. Yes, some will quibble with our assumptions, particularly the multiple considering legacy OEMs trade at single-digit P/Es and Toyota, as a best in class OEM, historically may trade closer to~10x. However, we’d a) argue that TSLA&#39;s auto business still has more growth potential ahead vs. a more mature Toyota and b) we believe we are being somewhat generous to auto for this analysis. We then discount that nominal auto value at the cost of equity (at that time) to that period. We then compare the implied auto contribution to the total market capitalization of TSLA at that time.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/5c1da45256b06a41729fadf0b64bf3d9\" title=\"\" tg-width=\"634\" tg-height=\"403\"/></p><p>A few things from this analysis surprised us:</p><ul style=\"\"><li><p>The market value attributable to auto was more consistent than we expected. It has generally been between $200-$300bn since 2021 or ~$60-$90 in per share terms. This surprised us because consensus 2030 deliveries used to be &gt;7mm and now stand &gt;30% lower at ~4.8mm units. Mitigating the impact of this negative revision is the discounting (i.e. we are now closer to 2030). Bears may argue even current 2030 expectations are too high, which may be warranted (UBS is at ~3.9mm). However, we felt using consensus expectations to figure out market expectations was more appropriate.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/824940f43a694f9bbfbd3094c34acda4\" title=\"\" tg-width=\"634\" tg-height=\"406\"/></p><ul style=\"\"><li><p>How much of TSLA&#39;s valuation is attributable to “other” initiatives? Over the past 4 years, on average only ~30% of TSLA’s stock price is attributable to core auto, again using our assumptions from above (less if one were to assume a lower margin or multiple). Over the past two years, this has been closer to ~36%. At TSLA’s current price, only 28% of TSLA’s current value is attributable to core auto, an 8pp swing since the end of June and at the lows over the past 2 years.</p></li></ul><p>While valuation disconnections from more tangible fundamentals have occurred in TSLA’s history, and it can persist for extended periods of times, we believe that when these hopes get elevated, it is not a good time to initiate or add to positions. Rather, it’s a time to sell. Over the past two years, when the percent of the stock price that our analysis shows is attributable to auto dips below the 30% average, the stock has entered downward trend channels (see 6/22 and 6/23).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/91e873407ad615e28f97130ffdfe1f69\" title=\"\" tg-width=\"654\" tg-height=\"466\"/></p><h2 id=\"id_3206630880\">What about TSLA’s other endeavors?</h2><p>With our attribution analysis showing less than 30% of the current stock price is attributable to core auto, we asked ourselves, did something change? While the recent 2Q24 auto deliveries of ~444k was better than expectations, it was still down -5% y/y and was likely supported by some promotional activity. Further, in our view, quarterly deliveries coming in 20-25k (~5%) better doesn’t warrant a 15% rally since the delivery print (and a ~22% rally over the past 10 days). So, is there reason to be more optimistic on some of TSLA’s other initiatives?</p><h3 id=\"id_2406147011\">Tesla Energy</h3><p>One area that the market may have gotten more excited about, that also came out with the deliveries release, is Tesla Energy, which reported 9.4 GWh of energy storage product deployment in the quarter (+157% y/y and +132% q/q). At their annual meeting, Elon Musk also indicated the company was tracking towards 200-300% y/y growth in energy storage. This is important since Energy is currently higher gross margin than Auto (Energy was 24.6% in 1Q24), so this could help stem negative revisions from the pricing/promotion actions taken to stimulate auto demand. While we are more positive on Energy and raise our Energy sales forecasts, we caution that Energy sales tend to be lumpy.</p><p>Tesla currently has their Megafactory in Lathrop, California, which has an annual capacity to build 10,000 Megapacks or ~40 GWh of storage. During 1Q24 earnings, TSLA announced that they had commissioned their second general assembly line as they look to ramp Lathrop to full capacity. TSLA is also opening their Megafactory in Shanghai which will add an additional 40 GWh of energy storage capacity. We expect this facility to be operational in 1H25. We now forecast TSLA will deploy ~27 GWh of storage this year, and ramp to ~37 GWh next year.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/2235a9dce09f3858e83800a2c8b54fef\" title=\"\" tg-width=\"778\" tg-height=\"712\"/></p><h3 id=\"id_1152913170\">AI</h3><p>Tesla is investing heavily in AI. Earlier this year, Musk announced that TSLA had installed and commissioned 35k Nvidia H100 GPUs and are aiming for 85k GPUs by the end of the year. Musk has also talked about spending ~$10bn on combined training and inference AI this year, the latter being primarily in the car. Tesla is also is developing their own silicon for their Dojo supercomputer, though in January 2024, Musk stated Dojo was “a long shot worth taking because the payoff is potentially very high. But it&#39;s not something that is a high probability.&#34;</p><p>The fruits of AI investment at Tesla would be related to Full Self Driving (FSD), which is their current advanced driving assistant, their robo-taxi initiative (planned robo-taxi day, now reportedly postponed to October), and Optimus, their humanoid robot initiative.</p><p>We believe TSLA stock price has gotten caught up in the AI trade/phenomenon. While we don’t doubt Tesla is making very good progress on such initiatives, aside from FSD (we were impressed by recent improvement), the other initiatives are purely R&amp;D. Large TAMs for sure, and we have more confidence in Tesla being able to manifest the power of AI in the physical world than we do for other companies. But, these are complex issues, that will take a long time to play out and success is not a certainty. As AI enthusiasm fades, we believe this can impact TSLA&#39;s multiple.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c5d81786f308252683379c4c0c26fe48\" title=\"\" tg-width=\"450\" tg-height=\"310\"/></p><h3 id=\"id_3277089746\">Full Self Driving (FSD)</h3><p>Of large debate is Tesla’s ability to charge, on a monthly recurring basis, for their advanced driver assistance system: FSD (supervised). Earlier this year, Tesla started rolling out the new version of FSD based on an end-to-end AI learning system. Tesla offered a 1-month free trial to all US Tesla vehicles with the proper hardware. They then lowered the monthly subscription cost to $99/month from $199/month.</p><p>We conducted a survey on 306 Tesla owners, ran over June 10-28th, to gauge customer reception and perception to FSD. Key points:</p><ul style=\"\"><li><p>A caveat, we believe our survey skews high to consumers that currently have (pay for) FSD vs. the reality of the marketplace. T his in part may be driven by ~53% of our respondents indicated that a Model S/X was their primary Tesla vs. S/X making up only ~6% of Tesla&#39;s 2023 US sales. S till, we are able to gather some insights from looking only at 3/Y owners and, in particular, respondents who don&#39;t currently own/subscribe to FSD to see what future &#34;take rates&#34; might be (though admittedly this is a smaller sample size).</p></li><li><p>Overall, we would say consumers are satisfied with FSD functionality (62% very satisfied) and feel safe using it (64% completely safe).</p></li><li><p>Of those that are not currently paying for FSD (so either free trial is over or still on free trial) 17% indicated they were likely to pay for FSD over the next 6 months, while 33% said somewhat likely.</p></li><li><p>However, our respondents did over-index to Model S/X vs. 3/Y when in reality, 3/Y is a significantly larger pool (and given the price point of the vehicle, points to a different willingness to pay, in our view). <strong>So, when we look only at respondents who said their main vehicle was a 3 or Y, very likely to pay for FSD over next 6 months dropped to 9% and Net Likely vs. Unlikely is only +3% (Figure 15).</strong></p></li><li><p>At the current $99/month level, 43% of Tesla customers surveyed (that indicated they are likely to continue to pay or will be likely to pay for FSD) indicated they would be willing to pay around this price ($76-$100/month). This dropped to 35% when only looking at Model 3/Y users. To us, this suggests that significantly higher adoption levels may need further price reductions.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b5d55bb0563a4f66a132b16a8deab211\" title=\"\" tg-width=\"793\" tg-height=\"601\"/></p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/af47480c103d4f6e2b0af57737985d8d\" title=\"\" tg-width=\"799\" tg-height=\"274\"/></p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/325c4b93ce1fca3b093525dc33bb296b\" title=\"\" tg-width=\"804\" tg-height=\"639\"/></p><p>The willingness (and ability) to pay for FSD matters to us as we think about future, low cost Tesla models. These new lower cost models will have a less expensive monthly vehicle payment. But, that also means that adding an additional $99/month to that payment for FSD will be a significant increase.</p><p>In China, while Tesla is making a push to be able to make FSD available, we have doubts over Tesla&#39;s ability to charge for FSD given many competitors already offer an autonomous solution without charging a monthly fee (or some even an upfront fee). Rather, we view FSD in China as almost a necessity to remain competitive with domestic Chinese offerings that have similar functionality.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b17104146f0628867d84b93db9210fa2\" title=\"\" tg-width=\"783\" tg-height=\"163\"/></p><h3 id=\"id_1267251312\">Robo-taxi</h3><p>We believe robo-taxis are a difficult technological endeavor and the business model also may face regulatory hurdles as well as questions around consumer adoption. Thus, we believe a meaningful r obo-taxi operation in the US is further out (not this decade). Tesla reportedly/recently pushed the planned 8/8 robo-taxi day to October. A subtle reminder that Tesla has had difficulty meeting timelines.</p><p>On the technology side, TSLA&#39;s move to an end-to-end (GenAI) approach has allowed for meaningful improvement in the FSD product. But the FSD product is a very good advanced driving assistant system (L2+). To move to a robo-taxi solution, the march of 9s must continue to be able to operate in all conditions within the operational design domain (ODD). We believe the end-to-end approach, on it&#39;s own, will eventually start to show slowing improvement and diminishing returns. Further, the cost for this improvement can be high. More, unique data is needed to continue the system improvement. TSLA does have access to a lot of data from their fleet, and they employ simulation. But, we believe that, similar to what is seen in GenAI with large language models (LLMs), progress can slow, and each additional improvement to the model can become increasingly more expensive to take (obtaining that new data to get the improvement and the compute to process it).</p><p>The other challenge with an end-to-end approach could be a regulatory one. There will inevitably be accidents and with an end-to-end approach without guard rails, it is difficult to understand why the system made a decision it did, thus difficult to correct for the problem (as rare as the specific event might be). We recently held an expert call on Gen AI for autonomous driving that highlighted the issue regulators may have with the lack of traceability and transparency that comes with an end-to-end approach that TSLA currently utilizes. Further, in certain geographies,TSLA still needs to test their robo-taxi with a driver before being permitted to test autonomously and then to offer driverless rides (see Waymo and Cruise).</p><h3 id=\"id_2212439252\">Optimus</h3><p>While we are excited about the progress Tesla is making on their humanoid robot, we believe this opportunity is much further out. At their annual shareholder meeting, Elon Musk helped frame the long-term opportunity. H e mentioned there could be, one day, 10bn humanoid robots, so if TSLA gets 10% share, that is 100mm Optimus units a year, and if sold for $20k, suggests a $2T revenue opportunity, $1T profit opportunity and a $20T market value opportunity (20x). However, we have difficulty underwriting significant (or specific) value to this opportunity today given the many uncertain variables, the probability of success and the unknown time frame.</p><h2 id=\"id_1024744650\">Sum-of-the-parts</h2><p>Below we take a look at a sum-of-the-parts (SOTP) for TSLA to support our P/E based valuation. We also show an upside and downside scenario.</p><ul style=\"\"><li><p><strong>Auto.</strong> We forecast 2030 units at 3.9mm units and ~$146bn in auto revenue. Applying a 15% “normalized” EBIT margin, applying a 20x P/E multiple and discounting that back to a year from now (mid-2025E) at ~13% cost of equity gives us $57/share value. 20x is above traditional OEMs in the mid-single-digits P/E and Toyota at ~10x but warranted given Tesla would still have more room for growth and the &#34;normalized&#34; Auto EBIT margins for TSLA (especially relative to legacy OEMs) could be higher.</p></li><li><p><strong>Energy.</strong> We forecast 113 GWh storage deployment and ~$28bn in Energy revenue (22% 2024-2030E CAGR). Applying a 20% “normalized” EBIT margin, applying a near-market multiple of 25x P/E multiple and discounting that back to a year from now (mid-2025E) gives us $18/share value.</p></li><li><p><strong>FSD.</strong> We forecast ~$1.5bn in 2030 revenue, which equates to ~$0.33 in EPS, and apply a software like 50x multiple, which discounted back to a year from now (mid-2025E) gives us a $9/share value.</p></li></ul><ul style=\"\"><li><p><strong>Robo-taxi.</strong> According to CNBC, Waymo, which actually gives driverless rides/operates a robo-taxi service today, latest valuation (2020) was $30bn. GM’s Cruise similarly once had a $30bn valuation, though we believe a current mark could be lower. In our base case, we apply the latest Waymo valuation of $30bn or $9/share. Our upside case more than triples the Waymo valuation to ~$100bn (we&#39;d also note that Uber has a ~$144bn market value). Our downside case assumes no value. We note that Baidu has recently been in the news as their Apollo Go robotaxi autonomous ride-hailing platform has been gaining attention and is piloting in areas such as Wuhan. However, we note that the entire Baidu market cap is ~$35bn. T he stock has rallied of late (~14%) on some of this robotaxi optimism, but that rally only contributed ~$4bn to the market cap.</p></li><li><p><strong>The TSLA Premium (AI, Optimus, other initiatives).</strong> These are difficult to value given they are, at best, R&amp;D today. Here, we are relying on the &#34;collective wisdom of markets&#34;. Going back to our earlier TSLA valuation attribution analysis, on average over the past 2-years, the market has assigned ~$490bn of value (~$141/share) to ex-auto initiatives. Between Energy, FSD and robo-taxi, we only identified $36/share of that, leaving the TSLA premium at $105/share. Note, that assuming the 13% cost of equity, the 5-year future value of that premium is $672bn and the 10-year future value is $1.2T. Given that many of these initiatives are likely to take time to materialize, we believe this seems more than fair. In our upside case, we use the more recent (high) level from our valuation attribution analysis while our downside case assumes no premium, which is closer to the minimum we&#39;ve seen vs identifiable valuations.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3618826a24dbabcfdf1557a12da5e9f1\" title=\"\" tg-width=\"574\" tg-height=\"708\"/></p><h2 id=\"id_3243539219\">VALUATION</h2><p>We value TSLA shares using a 55x P/E multiple and apply that to our current 3Q25-2Q26 TSLA EPS forecast. This yields our new $197 price target. 55x (45x prior) is at the high-end of the NTM P/E valuation range over the past 2-years but is supported by our SOTP work above.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/6a53beb83537bb6c04d35aab5ff5521b\" title=\"\" tg-width=\"421\" tg-height=\"270\"/></p><h2 id=\"id_3010455971\">Pivotal Questions</h2><h3 id=\"id_1253584077\">Q: Can TSLA get to &gt;5mm vehicle deliveries by 2030?</h3><p><strong>UBS VIEW</strong></p><p>No. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving &gt;3mm units for delivery when max capacity may be ~3mm could be challenging.</p><p><strong>EVIDENCE</strong></p><p>We took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla&#39;s perception in China.</p><p><strong>WHAT´S PRICED IN?</strong></p><p>At current levels, all else equal, we believe 2030 deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.</p><h2 id=\"id_2646094200\">How impactful will the &#39;Model 2.5&#39; be?</h2><p>Tesla’s eventful robo-taxi day may get most of the fanfare, focusing on AI and a robo-taxi service. However, in our view, a robo-taxi and other AI initiatives are still much further out. That is why we are focused on the “new” vehicle that Tesla plans to introduce, which we dub the &#39;Model 2.5&#39;. To us, this new vehicle could be the only data point to come out of the event (now expected in Oct) that can materially get investors to revise 2025/26 estimates.</p><p>Recall, Tesla scrapped the Model 2, which was expected to use a brand new unboxed manufacturing process to significantly lower the cost to produce the vehicle and offer a “$25k EV”. In their 1Q24 earnings release, Tesla indicated they plan to launch new vehicles, including more affordable models that utilize aspects of that next generation platform as well as aspects of their existing platform and will be able to be produced on the same manufacturing lines as Tesla’s current vehicle line-up.</p><p>We expect the Model 2.5 to look meaningfully different from the Model 3/Y silhouette as to differentiate the vehicle from potential Model 3/Y buyers. We also expect the starting price to be materially lower, potentially down to $25k (though we’d expect few variants to actually transact at that price).</p><p>What is the opportunity for the Model 2.5? In the US, the small standard car category (featuring the likes of the Toyota Corolla and Honda Civic) has accounted for ~7% of total sales over the past 5 years, or ~1mm units, on average. The Toyota Corolla is the current segment leader at ~23% share.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/756bc5e5ecd7afbf233418072962ec34\" title=\"\" tg-width=\"784\" tg-height=\"369\"/></p><p>When we look at the Model 3/Y and their segments, small premium II car and small premium II SUV, respectively, these Tesla models have been able to garner 40-50% share of those segments over time. If Tesla were able to garner similar share in the small standard car category, that would yield a ~450k annual sales opportunity for the Model 2.5 in the US. However, appealing to a lower tier consumer may yield additional challenges for that consumer to go electric. For instance, access to at home charging may be more limited for lower income buyers.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4adab9bc7ccdb9925ee45a4524dd4f28\" title=\"\" tg-width=\"787\" tg-height=\"316\"/></p><p>In Europe and China, smaller entry vehicles may appeal to those consumers relative to the US. I n 2023, European sales of small entry level cars was ~1.1mm or ~6% of sales. However, Eastern &amp; Central Europe made up about ~600k of that figure. W e believe these regions are likely to lag Western Europe on electrification. The Model 2.5 is also likely to face more competition in Europe as legacy OEMs look to electrify their small, affordable vehicle offerings. Further, smaller EVs from China are likely to enter the European market.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3e4fddc5de56a38ee01de16ee69e36d5\" title=\"\" tg-width=\"792\" tg-height=\"310\"/></p><p>In 2023, the Chinese affordable entry car market was ~1.7mm units, or ~6% of sales. However, t he Model 2.5 is likely to face intense competition as well, as even today, competitors for a low cost BEVs in China exist.</p><p>To further show the competitive challenge Tesla has in China, we looked to UBS Evidence Lab and China 360, who recently published a brand perception survey which surveyed 1,800 Chinese customers. In regards to Autos, the survey highlighted that the top 5 factors of importance for Chinese customers are safety, trustworthiness, high quality, value for money and versatility. T he survey highlighted that Chinese customers view Tesla&#39;s brand image as one more of p remiumness, trendiness and innovation. On the top 5 factors, Tesla only screened well on high quality.</p><h2 id=\"id_2997648751\">Guided by capacity</h2><p>While the market opportunity may be there globally, we must always keep in mind that production and deliveries must be guided by capacity. We currently forecast TSLA 2024 production at 1.78mm and deliveries at 1.69mm. As of 1Q24, Tesla’s stated installed capacity is 2.35mm units. Tesla has indicated that the move to utilize the same manufacturing lines as their current vehicle lineup would enable them to fully utilize their expected maximum capacity of close to 3mm units. We believe this means utilizing more of the space at their Austin and Berlin facilities. We note Tesla recently received approval to expand capacity in Berlin to increase manufacturing capacity to ~1mm units. Europe imported ~170k TSLA vehicles from China last year, but in light of potential tariffs on EVs made in China, this could make manufacturing more vehicles in Europe more attractive. TSLA produced ~200k vehicles in Germany last year according to S&amp;P Mobility. We believe Tesla may eventually explore expanded capacity at Shanghai, but for now, we believe that facility is operating at max capacity.</p><p>Tesla indicated that they will utilize that ~3mm of capacity before investing in new manufacturing lines. We would assume this means new manufacturing facilities as well. Consensus is currently looking for ~3.1mm unit deliveries in 2027, which likely means production has to be higher than that. Further, operating at 100% utilization is very difficult. So, we see risk to current unit expectations over the coming years.</p><h2 id=\"id_2569836359\">New models important as current demand stagnates</h2><p>The reason why the new model is so critical to TSLA growth is that demand looks more challenging in Tesla’s major regions of the US, China and Europe.</p><h3 id=\"id_2364838120\">US - Is Tesla demand saturated?</h3><p>In the US, YTD BEV penetration is 7.7%, up from 7.6% in 2023. TSLA&#39;s current share of the BEV market in the US is ~51%, which has come down from ~56% in 2023.</p><p>In the US, even recent levels of demand for TSLA vehicles seems to be driven by pricing actions. This is not just price cuts but now also financing actions. In May, TSLA lowered the APR for the Model Y to 0.99% (from a market rate of closer to 6.39%) and lowered the monthly lease payment for the Model 3 to $299 from $329.</p><h3 id=\"id_2405590704\">Europe - demand lower y/y</h3><p>In Europe, BEV penetration YTD is 12.1% (fairly flat y/y), and TSLA has ~17% share, which is down from ~19% last year while penetration has remained relatively flat. This is driven primarily by falling demand in Germany, France and Norway. We believe BEV penetration has stalled, in part because there is no regulatory need for OEMs to push higher BEV mix this year. That should change next year, which could mean we see BEV penetration in Europe increase, but TSLA share decrease further.</p><h3 id=\"id_678076539\">China - A very competitive market</h3><p>In China, YTD NEV retail penetration is ~40%, TSLA&#39;s share of the NEV market being ~7%, with TSLA losing 100bps of share vs 2023. China remains a very competitive market with a multitude of new entrants and new models being brought to production a lot faster than in other parts of the world.</p><h2 id=\"id_3022804001\">Can the Model 2.5 deliver on margin expectations?</h2><p>This remains a key and open question, but the math seems difficult. For instance, if we assume that a Model Y sells for ~$45k and has 20% gross margins, then the COGS/unit is ~$36k. The Model 2 was expected to start at a $25k price point but was also supposed to use an unboxed manufacturing concept that was expected to reduce COGS by ~50% vs. Model 3/Y or call it ~$20k of COGS for the original Model 2 plan. If we assume the plan was for the Model 2 to have had similar gross margins to the Model Y, Model 2 COGS would need to be ~$20k. Part of this reduction is from a smaller battery, reduced content (i.e. no glass roof) as well as better integration and controller reduction, etc. However, we believe roughly 1/3rd was due to the new unboxed manufacturing process. This means Tesla would need to find an additional $5k in cost to get the targeted gross margins of the original Model 2 plan. If we assume Tesla were able to get half of the savings from the originally planned unboxed manufacturing benefit, then, that would imply a gross margin of 10%. Of course, pricing could be higher (and effective pricing will likely be higher from differing trims). However, the higher the price of the Model 2.5 goes and the closer it gets to Model 3/Y pricing, the differentiation and cannibalization problem gets larger.</p><h3 id=\"id_130370043\">Risk to the current share price is currently at 1:1.8 to the downside</h3><p><strong>UPSIDE ($338):</strong> Our upside case uses a 79x PE on our 3Q25-2Q26 EPS estimate of $4.29. This is supported by our SOTP analysis that attributes $106 to Auto, $30 to Energy, $13 to FSD, $29 to Robo-taxi and $160 as a Tesla premium for all other initiatives. This implies a value per share of $338.</p><p><strong>BASE ($197):</strong> Our valuation uses 55x PE on our 3Q25-2Q26 EPS estimate of $3.57. This is supported by our SOTP analysis that attributes $57 to Auto, $18 to Energy, $9 to FSD, $9 to Robo-taxi and a $105 TSLA premium for other initiatives in line with market implied average over past 2-years. This gets us to our $197 PT.</p><p><strong>DOWNSIDE ($67):</strong> Our downside case uses 23x PE on our 3Q25-2Q26 EPS estimate of $2.86. This is supported by our SOTP analysis that attributes $48 to Auto, $14 to Energy, $5 to FSD. In our downside we do not attribute value to Robo-taxi or include a TSLA premium in our valuation, which is closer to the minimum we&#39;ve seen vs identifiable value. This implies a value per share of $67.</p></body></html>\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"TSLA":"特斯拉"},"source_url":"","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1195381387","content_text":"Tesla Inc.’s stock is downgraded by UBS Group, on concerns that the US electric carmaker’s shares have risen “too much, too soon” on optimism over its artificial intelligence plans. Increasingly difficult to justify valuationUBS downgrades TSLA from Neutral to Sell. TSLA is more than just an auto company, and there are some positive developments (e.g. Energy, FSD) that add additional support. This is increasingly important as expectations for the core Auto business deteriorate. TSLA has always had a premium attached to it for other, future, growth initiatives. Properly valuing that optionality is difficult. This premium has widened of late, we believe, on AI enthusiasm. After going through the different businesses we can more substantially value, at current levels, we are still left with a >$500bn “stub” for that future growth. Even if we give that “stub” a 5-year time horizon, that implies a 5-year future value of $1T. And this is just to justify current levels; one would need to see an even larger opportunity to justify a Buy rating. While TSLA is investing heavily in AI and the tech is making progress, investment is costly, pace of improvement may slow and the payoff is long dated. If market enthusiasm for AI diminishes, this may impact TSLA's multiple. Given the lack of visibility and the risk that growth opportunities materialize on a longer time horizon (or not at all), with the stock at 86x NTM P/E, downgrade to Sell.When ex-auto contribution to price nears the highs, good opportunity to sellOur valuation attribution analysis shows that the market has (fairly consistently) valued TSLA’s core auto business between $60-$90/share. The “other attribution” has been volatile but past 2 year average is ~$140/share. With the recent rally, it’s now nearly ~$175/share. Fig. 3 shows when other becomes larger contributor to price, stock starts to trend down. O ur SOTP view values auto at ~$57, Energy, which has shown recent strong growth (and higher margin) is worth ~$18. We estimate FSD/robo-taxi could be ~$18 (see UBS Evidence Lab FSD survey inside), but that's only ~$93 of the more easily identifiable value, implying a premium/future option value that is ~61% of today’s price.Where could we be wrong? 1) TSLA price disconnecting from fundamentals has occurred in the past and can persist for a while. 2) 2Q24 results may be above expectations, causing positive revisions to 25/26F helping to sustain momentum. 3) Investor tepidness to be negative into “robo-taxi” day, and/or there is a true upside surprise at the event. In our view, we believe TSLA is making good technological progress, but the challenge is hard and may face operational challenges (regulatory, etc.). More meaningful than robo-taxi is showing the new vehicle, as that could change 25/26F numbers. But consensus already considers higher units, and we believe the vehicle could pressure auto margins.Valuation: PT to $ 197 from $147 based on 55x P/E (45x prior)55x is at the high end of the past 2-year range and is supported by our SOTP analysis.Pivotal QuestionsQ: Can TSLA get to >5mm v ehicle deliveries by 2030?No. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for the current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving >3mm units for delivery when max capacity may be ~3mm could be challenging.Q: Can Energy grow at a ~30% CAGR through 2030?Potentially. TSLA Energy has grown impressively of late, and importantly, this is currently a high margin business for the company. However, we caution that energy storage deployments can be lumpy. Looking ahead, the opportunity for stationary storage is large, so a ~30% CAGR through 2030 to get to ~$42bn in 2030 revenue is possible. However, more capacity investment would be needed, the timing of which isn't clear, and the law of large numbers may come into play as we move through the decade. We model a ~22% CAGR through 2030E.UBS VIEWWe are Sell rated on TSLA. TSLA is more than just an auto company, and there are some positive developments in other areas such as Energy and FSD. Further, TSLA has always traded with a premium attached to it for other, future growth initiatives. Properly valuing that optionality is difficult. However, at current levels, we believe that unidentifiable premium is too significant. Given the lack of visibility and the risk that these growth opportunities materialize on a longer time horizon (or don’t materialize at all), we rate the stock Sell.EVIDENCEWe created a proprietary valuation attribution analysis to better understand TSLA valuation. We took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla's perception in China. We also utilized a UBS Evidence Lab survey to help us better understand the FSD opportunity.WHAT´S PRICED IN?Tesla has many factors driving its price action, but at current levels and all else equal, we believe 2030 auto units deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.Company DescriptionTesla, Inc. manufactures and sells fully electric vehicles and energy generation and storage systems, and related services. The company's mission is to accelerate the world’s transition to sustainable energy. T he company is also working on automated driving technology and Optimus, a robotic humanoid.More than an auto company, but how much more?TSLA is often labeled “not an auto company” or “more than an auto company”. We are more inclined to agree with the latter considering the vast majority of today’s revenue/profits are related to the manufacturing and selling of vehicles. This makes valuing TSLA stock challenging at times. We are not here to say that TSLA should be valued as an auto company as there are other initiatives. Some of these initiatives may have payoffs way out in the future. TSLA stock price been sensitive to future businesses, opportunities and TAMs (i.e. the potential of what TSLA could become). Some premium for this potential is fair, but we do believe investors should be cognizant of how much the auto business and other more readily valuable businesses contributes to the stock price to help ground the valuation and select entry and exit points.UBS' TSLA valuation attribution analysisBelow, we took a look at the historical contribution of TSLA’s automotive business to TSLA’s total market value. We specifically focus on auto only for this analysis as for a large period of time, this has been, and remains, the company's primary driver. A uto also has the richest data for historical consensus expectations. For this analysis, we took consensus 2030 auto delivery expectations (at that time) and consistently applied a $40k ASP, a normalized Auto EBIT margin of 15% and 20x forward P/E multiple. Yes, some will quibble with our assumptions, particularly the multiple considering legacy OEMs trade at single-digit P/Es and Toyota, as a best in class OEM, historically may trade closer to~10x. However, we’d a) argue that TSLA's auto business still has more growth potential ahead vs. a more mature Toyota and b) we believe we are being somewhat generous to auto for this analysis. We then discount that nominal auto value at the cost of equity (at that time) to that period. We then compare the implied auto contribution to the total market capitalization of TSLA at that time.A few things from this analysis surprised us:The market value attributable to auto was more consistent than we expected. It has generally been between $200-$300bn since 2021 or ~$60-$90 in per share terms. This surprised us because consensus 2030 deliveries used to be >7mm and now stand >30% lower at ~4.8mm units. Mitigating the impact of this negative revision is the discounting (i.e. we are now closer to 2030). Bears may argue even current 2030 expectations are too high, which may be warranted (UBS is at ~3.9mm). However, we felt using consensus expectations to figure out market expectations was more appropriate.How much of TSLA's valuation is attributable to “other” initiatives? Over the past 4 years, on average only ~30% of TSLA’s stock price is attributable to core auto, again using our assumptions from above (less if one were to assume a lower margin or multiple). Over the past two years, this has been closer to ~36%. At TSLA’s current price, only 28% of TSLA’s current value is attributable to core auto, an 8pp swing since the end of June and at the lows over the past 2 years.While valuation disconnections from more tangible fundamentals have occurred in TSLA’s history, and it can persist for extended periods of times, we believe that when these hopes get elevated, it is not a good time to initiate or add to positions. Rather, it’s a time to sell. Over the past two years, when the percent of the stock price that our analysis shows is attributable to auto dips below the 30% average, the stock has entered downward trend channels (see 6/22 and 6/23).What about TSLA’s other endeavors?With our attribution analysis showing less than 30% of the current stock price is attributable to core auto, we asked ourselves, did something change? While the recent 2Q24 auto deliveries of ~444k was better than expectations, it was still down -5% y/y and was likely supported by some promotional activity. Further, in our view, quarterly deliveries coming in 20-25k (~5%) better doesn’t warrant a 15% rally since the delivery print (and a ~22% rally over the past 10 days). So, is there reason to be more optimistic on some of TSLA’s other initiatives?Tesla EnergyOne area that the market may have gotten more excited about, that also came out with the deliveries release, is Tesla Energy, which reported 9.4 GWh of energy storage product deployment in the quarter (+157% y/y and +132% q/q). At their annual meeting, Elon Musk also indicated the company was tracking towards 200-300% y/y growth in energy storage. This is important since Energy is currently higher gross margin than Auto (Energy was 24.6% in 1Q24), so this could help stem negative revisions from the pricing/promotion actions taken to stimulate auto demand. While we are more positive on Energy and raise our Energy sales forecasts, we caution that Energy sales tend to be lumpy.Tesla currently has their Megafactory in Lathrop, California, which has an annual capacity to build 10,000 Megapacks or ~40 GWh of storage. During 1Q24 earnings, TSLA announced that they had commissioned their second general assembly line as they look to ramp Lathrop to full capacity. TSLA is also opening their Megafactory in Shanghai which will add an additional 40 GWh of energy storage capacity. We expect this facility to be operational in 1H25. We now forecast TSLA will deploy ~27 GWh of storage this year, and ramp to ~37 GWh next year.AITesla is investing heavily in AI. Earlier this year, Musk announced that TSLA had installed and commissioned 35k Nvidia H100 GPUs and are aiming for 85k GPUs by the end of the year. Musk has also talked about spending ~$10bn on combined training and inference AI this year, the latter being primarily in the car. Tesla is also is developing their own silicon for their Dojo supercomputer, though in January 2024, Musk stated Dojo was “a long shot worth taking because the payoff is potentially very high. But it's not something that is a high probability.\"The fruits of AI investment at Tesla would be related to Full Self Driving (FSD), which is their current advanced driving assistant, their robo-taxi initiative (planned robo-taxi day, now reportedly postponed to October), and Optimus, their humanoid robot initiative.We believe TSLA stock price has gotten caught up in the AI trade/phenomenon. While we don’t doubt Tesla is making very good progress on such initiatives, aside from FSD (we were impressed by recent improvement), the other initiatives are purely R&D. Large TAMs for sure, and we have more confidence in Tesla being able to manifest the power of AI in the physical world than we do for other companies. But, these are complex issues, that will take a long time to play out and success is not a certainty. As AI enthusiasm fades, we believe this can impact TSLA's multiple.Full Self Driving (FSD)Of large debate is Tesla’s ability to charge, on a monthly recurring basis, for their advanced driver assistance system: FSD (supervised). Earlier this year, Tesla started rolling out the new version of FSD based on an end-to-end AI learning system. Tesla offered a 1-month free trial to all US Tesla vehicles with the proper hardware. They then lowered the monthly subscription cost to $99/month from $199/month.We conducted a survey on 306 Tesla owners, ran over June 10-28th, to gauge customer reception and perception to FSD. Key points:A caveat, we believe our survey skews high to consumers that currently have (pay for) FSD vs. the reality of the marketplace. T his in part may be driven by ~53% of our respondents indicated that a Model S/X was their primary Tesla vs. S/X making up only ~6% of Tesla's 2023 US sales. S till, we are able to gather some insights from looking only at 3/Y owners and, in particular, respondents who don't currently own/subscribe to FSD to see what future \"take rates\" might be (though admittedly this is a smaller sample size).Overall, we would say consumers are satisfied with FSD functionality (62% very satisfied) and feel safe using it (64% completely safe).Of those that are not currently paying for FSD (so either free trial is over or still on free trial) 17% indicated they were likely to pay for FSD over the next 6 months, while 33% said somewhat likely.However, our respondents did over-index to Model S/X vs. 3/Y when in reality, 3/Y is a significantly larger pool (and given the price point of the vehicle, points to a different willingness to pay, in our view). So, when we look only at respondents who said their main vehicle was a 3 or Y, very likely to pay for FSD over next 6 months dropped to 9% and Net Likely vs. Unlikely is only +3% (Figure 15).At the current $99/month level, 43% of Tesla customers surveyed (that indicated they are likely to continue to pay or will be likely to pay for FSD) indicated they would be willing to pay around this price ($76-$100/month). This dropped to 35% when only looking at Model 3/Y users. To us, this suggests that significantly higher adoption levels may need further price reductions.The willingness (and ability) to pay for FSD matters to us as we think about future, low cost Tesla models. These new lower cost models will have a less expensive monthly vehicle payment. But, that also means that adding an additional $99/month to that payment for FSD will be a significant increase.In China, while Tesla is making a push to be able to make FSD available, we have doubts over Tesla's ability to charge for FSD given many competitors already offer an autonomous solution without charging a monthly fee (or some even an upfront fee). Rather, we view FSD in China as almost a necessity to remain competitive with domestic Chinese offerings that have similar functionality.Robo-taxiWe believe robo-taxis are a difficult technological endeavor and the business model also may face regulatory hurdles as well as questions around consumer adoption. Thus, we believe a meaningful r obo-taxi operation in the US is further out (not this decade). Tesla reportedly/recently pushed the planned 8/8 robo-taxi day to October. A subtle reminder that Tesla has had difficulty meeting timelines.On the technology side, TSLA's move to an end-to-end (GenAI) approach has allowed for meaningful improvement in the FSD product. But the FSD product is a very good advanced driving assistant system (L2+). To move to a robo-taxi solution, the march of 9s must continue to be able to operate in all conditions within the operational design domain (ODD). We believe the end-to-end approach, on it's own, will eventually start to show slowing improvement and diminishing returns. Further, the cost for this improvement can be high. More, unique data is needed to continue the system improvement. TSLA does have access to a lot of data from their fleet, and they employ simulation. But, we believe that, similar to what is seen in GenAI with large language models (LLMs), progress can slow, and each additional improvement to the model can become increasingly more expensive to take (obtaining that new data to get the improvement and the compute to process it).The other challenge with an end-to-end approach could be a regulatory one. There will inevitably be accidents and with an end-to-end approach without guard rails, it is difficult to understand why the system made a decision it did, thus difficult to correct for the problem (as rare as the specific event might be). We recently held an expert call on Gen AI for autonomous driving that highlighted the issue regulators may have with the lack of traceability and transparency that comes with an end-to-end approach that TSLA currently utilizes. Further, in certain geographies,TSLA still needs to test their robo-taxi with a driver before being permitted to test autonomously and then to offer driverless rides (see Waymo and Cruise).OptimusWhile we are excited about the progress Tesla is making on their humanoid robot, we believe this opportunity is much further out. At their annual shareholder meeting, Elon Musk helped frame the long-term opportunity. H e mentioned there could be, one day, 10bn humanoid robots, so if TSLA gets 10% share, that is 100mm Optimus units a year, and if sold for $20k, suggests a $2T revenue opportunity, $1T profit opportunity and a $20T market value opportunity (20x). However, we have difficulty underwriting significant (or specific) value to this opportunity today given the many uncertain variables, the probability of success and the unknown time frame.Sum-of-the-partsBelow we take a look at a sum-of-the-parts (SOTP) for TSLA to support our P/E based valuation. We also show an upside and downside scenario.Auto. We forecast 2030 units at 3.9mm units and ~$146bn in auto revenue. Applying a 15% “normalized” EBIT margin, applying a 20x P/E multiple and discounting that back to a year from now (mid-2025E) at ~13% cost of equity gives us $57/share value. 20x is above traditional OEMs in the mid-single-digits P/E and Toyota at ~10x but warranted given Tesla would still have more room for growth and the \"normalized\" Auto EBIT margins for TSLA (especially relative to legacy OEMs) could be higher.Energy. We forecast 113 GWh storage deployment and ~$28bn in Energy revenue (22% 2024-2030E CAGR). Applying a 20% “normalized” EBIT margin, applying a near-market multiple of 25x P/E multiple and discounting that back to a year from now (mid-2025E) gives us $18/share value.FSD. We forecast ~$1.5bn in 2030 revenue, which equates to ~$0.33 in EPS, and apply a software like 50x multiple, which discounted back to a year from now (mid-2025E) gives us a $9/share value.Robo-taxi. According to CNBC, Waymo, which actually gives driverless rides/operates a robo-taxi service today, latest valuation (2020) was $30bn. GM’s Cruise similarly once had a $30bn valuation, though we believe a current mark could be lower. In our base case, we apply the latest Waymo valuation of $30bn or $9/share. Our upside case more than triples the Waymo valuation to ~$100bn (we'd also note that Uber has a ~$144bn market value). Our downside case assumes no value. We note that Baidu has recently been in the news as their Apollo Go robotaxi autonomous ride-hailing platform has been gaining attention and is piloting in areas such as Wuhan. However, we note that the entire Baidu market cap is ~$35bn. T he stock has rallied of late (~14%) on some of this robotaxi optimism, but that rally only contributed ~$4bn to the market cap.The TSLA Premium (AI, Optimus, other initiatives). These are difficult to value given they are, at best, R&D today. Here, we are relying on the \"collective wisdom of markets\". Going back to our earlier TSLA valuation attribution analysis, on average over the past 2-years, the market has assigned ~$490bn of value (~$141/share) to ex-auto initiatives. Between Energy, FSD and robo-taxi, we only identified $36/share of that, leaving the TSLA premium at $105/share. Note, that assuming the 13% cost of equity, the 5-year future value of that premium is $672bn and the 10-year future value is $1.2T. Given that many of these initiatives are likely to take time to materialize, we believe this seems more than fair. In our upside case, we use the more recent (high) level from our valuation attribution analysis while our downside case assumes no premium, which is closer to the minimum we've seen vs identifiable valuations.VALUATIONWe value TSLA shares using a 55x P/E multiple and apply that to our current 3Q25-2Q26 TSLA EPS forecast. This yields our new $197 price target. 55x (45x prior) is at the high-end of the NTM P/E valuation range over the past 2-years but is supported by our SOTP work above.Pivotal QuestionsQ: Can TSLA get to >5mm vehicle deliveries by 2030?UBS VIEWNo. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving >3mm units for delivery when max capacity may be ~3mm could be challenging.EVIDENCEWe took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla's perception in China.WHAT´S PRICED IN?At current levels, all else equal, we believe 2030 deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.How impactful will the 'Model 2.5' be?Tesla’s eventful robo-taxi day may get most of the fanfare, focusing on AI and a robo-taxi service. However, in our view, a robo-taxi and other AI initiatives are still much further out. That is why we are focused on the “new” vehicle that Tesla plans to introduce, which we dub the 'Model 2.5'. To us, this new vehicle could be the only data point to come out of the event (now expected in Oct) that can materially get investors to revise 2025/26 estimates.Recall, Tesla scrapped the Model 2, which was expected to use a brand new unboxed manufacturing process to significantly lower the cost to produce the vehicle and offer a “$25k EV”. In their 1Q24 earnings release, Tesla indicated they plan to launch new vehicles, including more affordable models that utilize aspects of that next generation platform as well as aspects of their existing platform and will be able to be produced on the same manufacturing lines as Tesla’s current vehicle line-up.We expect the Model 2.5 to look meaningfully different from the Model 3/Y silhouette as to differentiate the vehicle from potential Model 3/Y buyers. We also expect the starting price to be materially lower, potentially down to $25k (though we’d expect few variants to actually transact at that price).What is the opportunity for the Model 2.5? In the US, the small standard car category (featuring the likes of the Toyota Corolla and Honda Civic) has accounted for ~7% of total sales over the past 5 years, or ~1mm units, on average. The Toyota Corolla is the current segment leader at ~23% share.When we look at the Model 3/Y and their segments, small premium II car and small premium II SUV, respectively, these Tesla models have been able to garner 40-50% share of those segments over time. If Tesla were able to garner similar share in the small standard car category, that would yield a ~450k annual sales opportunity for the Model 2.5 in the US. However, appealing to a lower tier consumer may yield additional challenges for that consumer to go electric. For instance, access to at home charging may be more limited for lower income buyers.In Europe and China, smaller entry vehicles may appeal to those consumers relative to the US. I n 2023, European sales of small entry level cars was ~1.1mm or ~6% of sales. However, Eastern & Central Europe made up about ~600k of that figure. W e believe these regions are likely to lag Western Europe on electrification. The Model 2.5 is also likely to face more competition in Europe as legacy OEMs look to electrify their small, affordable vehicle offerings. Further, smaller EVs from China are likely to enter the European market.In 2023, the Chinese affordable entry car market was ~1.7mm units, or ~6% of sales. However, t he Model 2.5 is likely to face intense competition as well, as even today, competitors for a low cost BEVs in China exist.To further show the competitive challenge Tesla has in China, we looked to UBS Evidence Lab and China 360, who recently published a brand perception survey which surveyed 1,800 Chinese customers. In regards to Autos, the survey highlighted that the top 5 factors of importance for Chinese customers are safety, trustworthiness, high quality, value for money and versatility. T he survey highlighted that Chinese customers view Tesla's brand image as one more of p remiumness, trendiness and innovation. On the top 5 factors, Tesla only screened well on high quality.Guided by capacityWhile the market opportunity may be there globally, we must always keep in mind that production and deliveries must be guided by capacity. We currently forecast TSLA 2024 production at 1.78mm and deliveries at 1.69mm. As of 1Q24, Tesla’s stated installed capacity is 2.35mm units. Tesla has indicated that the move to utilize the same manufacturing lines as their current vehicle lineup would enable them to fully utilize their expected maximum capacity of close to 3mm units. We believe this means utilizing more of the space at their Austin and Berlin facilities. We note Tesla recently received approval to expand capacity in Berlin to increase manufacturing capacity to ~1mm units. Europe imported ~170k TSLA vehicles from China last year, but in light of potential tariffs on EVs made in China, this could make manufacturing more vehicles in Europe more attractive. TSLA produced ~200k vehicles in Germany last year according to S&P Mobility. We believe Tesla may eventually explore expanded capacity at Shanghai, but for now, we believe that facility is operating at max capacity.Tesla indicated that they will utilize that ~3mm of capacity before investing in new manufacturing lines. We would assume this means new manufacturing facilities as well. Consensus is currently looking for ~3.1mm unit deliveries in 2027, which likely means production has to be higher than that. Further, operating at 100% utilization is very difficult. So, we see risk to current unit expectations over the coming years.New models important as current demand stagnatesThe reason why the new model is so critical to TSLA growth is that demand looks more challenging in Tesla’s major regions of the US, China and Europe.US - Is Tesla demand saturated?In the US, YTD BEV penetration is 7.7%, up from 7.6% in 2023. TSLA's current share of the BEV market in the US is ~51%, which has come down from ~56% in 2023.In the US, even recent levels of demand for TSLA vehicles seems to be driven by pricing actions. This is not just price cuts but now also financing actions. In May, TSLA lowered the APR for the Model Y to 0.99% (from a market rate of closer to 6.39%) and lowered the monthly lease payment for the Model 3 to $299 from $329.Europe - demand lower y/yIn Europe, BEV penetration YTD is 12.1% (fairly flat y/y), and TSLA has ~17% share, which is down from ~19% last year while penetration has remained relatively flat. This is driven primarily by falling demand in Germany, France and Norway. We believe BEV penetration has stalled, in part because there is no regulatory need for OEMs to push higher BEV mix this year. That should change next year, which could mean we see BEV penetration in Europe increase, but TSLA share decrease further.China - A very competitive marketIn China, YTD NEV retail penetration is ~40%, TSLA's share of the NEV market being ~7%, with TSLA losing 100bps of share vs 2023. China remains a very competitive market with a multitude of new entrants and new models being brought to production a lot faster than in other parts of the world.Can the Model 2.5 deliver on margin expectations?This remains a key and open question, but the math seems difficult. For instance, if we assume that a Model Y sells for ~$45k and has 20% gross margins, then the COGS/unit is ~$36k. The Model 2 was expected to start at a $25k price point but was also supposed to use an unboxed manufacturing concept that was expected to reduce COGS by ~50% vs. Model 3/Y or call it ~$20k of COGS for the original Model 2 plan. If we assume the plan was for the Model 2 to have had similar gross margins to the Model Y, Model 2 COGS would need to be ~$20k. Part of this reduction is from a smaller battery, reduced content (i.e. no glass roof) as well as better integration and controller reduction, etc. However, we believe roughly 1/3rd was due to the new unboxed manufacturing process. This means Tesla would need to find an additional $5k in cost to get the targeted gross margins of the original Model 2 plan. If we assume Tesla were able to get half of the savings from the originally planned unboxed manufacturing benefit, then, that would imply a gross margin of 10%. Of course, pricing could be higher (and effective pricing will likely be higher from differing trims). However, the higher the price of the Model 2.5 goes and the closer it gets to Model 3/Y pricing, the differentiation and cannibalization problem gets larger.Risk to the current share price is currently at 1:1.8 to the downsideUPSIDE ($338): Our upside case uses a 79x PE on our 3Q25-2Q26 EPS estimate of $4.29. This is supported by our SOTP analysis that attributes $106 to Auto, $30 to Energy, $13 to FSD, $29 to Robo-taxi and $160 as a Tesla premium for all other initiatives. This implies a value per share of $338.BASE ($197): Our valuation uses 55x PE on our 3Q25-2Q26 EPS estimate of $3.57. This is supported by our SOTP analysis that attributes $57 to Auto, $18 to Energy, $9 to FSD, $9 to Robo-taxi and a $105 TSLA premium for other initiatives in line with market implied average over past 2-years. This gets us to our $197 PT.DOWNSIDE ($67): Our downside case uses 23x PE on our 3Q25-2Q26 EPS estimate of $2.86. This is supported by our SOTP analysis that attributes $48 to Auto, $14 to Energy, $5 to FSD. In our downside we do not attribute value to Robo-taxi or include a TSLA premium in our valuation, which is closer to the minimum we've seen vs identifiable value. This implies a value per share of $67.","news_type":1},"isVote":1,"tweetType":1,"viewCount":36,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":314140905893976,"gmtCreate":1717714866876,"gmtModify":1717714868970,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"idStr":"4119166036703922","authorIdStr":"4119166036703922"},"themes":[],"htmlText":"Great article, would you like to share it?","listText":"Great article, would you like to share it?","text":"Great article, would you like to share it?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/314140905893976","repostId":"2441171474","repostType":2,"repost":{"id":"2441171474","pubTimestamp":1717679531,"share":"https://ttm.financial/m/news/2441171474?lang=&edition=fundamental","pubTime":"2024-06-06 21:12","market":"sh","language":"en","title":"Shopify: Beyond The Short-Term Noise, A Long-Term Growth Story, Buy","url":"https://stock-news.laohu8.com/highlight/detail?id=2441171474","media":"seekingalpha","summary":"Shopify's recent earnings report showed a net loss due to the sale of its logistics business, causing a decline in share price.The company's guidance for the current quarter fell short of expectations","content":"<html><body><ul><li>Shopify's recent earnings report showed a net loss due to the sale of its logistics business, causing a decline in share price.</li><li>The company's guidance for the current quarter fell short of expectations, with projected revenue growth and operating expenses not meeting analyst predictions.</li><li>Despite short-term headwinds, Shopify's strong market position, diversified revenue stream, and focus on innovation make it an undervalued stock with long-term growth potential.</li><li>Initiating coverage with a long-term Buy based on Shopify's healthy financials and growth potential. However, near-term volatility is possible due to the economic cycle and management's lack of a clear growth strategy.</li><li>My analysis specializes in identifying companies that are experiencing growth at a reasonable price. Rating systems don't consider time horizons or investment strategies. My articles aim to inform, not to make decisions.</li></ul><p><figure><picture><img fetchpriority=\"high\" height=\"1024px\" sizes=\"(max-width: 768px) calc(100vw - 36px), (max-width: 1024px) calc(100vw - 132px), (max-width: 1200px) calc(66.6vw - 72px), 600px\" src=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w750\" srcset=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w1536 1536w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w1280 1280w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w1080 1080w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w750 750w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w640 640w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w480 480w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w320 320w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w240 240w\" width=\"1536px\"/></picture><figcaption><p>The Good Brigade/DigitalVision via Getty Images</p></figcaption></figure></p> <h2><strong>Investment Thesis</strong></h2> <p>Shopify (<span>NYSE:SHOP</span>) shares experienced a steep decline after the company released its first quarter earnings for 2024. While revenues of $1.86 billion surpassed analyst expectations, the company reported a net loss compared to<span> a profit in the same period last year. However, this loss stemmed from a charge associated with the sale of Shopify's logistics business.</span></p> <blockquote><p><em>The decline year-over-year was primarily due to the sale of the logistics business and lower headcount, partially offset by increases in marketing spend.</em></p></blockquote> <p>Investors were most concerned by Shopify's guidance for the current quarter. Revenue growth is projected to be in the high teens YoY, which represents a slowdown compared to recent quarters. This fell short of expectations for continued high-growth performance. Additionally, the company anticipates operating expenses to rise at a rate exceeding analysts' predictions. Gross margin is also expected to decrease<span> slightly due to the divestiture of the logistics business.</span></p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176242024881852.png\"/></span></picture><figcaption><p>Shopify earnings presentation</p></figcaption></figure></p> <p>I believe this is a challenging economic scenario with a slowdown in economic spending; however, I believe Shopify is still well-positioned for long-term success. However, factors like revenue growth over time and rising expenses need to be monitored. The combination of the mixed earnings report and cautious guidance resulted in a significant drop of 18% in the share price.</p> <p>In this article, I will go into the details of the company and see if it's a candidate for my growth at reasonable price portfolio over the long term. To accomplish this, I will review factors including, management, corporate strategy, and financial health.</p> <p>At the end, you will read that I find Shopify undervalued with growth potential. I find that while Shopify's current performance and guidance suggest short-term headwinds, I remain positive on its long-term prospects. The economic cycle can certainly pressure stock prices, especially for companies exposed to consumer spending. However, Shopify's core business- e-commerce- is poised for continued growth thanks to the ever-increasing shift to online shopping worldwide, as reflected by Shopify's increase in Gross Merchandise Value (GMV) and international growth.</p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176246908421538.png\"/></span></picture><figcaption><p>Shopify earnings presentation</p></figcaption></figure></p> <p>Additionally, the company boasts characteristics that indicate its potential to thrive for the next decade. These include a strong market position, a diversified revenue stream, and a focus on innovation. Therefore, despite current volatility, I'm initiating coverage of Shopify with a Buy rating.</p> <h2><strong>Management Evaluation</strong></h2> <p>Shopify's CEO, Tobias Lutke, cofounded the company in 2004 and has been instrumental in its growth, serving as both CTO and CEO. Despite a low Glassdoor rating, likely due to workforce reductions last year, his long-term commitment is evident. Lutke owns a significant 6% portion of the company with 40% voting power and receives most of his compensation in stock awards with $20 million in the last two years and $15 million the year before rather than taking a cash salary which is just $1 (yes, $1). This strong alignment with shareholders' interests suggests he's invested in Shopify's success for the long haul, and therefore I find he has a \"high alignment ratio\" with the company's long-term success. Although, I believe he should let someone with more management experience run the company growth strategy.</p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176232456592731.png\"/></span></picture><figcaption><p>simplywall.st</p></figcaption></figure></p> <p>Jeff Hoffmeister, Shopify's CFO since 2022, has a background in managing high-growth tech companies. Despite joining during a period of layoffs that impacted employee morale as seen in the company reviews on Glassdoor, he's overseen positive financial trends. Under his leadership, Shopify has managed debt effectively to finance projects, and both FCF and ROE have been steadily increasing. I find this financial performance might be adept at balancing growth with responsible financial management.</p> <p><figure contenteditable=\"false\"><picture><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-1717623245350983.png\"/></picture><figcaption><p>Seeking Alpha</p></figcaption></figure></p> <p>Overall, I find Shopify leadership a mixed bag. CEO, Tobias Lutke, has deep company knowledge and shareholder alignment. However, layoffs under his watch likely contributed to the low Glassdoor rating. CFO Hoffmeister brings tech finance experience, managing debt and boosting FCF and ROE. Yet, his arrival coincides with layoffs and his impact on long-term growth strategy remains unclear.</p> <p><figure contenteditable=\"false\"><picture><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176232454775417.png\"/></picture><figcaption><p>Glassdoor</p></figcaption></figure></p> <p>Shopify management have strengths, but I find that they fall short of expectations for a growth company, and therefore I give them a rating of just \"Meets Expectations\". Lutke commitment is admirable, but his experience might be insufficient for Shopify's current growth phase. Hoffmeister's financial skills are valuable, but his recent appointment leaves his strategic influence uncertain. Further, the biggest challenge I find is the need for a clear growth strategy.</p> <h2><strong>Corporate Strategy</strong></h2> <p>Shopify's growth hinges on expanding its ecosystem. They focus on adding new stores to their marketplace, giving merchants more sales channels like social commerce, and enabling omnichannel experiences. They contrast with Amazon's strategy of leveraging its massive customer base to grow its marketplace and prioritize cloud computing services (AWS) for additional revenue streams.</p> <p>I have created the table below comparing Costco current strategy to some of it current competitors:</p> <span><span><span></span><table> <tr> <td> </td> <td><p>Shopify</p></td> <td><p>Amazon (AMZN)</p></td> <td><p><a href=\"https://laohu8.com/S/EBAY\">eBay</a> (EBAY)</p></td> <td><p>Wix (WIX)</p></td> </tr> <tr> <td><p>Corporate Strategy</p></td> <td><p>Ecommerce platform for SMB to sell directly to consumers-Focus on expanding its app marketplace and offering additional sales channels, including social commerce.</p></td> <td><p>Online marketplace offering a platform for third-party sellers-Growth strategy emphasizes cloud computing services (AWS) and expansion into new markets</p></td> <td><p>Online marketplace for buyers and sellers-Focuses on attracting new sellers through lower fees and improving user experience.</p></td> <td><p>Website creation platform with ecommerce functionality- Growth strategy emphasizes increasing international sales and building stronger community for sellers.</p></td> </tr> <tr> <td><p>Advantages</p></td> <td><p>Easy to set up and use, customizable stores, strong app marketplace for additional features.</p></td> <td><p>Massive customer base, fulfillment and logistics services. Brand recognition.</p></td> <td><p>Established brand, large buyer base, wide variety of products, lower fees for high-volume sellers.</p></td> <td><p>Easy to use drag-and-drop website builder, beautiful design templates, affordable pricing</p></td> </tr> <tr> <td><p>Disadvantages</p></td> <td><p>Transaction fees can be expensive for high-volume sellers, limited control over fulfillment.</p></td> <td><p>Highly competitive, strict seller guidelines, high fees for FBA sellers.</p></td> <td><p>Highly competitive, lower margins due to auction format, less control over branding</p></td> <td><p>Limited customization, compared to Shopify, may not be ideal for complex e-commerce needs.</p></td> </tr> </table> <span></span></span><button><svg viewbox=\"0 0 16 16\" xmlns=\"http://www.w3.org/2000/svg\"><path clip-rule=\"evenodd\" d=\"M16 11a5 5 0 0 1-5 5H5a5 5 0 0 1-5-5V5a5 5 0 0 1 5-5h6a5 5 0 0 1 5 5v6zm-4.5-2.5h2v-6h-6v2h4v4zm-9-1h2v4h4v2h-6v-6z\" fill-rule=\"evenodd\"></path></svg>Click to enlarge</button></span> <p>Source: From companies' website, presentations, Seeking Alpha</p> <p>I believe that while Shopify offers ease of use and customization, it charges transaction fees and may not be ideal for high-volume sellers due to limited fulfillment control. It's hard to compare market share as Shopify model is not the same as traditional online marketplaces like Amazon's, eBay's or Etsy (ETSY). Shopify aims to empower merchants by offering all the tools to allow them to set up an independent online shop.</p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-1717625411390814.png\"/></span></picture><figcaption><p>Shopify.com</p></figcaption></figure></p> <p>Shopify's competitive advantage is its financial strength and dedication to independent online stores to build their brand and sell exclusive products that otherwise wouldn't' be able to do in the Amazon marketplace.</p> <p>Further, their financial strengths give it a strategic advantage for growth. This focus allows them to invest heavily in growth initiatives like international access compared to smaller competitors like Wix Stores (WIX), BigCommerce (BIGC), Squarespace (SQSP), and open-source solutions like WooCommerce.</p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176256393825946.png\"/></span></picture><figcaption><p>Shopify website</p></figcaption></figure></p> <h2><strong>Valuation</strong></h2> <p>Shopify currently trades at around $61.25, still down around -20% since its last reported earnings in early May.</p> <p>To assess its value, I employed a conservative 11% discount rate, this rate reflects the minimum return an investor expects to receive for their investments. Here, I am using a 5% risk-free rate, combined with the additional risk premium for holding stocks versus risk-free investments, I'm using 6% for this risk premium. While this could be further refined, lower or higher, I'm using it as a starting point only to get a gauge for unbiased market expectations.</p> <p>Then, using a simple 10-year two staged DCF model, I reversed the formula to solve for the high-growth rate. To achieve this, I assumed a terminal growth rate of 4% in the second stage. Predicting growth beyond a 10-year horizon is challenging, but in my experience, a 4% rate reflects a more sustainable long-term trajectory for mature companies. You can find historical GDP growth data to explore past trends here. Again, these assumptions can be higher or lower, but from my experience I feel comfortable using a 4% rate as a base case scenario. The formula used is:</p> <p>$61 = (sum^10 EPS (1 + \"X\") / 1+r)) + TV (sum^10 EPS (1+g) / (1+r))</p> <p>Solving for g = 28%</p> <p>This suggests that the market currently prices SHOP EPS to grow at a rate of 28%. According to Seeking Alpha, analyst consensus EPS is expected to grow at a 44.25% and its FCF is trending higher.</p> <p><figure contenteditable=\"false\"><picture><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176232455076082.png\"/></picture><figcaption><p>Seeking Alpha</p></figcaption></figure></p> <p>Therefore, I believe SHOP is undervalued at this point. However, it's important to note that despite this undervaluation, I am expecting a clearer message from management about a more concrete growth strategy. I will be a buyer on this weakness as I believe they will figure it out, and I also understand that the stock might be pressured due to the current uncertainty in the economic cycle.</p> <h2><strong>Technical Analysis</strong></h2> <p>SHOP has had a hard time bouncing after it reported earnings, creating a support level at around $57-$60. Its RSI is at around 46, having crossed it 14-day average of 36 and pointing to keep increasing, indicating that the stock might increase in value. However, momentum according to Seeking Alpha still neutral:</p> <p><figure contenteditable=\"false\"><picture><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176232454450643.png\"/></picture><figcaption><p>Seeking Alpha</p></figcaption></figure></p> <p>I believe the market is waiting for concrete evidence of Shopify's growth initiatives translating into results. The current uncertainty surrounding the company, coupled with the broader headwinds in consumer discretionary stocks, is creating a volatile environment. Shopify's reliance on consumer spending add another layer of complexity. However, I believe in the company long-term potential success due to its strong market position and healthy financials.</p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176232456282568.png\"/></span></picture><figcaption><p>TradingView</p></figcaption></figure></p> <p>Therefore, I expect some short-term volatility in the stock price, potentially ranging between $60-$68 until the next earnings report. While cautiously optimistic, I consider the company as a growth at a reasonable price over the long term.</p> <p>Next earnings are July 26th</p> <h2><strong>Takeaway</strong></h2> <div></div> <p>Shopify's recent earnings miss and cautious guidance caused a drop, but a closer look reveals a potential long-term winner growing at a reasonable price. Strong fundamentals like a dominant market position and focus on innovation positions them for future growth in the booming e-commerce market. I consider the stock undervalued due to short-term headwinds from an economy slowdown, and I'm also adding to this an unclear growth strategy from management. However, I am confident management will eventually figure it out and believe in Shopify's long-term potential, starting my coverage with a cautious Buy.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Shopify: Beyond The Short-Term Noise, A Long-Term Growth Story, Buy</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nShopify: Beyond The Short-Term Noise, A Long-Term Growth Story, Buy\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-06 21:12 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4697756-shopify-beyond-the-short-term-noise-a-long-term-growth-story-buy><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Shopify's recent earnings report showed a net loss due to the sale of its logistics business, causing a decline in share price.The company's guidance for the current quarter fell short of expectations...</p>\n\n<a href=\"https://seekingalpha.com/article/4697756-shopify-beyond-the-short-term-noise-a-long-term-growth-story-buy\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg","relate_stocks":{"BK4220":"综合零售","BK4535":"淡马锡持仓","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","LU0079474960.USD":"联博美国增长基金A","LU0080751232.USD":"富达环球多元动力基金A","BK4538":"云计算","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","BK4116":"互联网服务与基础架构","LU0061474960.USD":"天利环球焦点基金AU Acc","LU0308772762.SGD":"Blackrock Global Allocation A2 SGD-H","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","IE00BKDWB100.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","LU0234572021.USD":"高盛美国核心股票组合Acc","LU1804176565.USD":"EASTSPRING INV GLOBAL GROWTH EQUITY \"A\" (USD) ACC","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","BIGC":"BigCommerce Holdings","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","SHOP":"Shopify Inc","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","WIX":"Wix.Com Ltd","BK4548":"巴美列捷福持仓","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","BYON":"BEYOND","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU0211327993.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (USD) ACC","LU0130103400.USD":"Natixis Harris Associates Global Equity RA USD","SQSP":"Squarespace Inc.","ETSY":"Etsy, Inc.","BK4539":"次新股","EBAY":"eBay","BK4554":"元宇宙及AR概念","BK4178":"家庭装饰零售","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","BK4532":"文艺复兴科技持仓","IE00BJTD4N35.SGD":"Neuberger Berman US Long Short Equity A1  Acc SGD-H","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","AMZN":"亚马逊","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","BK4534":"瑞士信贷持仓","BK4533":"AQR资本管理(全球第二大对冲基金)","LU2357305700.SGD":"Allianz Global Artificial Intelligence ET H2-SGD","LU0109391861.USD":"富兰克林美国机遇基金A Acc","IE00B3S45H60.SGD":"Neuberger Berman US Multicap Opportunities A Acc SGD-H","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元"},"source_url":"https://seekingalpha.com/article/4697756-shopify-beyond-the-short-term-noise-a-long-term-growth-story-buy","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2441171474","content_text":"Shopify's recent earnings report showed a net loss due to the sale of its logistics business, causing a decline in share price.The company's guidance for the current quarter fell short of expectations, with projected revenue growth and operating expenses not meeting analyst predictions.Despite short-term headwinds, Shopify's strong market position, diversified revenue stream, and focus on innovation make it an undervalued stock with long-term growth potential.Initiating coverage with a long-term Buy based on Shopify's healthy financials and growth potential. However, near-term volatility is possible due to the economic cycle and management's lack of a clear growth strategy.My analysis specializes in identifying companies that are experiencing growth at a reasonable price. Rating systems don't consider time horizons or investment strategies. My articles aim to inform, not to make decisions.The Good Brigade/DigitalVision via Getty Images Investment Thesis Shopify (NYSE:SHOP) shares experienced a steep decline after the company released its first quarter earnings for 2024. While revenues of $1.86 billion surpassed analyst expectations, the company reported a net loss compared to a profit in the same period last year. However, this loss stemmed from a charge associated with the sale of Shopify's logistics business. The decline year-over-year was primarily due to the sale of the logistics business and lower headcount, partially offset by increases in marketing spend. Investors were most concerned by Shopify's guidance for the current quarter. Revenue growth is projected to be in the high teens YoY, which represents a slowdown compared to recent quarters. This fell short of expectations for continued high-growth performance. Additionally, the company anticipates operating expenses to rise at a rate exceeding analysts' predictions. Gross margin is also expected to decrease slightly due to the divestiture of the logistics business. Shopify earnings presentation I believe this is a challenging economic scenario with a slowdown in economic spending; however, I believe Shopify is still well-positioned for long-term success. However, factors like revenue growth over time and rising expenses need to be monitored. The combination of the mixed earnings report and cautious guidance resulted in a significant drop of 18% in the share price. In this article, I will go into the details of the company and see if it's a candidate for my growth at reasonable price portfolio over the long term. To accomplish this, I will review factors including, management, corporate strategy, and financial health. At the end, you will read that I find Shopify undervalued with growth potential. I find that while Shopify's current performance and guidance suggest short-term headwinds, I remain positive on its long-term prospects. The economic cycle can certainly pressure stock prices, especially for companies exposed to consumer spending. However, Shopify's core business- e-commerce- is poised for continued growth thanks to the ever-increasing shift to online shopping worldwide, as reflected by Shopify's increase in Gross Merchandise Value (GMV) and international growth. Shopify earnings presentation Additionally, the company boasts characteristics that indicate its potential to thrive for the next decade. These include a strong market position, a diversified revenue stream, and a focus on innovation. Therefore, despite current volatility, I'm initiating coverage of Shopify with a Buy rating. Management Evaluation Shopify's CEO, Tobias Lutke, cofounded the company in 2004 and has been instrumental in its growth, serving as both CTO and CEO. Despite a low Glassdoor rating, likely due to workforce reductions last year, his long-term commitment is evident. Lutke owns a significant 6% portion of the company with 40% voting power and receives most of his compensation in stock awards with $20 million in the last two years and $15 million the year before rather than taking a cash salary which is just $1 (yes, $1). This strong alignment with shareholders' interests suggests he's invested in Shopify's success for the long haul, and therefore I find he has a \"high alignment ratio\" with the company's long-term success. Although, I believe he should let someone with more management experience run the company growth strategy. simplywall.st Jeff Hoffmeister, Shopify's CFO since 2022, has a background in managing high-growth tech companies. Despite joining during a period of layoffs that impacted employee morale as seen in the company reviews on Glassdoor, he's overseen positive financial trends. Under his leadership, Shopify has managed debt effectively to finance projects, and both FCF and ROE have been steadily increasing. I find this financial performance might be adept at balancing growth with responsible financial management. Seeking Alpha Overall, I find Shopify leadership a mixed bag. CEO, Tobias Lutke, has deep company knowledge and shareholder alignment. However, layoffs under his watch likely contributed to the low Glassdoor rating. CFO Hoffmeister brings tech finance experience, managing debt and boosting FCF and ROE. Yet, his arrival coincides with layoffs and his impact on long-term growth strategy remains unclear. Glassdoor Shopify management have strengths, but I find that they fall short of expectations for a growth company, and therefore I give them a rating of just \"Meets Expectations\". Lutke commitment is admirable, but his experience might be insufficient for Shopify's current growth phase. Hoffmeister's financial skills are valuable, but his recent appointment leaves his strategic influence uncertain. Further, the biggest challenge I find is the need for a clear growth strategy. Corporate Strategy Shopify's growth hinges on expanding its ecosystem. They focus on adding new stores to their marketplace, giving merchants more sales channels like social commerce, and enabling omnichannel experiences. They contrast with Amazon's strategy of leveraging its massive customer base to grow its marketplace and prioritize cloud computing services (AWS) for additional revenue streams. I have created the table below comparing Costco current strategy to some of it current competitors:     Shopify Amazon (AMZN) eBay (EBAY) Wix (WIX)   Corporate Strategy Ecommerce platform for SMB to sell directly to consumers-Focus on expanding its app marketplace and offering additional sales channels, including social commerce. Online marketplace offering a platform for third-party sellers-Growth strategy emphasizes cloud computing services (AWS) and expansion into new markets Online marketplace for buyers and sellers-Focuses on attracting new sellers through lower fees and improving user experience. Website creation platform with ecommerce functionality- Growth strategy emphasizes increasing international sales and building stronger community for sellers.   Advantages Easy to set up and use, customizable stores, strong app marketplace for additional features. Massive customer base, fulfillment and logistics services. Brand recognition. Established brand, large buyer base, wide variety of products, lower fees for high-volume sellers. Easy to use drag-and-drop website builder, beautiful design templates, affordable pricing   Disadvantages Transaction fees can be expensive for high-volume sellers, limited control over fulfillment. Highly competitive, strict seller guidelines, high fees for FBA sellers. Highly competitive, lower margins due to auction format, less control over branding Limited customization, compared to Shopify, may not be ideal for complex e-commerce needs.   Click to enlarge Source: From companies' website, presentations, Seeking Alpha I believe that while Shopify offers ease of use and customization, it charges transaction fees and may not be ideal for high-volume sellers due to limited fulfillment control. It's hard to compare market share as Shopify model is not the same as traditional online marketplaces like Amazon's, eBay's or Etsy (ETSY). Shopify aims to empower merchants by offering all the tools to allow them to set up an independent online shop. Shopify.com Shopify's competitive advantage is its financial strength and dedication to independent online stores to build their brand and sell exclusive products that otherwise wouldn't' be able to do in the Amazon marketplace. Further, their financial strengths give it a strategic advantage for growth. This focus allows them to invest heavily in growth initiatives like international access compared to smaller competitors like Wix Stores (WIX), BigCommerce (BIGC), Squarespace (SQSP), and open-source solutions like WooCommerce. Shopify website Valuation Shopify currently trades at around $61.25, still down around -20% since its last reported earnings in early May. To assess its value, I employed a conservative 11% discount rate, this rate reflects the minimum return an investor expects to receive for their investments. Here, I am using a 5% risk-free rate, combined with the additional risk premium for holding stocks versus risk-free investments, I'm using 6% for this risk premium. While this could be further refined, lower or higher, I'm using it as a starting point only to get a gauge for unbiased market expectations. Then, using a simple 10-year two staged DCF model, I reversed the formula to solve for the high-growth rate. To achieve this, I assumed a terminal growth rate of 4% in the second stage. Predicting growth beyond a 10-year horizon is challenging, but in my experience, a 4% rate reflects a more sustainable long-term trajectory for mature companies. You can find historical GDP growth data to explore past trends here. Again, these assumptions can be higher or lower, but from my experience I feel comfortable using a 4% rate as a base case scenario. The formula used is: $61 = (sum^10 EPS (1 + \"X\") / 1+r)) + TV (sum^10 EPS (1+g) / (1+r)) Solving for g = 28% This suggests that the market currently prices SHOP EPS to grow at a rate of 28%. According to Seeking Alpha, analyst consensus EPS is expected to grow at a 44.25% and its FCF is trending higher. Seeking Alpha Therefore, I believe SHOP is undervalued at this point. However, it's important to note that despite this undervaluation, I am expecting a clearer message from management about a more concrete growth strategy. I will be a buyer on this weakness as I believe they will figure it out, and I also understand that the stock might be pressured due to the current uncertainty in the economic cycle. Technical Analysis SHOP has had a hard time bouncing after it reported earnings, creating a support level at around $57-$60. Its RSI is at around 46, having crossed it 14-day average of 36 and pointing to keep increasing, indicating that the stock might increase in value. However, momentum according to Seeking Alpha still neutral: Seeking Alpha I believe the market is waiting for concrete evidence of Shopify's growth initiatives translating into results. The current uncertainty surrounding the company, coupled with the broader headwinds in consumer discretionary stocks, is creating a volatile environment. Shopify's reliance on consumer spending add another layer of complexity. However, I believe in the company long-term potential success due to its strong market position and healthy financials. TradingView Therefore, I expect some short-term volatility in the stock price, potentially ranging between $60-$68 until the next earnings report. While cautiously optimistic, I consider the company as a growth at a reasonable price over the long term. Next earnings are July 26th Takeaway  Shopify's recent earnings miss and cautious guidance caused a drop, but a closer look reveals a potential long-term winner growing at a reasonable price. Strong fundamentals like a dominant market position and focus on innovation positions them for future growth in the booming e-commerce market. I consider the stock undervalued due to short-term headwinds from an economy slowdown, and I'm also adding to this an unclear growth strategy from management. However, I am confident management will eventually figure it out and believe in Shopify's long-term potential, starting my coverage with a cautious Buy.","news_type":1},"isVote":1,"tweetType":1,"viewCount":158,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":307609396154496,"gmtCreate":1716103802202,"gmtModify":1716103805533,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"idStr":"4119166036703922","authorIdStr":"4119166036703922"},"themes":[],"htmlText":"Great article, would you like to share it?","listText":"Great article, would you like to share it?","text":"Great article, would you like to share it?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/307609396154496","repostId":"1135619293","repostType":2,"repost":{"id":"1135619293","weMediaInfo":{"introduction":"Providing stock market headlines, business news, financials and earnings ","home_visible":1,"media_name":"Tiger Newspress","id":"1079075236","head_image":"https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba"},"pubTimestamp":1716083994,"share":"https://ttm.financial/m/news/1135619293?lang=&edition=fundamental","pubTime":"2024-05-19 09:59","market":"us","language":"en","title":"Weekly Hottest Sector｜Roaring Kitty Is Back but FFIE is This Time Meme Frenzy's Biggest Winner","url":"https://stock-news.laohu8.com/highlight/detail?id=1135619293","media":"Tiger Newspress","summary":"It was the week the meme-stock frenzy from 2021 returned with a vengeance - and it may all be over already.All it took was a tweet from the long-dormant X account associated with investor Keith Gill, ","content":"<html><head></head><body><p style=\"text-align: start;\">It was the week the meme-stock frenzy from 2021 returned with a vengeance - and it may all be over already.</p><p style=\"text-align: start;\">All it took was a tweet from the long-dormant X account associated with investor Keith Gill, aka Roaring Kitty, last Sunday to spark a fresh frenzy of buying of videogame retailer GameStop Corp.&#39;s (GME) and cinema chain AMC Entertainment Holdings Inc.&#39;s (AMC) stocks that lasted through Tuesday.</p><p><img src=\"https://community-static.tradeup.com/news/9e2af2d57b32a97fb66374bf7da4b7b1\" alt=\"\"/>GameStop (GME) and AMC (AMC) weren&#39;t the only stocks caught up in this week&#39;s meme craze. While shares of the short-lived rally&#39;s flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.</p><p style=\"text-align: start;\">For example, EV-related startup Faraday Future (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/7e08b997968e777fbc4f18017bd4739f\" tg-width=\"732\" tg-height=\"596\"/></p><h2 id=\"id_1898331808\">GameStop Issues Profit Warning, Files to Issue More Shares</h2><p>GameStop Corp.’s stock fell 20% on Friday, after the videogame retailer and key meme stock issued a profit and sales warning for the first quarter and also filed to sell more shares.</p><p>Grapevine, Texas-based GameStop said it expects its first-quarter net loss to range from $27 million to $37 million, narrower than the loss of $50.5 million posted in the year-earlier quarter. The company’s first quarter ended May 4.</p><p>Sales are expected to range from $872 million to $892 million, down from $1.237 billion a year ago.</p><h2 id=\"id_1692616779\">AMC Discloses Debt-for-Equity Swap That Will See It Issue 23.3 Million Shares</h2><p>AMC Entertainment Holdings disclosed that it will issue 23.3 million shares in a debt-for-equity exchange for $163.9 million of bonds that mature in 2026 on Wednesday.</p><p style=\"text-align: start;\">The 10%/12% cash/PIK toggle bonds — PIK stands for payment-in-kind — offer an issuer the ability to defer interest payments in return for a higher coupon later.</p><h2 id=\"id_830057657\">Bill Gross Sells GameStop, AMC Options to Cash In on Meme Mania</h2><p>Bill Gross is making a habit of selling options on meme stocks, and his latest trades center on GameStop Corp. and AMC Entertainment Holdings Inc. The legendary investor said he sold calls and puts on the poster children of the meme stock mania, as the shares of both companies take off with speculators using the retail trader favorites as a way to treat the stock market as a casino.</p><p>In a critique of the latest trading flurry, in which GameStop has soared 179% in two days while AMC has jumped 135%, Gross posted on X that “Gamestonk” is passe. “Buy? Sell? Not me,” he wrote on the social media platform Tuesday.</p><p>His strategy centers on selling what he describes as “400% annualized volatility.” </p><h2 id=\"caas-lead-header-undefined\">These stocks ripped even higher than GameStop in the meme rally</h2><p>GameStop (GME) and AMC (AMC) weren&#39;t the only stocks caught up in this week&#39;s meme craze. While shares of the short-lived rally&#39;s flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.</p><p>For example, EV-related startup <strong>Faraday Future</strong> (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.</p><p>Over the past 24 hours, Faraday Future was the third-most-mentioned stock on Reddit&#39;s WallStreetBets forum behind the SPDR S&amp;P 500 ETF (SPY) and Nvidia (NVDA), according to web data company Thinknum.</p><p>Retail trader and YouTuber Matt Kohrs told Yahoo Finance, &#34;Similar to 2021 [during the meme rally], people seem to be targeting equities with high short interest,&#34; noting Faraday Future&#39;s short interest sits at roughly 92% of the float.</p><p>Other heavily shorted stocks that were volatile during the session include <strong>Crown ElectroKinetics</strong> (CRKN). The Oregon-based smart glass micro-cap company gained nearly 300% over the past five days.</p><p><strong>Greenwave Technology Solutions</strong> (GWAV) was up more than 250% for the week. The small, Virginia-based metal recycling company added to prior session gains as shares of GameStop and AMC were unraveling.</p></body></html>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Weekly Hottest Sector｜Roaring Kitty Is Back but FFIE is This Time Meme Frenzy's Biggest Winner</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWeekly Hottest Sector｜Roaring Kitty Is Back but FFIE is This Time Meme Frenzy's Biggest Winner\n</h2>\n\n<h4 class=\"meta\">\n\n\n<a class=\"head\" href=\"https://laohu8.com/wemedia/1079075236\">\n\n\n<div class=\"h-thumb\" style=\"background-image:url(https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba);background-size:cover;\"></div>\n\n<div class=\"h-content\">\n<p class=\"h-name\">Tiger Newspress </p>\n<p class=\"h-time\">2024-05-19 09:59</p>\n</div>\n\n</a>\n\n\n</h4>\n\n</header>\n<article>\n<html><head></head><body><p style=\"text-align: start;\">It was the week the meme-stock frenzy from 2021 returned with a vengeance - and it may all be over already.</p><p style=\"text-align: start;\">All it took was a tweet from the long-dormant X account associated with investor Keith Gill, aka Roaring Kitty, last Sunday to spark a fresh frenzy of buying of videogame retailer GameStop Corp.&#39;s (GME) and cinema chain AMC Entertainment Holdings Inc.&#39;s (AMC) stocks that lasted through Tuesday.</p><p><img src=\"https://community-static.tradeup.com/news/9e2af2d57b32a97fb66374bf7da4b7b1\" alt=\"\"/>GameStop (GME) and AMC (AMC) weren&#39;t the only stocks caught up in this week&#39;s meme craze. While shares of the short-lived rally&#39;s flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.</p><p style=\"text-align: start;\">For example, EV-related startup Faraday Future (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/7e08b997968e777fbc4f18017bd4739f\" tg-width=\"732\" tg-height=\"596\"/></p><h2 id=\"id_1898331808\">GameStop Issues Profit Warning, Files to Issue More Shares</h2><p>GameStop Corp.’s stock fell 20% on Friday, after the videogame retailer and key meme stock issued a profit and sales warning for the first quarter and also filed to sell more shares.</p><p>Grapevine, Texas-based GameStop said it expects its first-quarter net loss to range from $27 million to $37 million, narrower than the loss of $50.5 million posted in the year-earlier quarter. The company’s first quarter ended May 4.</p><p>Sales are expected to range from $872 million to $892 million, down from $1.237 billion a year ago.</p><h2 id=\"id_1692616779\">AMC Discloses Debt-for-Equity Swap That Will See It Issue 23.3 Million Shares</h2><p>AMC Entertainment Holdings disclosed that it will issue 23.3 million shares in a debt-for-equity exchange for $163.9 million of bonds that mature in 2026 on Wednesday.</p><p style=\"text-align: start;\">The 10%/12% cash/PIK toggle bonds — PIK stands for payment-in-kind — offer an issuer the ability to defer interest payments in return for a higher coupon later.</p><h2 id=\"id_830057657\">Bill Gross Sells GameStop, AMC Options to Cash In on Meme Mania</h2><p>Bill Gross is making a habit of selling options on meme stocks, and his latest trades center on GameStop Corp. and AMC Entertainment Holdings Inc. The legendary investor said he sold calls and puts on the poster children of the meme stock mania, as the shares of both companies take off with speculators using the retail trader favorites as a way to treat the stock market as a casino.</p><p>In a critique of the latest trading flurry, in which GameStop has soared 179% in two days while AMC has jumped 135%, Gross posted on X that “Gamestonk” is passe. “Buy? Sell? Not me,” he wrote on the social media platform Tuesday.</p><p>His strategy centers on selling what he describes as “400% annualized volatility.” </p><h2 id=\"caas-lead-header-undefined\">These stocks ripped even higher than GameStop in the meme rally</h2><p>GameStop (GME) and AMC (AMC) weren&#39;t the only stocks caught up in this week&#39;s meme craze. While shares of the short-lived rally&#39;s flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.</p><p>For example, EV-related startup <strong>Faraday Future</strong> (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.</p><p>Over the past 24 hours, Faraday Future was the third-most-mentioned stock on Reddit&#39;s WallStreetBets forum behind the SPDR S&amp;P 500 ETF (SPY) and Nvidia (NVDA), according to web data company Thinknum.</p><p>Retail trader and YouTuber Matt Kohrs told Yahoo Finance, &#34;Similar to 2021 [during the meme rally], people seem to be targeting equities with high short interest,&#34; noting Faraday Future&#39;s short interest sits at roughly 92% of the float.</p><p>Other heavily shorted stocks that were volatile during the session include <strong>Crown ElectroKinetics</strong> (CRKN). The Oregon-based smart glass micro-cap company gained nearly 300% over the past five days.</p><p><strong>Greenwave Technology Solutions</strong> (GWAV) was up more than 250% for the week. The small, Virginia-based metal recycling company added to prior session gains as shares of GameStop and AMC were unraveling.</p></body></html>\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"GWAV":"Greenwave Technology Solutions Inc.","AMC":"AMC院线","GME":"游戏驿站","FFIE":"Faraday Future","CRKN":"Crown Electrokinetics Corp."},"source_url":"","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1135619293","content_text":"It was the week the meme-stock frenzy from 2021 returned with a vengeance - and it may all be over already.All it took was a tweet from the long-dormant X account associated with investor Keith Gill, aka Roaring Kitty, last Sunday to spark a fresh frenzy of buying of videogame retailer GameStop Corp.'s (GME) and cinema chain AMC Entertainment Holdings Inc.'s (AMC) stocks that lasted through Tuesday.GameStop (GME) and AMC (AMC) weren't the only stocks caught up in this week's meme craze. While shares of the short-lived rally's flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.For example, EV-related startup Faraday Future (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.GameStop Issues Profit Warning, Files to Issue More SharesGameStop Corp.’s stock fell 20% on Friday, after the videogame retailer and key meme stock issued a profit and sales warning for the first quarter and also filed to sell more shares.Grapevine, Texas-based GameStop said it expects its first-quarter net loss to range from $27 million to $37 million, narrower than the loss of $50.5 million posted in the year-earlier quarter. The company’s first quarter ended May 4.Sales are expected to range from $872 million to $892 million, down from $1.237 billion a year ago.AMC Discloses Debt-for-Equity Swap That Will See It Issue 23.3 Million SharesAMC Entertainment Holdings disclosed that it will issue 23.3 million shares in a debt-for-equity exchange for $163.9 million of bonds that mature in 2026 on Wednesday.The 10%/12% cash/PIK toggle bonds — PIK stands for payment-in-kind — offer an issuer the ability to defer interest payments in return for a higher coupon later.Bill Gross Sells GameStop, AMC Options to Cash In on Meme ManiaBill Gross is making a habit of selling options on meme stocks, and his latest trades center on GameStop Corp. and AMC Entertainment Holdings Inc. The legendary investor said he sold calls and puts on the poster children of the meme stock mania, as the shares of both companies take off with speculators using the retail trader favorites as a way to treat the stock market as a casino.In a critique of the latest trading flurry, in which GameStop has soared 179% in two days while AMC has jumped 135%, Gross posted on X that “Gamestonk” is passe. “Buy? Sell? Not me,” he wrote on the social media platform Tuesday.His strategy centers on selling what he describes as “400% annualized volatility.” These stocks ripped even higher than GameStop in the meme rallyGameStop (GME) and AMC (AMC) weren't the only stocks caught up in this week's meme craze. While shares of the short-lived rally's flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.For example, EV-related startup Faraday Future (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.Over the past 24 hours, Faraday Future was the third-most-mentioned stock on Reddit's WallStreetBets forum behind the SPDR S&P 500 ETF (SPY) and Nvidia (NVDA), according to web data company Thinknum.Retail trader and YouTuber Matt Kohrs told Yahoo Finance, \"Similar to 2021 [during the meme rally], people seem to be targeting equities with high short interest,\" noting Faraday Future's short interest sits at roughly 92% of the float.Other heavily shorted stocks that were volatile during the session include Crown ElectroKinetics (CRKN). The Oregon-based smart glass micro-cap company gained nearly 300% over the past five days.Greenwave Technology Solutions (GWAV) was up more than 250% for the week. The small, Virginia-based metal recycling company added to prior session gains as shares of GameStop and AMC were unraveling.","news_type":1},"isVote":1,"tweetType":1,"viewCount":100,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":279440066322584,"gmtCreate":1709244275366,"gmtModify":1709257499603,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"idStr":"4119166036703922","authorIdStr":"4119166036703922"},"themes":[],"htmlText":"<a href=\"https://ttm.financial/S/HPE\">$Hewlett Packard Enterprise(HPE)$ </a>&nbsp;","listText":"<a href=\"https://ttm.financial/S/HPE\">$Hewlett Packard Enterprise(HPE)$ </a>&nbsp;","text":"$Hewlett Packard Enterprise(HPE)$","images":[{"img":"https://community-static.tradeup.com/news/b82c338571a0acdc203e8086cc4ad8a5","width":"858","height":"1809"}],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/279440066322584","isVote":1,"tweetType":1,"viewCount":238,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":1,"langContent":"EN","totalScore":0},{"id":271242332406000,"gmtCreate":1707259243490,"gmtModify":1707271495168,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"idStr":"4119166036703922","authorIdStr":"4119166036703922"},"themes":[],"title":"Start from Small","htmlText":"<a href=\"https://ttm.financial/S/SE\">$Sea Ltd(SE)$ </a>&nbsp;[Grin]&nbsp;&nbsp;[Grin]&nbsp;&nbsp;","listText":"<a href=\"https://ttm.financial/S/SE\">$Sea Ltd(SE)$ </a>&nbsp;[Grin]&nbsp;&nbsp;[Grin]&nbsp;&nbsp;","text":"$Sea Ltd(SE)$ [Grin] [Grin]","images":[{"img":"https://community-static.tradeup.com/news/9ab2a52df0783aeed19a0bdef929fd2a","width":"858","height":"1809"}],"top":1,"highlighted":1,"essential":1,"paper":2,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/271242332406000","isVote":1,"tweetType":1,"viewCount":327,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":1,"langContent":"EN","totalScore":0},{"id":271242329911576,"gmtCreate":1707259067456,"gmtModify":1707271473432,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"idStr":"4119166036703922","authorIdStr":"4119166036703922"},"themes":[],"htmlText":"<a href=\"https://ttm.financial/S/SE\">$Sea Ltd(SE)$ </a>&nbsp;","listText":"<a href=\"https://ttm.financial/S/SE\">$Sea Ltd(SE)$ </a>&nbsp;","text":"$Sea Ltd(SE)$","images":[{"img":"https://community-static.tradeup.com/news/aa1d1a8c69dd047238992cc0d89c4a04","width":"858","height":"1809"}],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/271242329911576","isVote":1,"tweetType":1,"viewCount":187,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":1,"langContent":"EN","totalScore":0},{"id":239063735255120,"gmtCreate":1699402485826,"gmtModify":1699408825173,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"idStr":"4119166036703922","authorIdStr":"4119166036703922"},"themes":[],"htmlText":"Great ariticle, would you like to share it?","listText":"Great ariticle, would you like to share it?","text":"Great ariticle, would you like to share it?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/239063735255120","repostId":"2381178554","repostType":2,"isVote":1,"tweetType":1,"viewCount":303,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"hots":[{"id":307609396154496,"gmtCreate":1716103802202,"gmtModify":1716103805533,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"authorIdStr":"4119166036703922","idStr":"4119166036703922"},"themes":[],"htmlText":"Great article, would you like to share it?","listText":"Great article, would you like to share it?","text":"Great article, would you like to share it?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/307609396154496","repostId":"1135619293","repostType":2,"repost":{"id":"1135619293","weMediaInfo":{"introduction":"Providing stock market headlines, business news, financials and earnings ","home_visible":1,"media_name":"Tiger Newspress","id":"1079075236","head_image":"https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba"},"pubTimestamp":1716083994,"share":"https://ttm.financial/m/news/1135619293?lang=&edition=fundamental","pubTime":"2024-05-19 09:59","market":"us","language":"en","title":"Weekly Hottest Sector｜Roaring Kitty Is Back but FFIE is This Time Meme Frenzy's Biggest Winner","url":"https://stock-news.laohu8.com/highlight/detail?id=1135619293","media":"Tiger Newspress","summary":"It was the week the meme-stock frenzy from 2021 returned with a vengeance - and it may all be over already.All it took was a tweet from the long-dormant X account associated with investor Keith Gill, ","content":"<html><head></head><body><p style=\"text-align: start;\">It was the week the meme-stock frenzy from 2021 returned with a vengeance - and it may all be over already.</p><p style=\"text-align: start;\">All it took was a tweet from the long-dormant X account associated with investor Keith Gill, aka Roaring Kitty, last Sunday to spark a fresh frenzy of buying of videogame retailer GameStop Corp.&#39;s (GME) and cinema chain AMC Entertainment Holdings Inc.&#39;s (AMC) stocks that lasted through Tuesday.</p><p><img src=\"https://community-static.tradeup.com/news/9e2af2d57b32a97fb66374bf7da4b7b1\" alt=\"\"/>GameStop (GME) and AMC (AMC) weren&#39;t the only stocks caught up in this week&#39;s meme craze. While shares of the short-lived rally&#39;s flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.</p><p style=\"text-align: start;\">For example, EV-related startup Faraday Future (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/7e08b997968e777fbc4f18017bd4739f\" tg-width=\"732\" tg-height=\"596\"/></p><h2 id=\"id_1898331808\">GameStop Issues Profit Warning, Files to Issue More Shares</h2><p>GameStop Corp.’s stock fell 20% on Friday, after the videogame retailer and key meme stock issued a profit and sales warning for the first quarter and also filed to sell more shares.</p><p>Grapevine, Texas-based GameStop said it expects its first-quarter net loss to range from $27 million to $37 million, narrower than the loss of $50.5 million posted in the year-earlier quarter. The company’s first quarter ended May 4.</p><p>Sales are expected to range from $872 million to $892 million, down from $1.237 billion a year ago.</p><h2 id=\"id_1692616779\">AMC Discloses Debt-for-Equity Swap That Will See It Issue 23.3 Million Shares</h2><p>AMC Entertainment Holdings disclosed that it will issue 23.3 million shares in a debt-for-equity exchange for $163.9 million of bonds that mature in 2026 on Wednesday.</p><p style=\"text-align: start;\">The 10%/12% cash/PIK toggle bonds — PIK stands for payment-in-kind — offer an issuer the ability to defer interest payments in return for a higher coupon later.</p><h2 id=\"id_830057657\">Bill Gross Sells GameStop, AMC Options to Cash In on Meme Mania</h2><p>Bill Gross is making a habit of selling options on meme stocks, and his latest trades center on GameStop Corp. and AMC Entertainment Holdings Inc. The legendary investor said he sold calls and puts on the poster children of the meme stock mania, as the shares of both companies take off with speculators using the retail trader favorites as a way to treat the stock market as a casino.</p><p>In a critique of the latest trading flurry, in which GameStop has soared 179% in two days while AMC has jumped 135%, Gross posted on X that “Gamestonk” is passe. “Buy? Sell? Not me,” he wrote on the social media platform Tuesday.</p><p>His strategy centers on selling what he describes as “400% annualized volatility.” </p><h2 id=\"caas-lead-header-undefined\">These stocks ripped even higher than GameStop in the meme rally</h2><p>GameStop (GME) and AMC (AMC) weren&#39;t the only stocks caught up in this week&#39;s meme craze. While shares of the short-lived rally&#39;s flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.</p><p>For example, EV-related startup <strong>Faraday Future</strong> (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.</p><p>Over the past 24 hours, Faraday Future was the third-most-mentioned stock on Reddit&#39;s WallStreetBets forum behind the SPDR S&amp;P 500 ETF (SPY) and Nvidia (NVDA), according to web data company Thinknum.</p><p>Retail trader and YouTuber Matt Kohrs told Yahoo Finance, &#34;Similar to 2021 [during the meme rally], people seem to be targeting equities with high short interest,&#34; noting Faraday Future&#39;s short interest sits at roughly 92% of the float.</p><p>Other heavily shorted stocks that were volatile during the session include <strong>Crown ElectroKinetics</strong> (CRKN). The Oregon-based smart glass micro-cap company gained nearly 300% over the past five days.</p><p><strong>Greenwave Technology Solutions</strong> (GWAV) was up more than 250% for the week. The small, Virginia-based metal recycling company added to prior session gains as shares of GameStop and AMC were unraveling.</p></body></html>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Weekly Hottest Sector｜Roaring Kitty Is Back but FFIE is This Time Meme Frenzy's Biggest Winner</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWeekly Hottest Sector｜Roaring Kitty Is Back but FFIE is This Time Meme Frenzy's Biggest Winner\n</h2>\n\n<h4 class=\"meta\">\n\n\n<a class=\"head\" href=\"https://laohu8.com/wemedia/1079075236\">\n\n\n<div class=\"h-thumb\" style=\"background-image:url(https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba);background-size:cover;\"></div>\n\n<div class=\"h-content\">\n<p class=\"h-name\">Tiger Newspress </p>\n<p class=\"h-time\">2024-05-19 09:59</p>\n</div>\n\n</a>\n\n\n</h4>\n\n</header>\n<article>\n<html><head></head><body><p style=\"text-align: start;\">It was the week the meme-stock frenzy from 2021 returned with a vengeance - and it may all be over already.</p><p style=\"text-align: start;\">All it took was a tweet from the long-dormant X account associated with investor Keith Gill, aka Roaring Kitty, last Sunday to spark a fresh frenzy of buying of videogame retailer GameStop Corp.&#39;s (GME) and cinema chain AMC Entertainment Holdings Inc.&#39;s (AMC) stocks that lasted through Tuesday.</p><p><img src=\"https://community-static.tradeup.com/news/9e2af2d57b32a97fb66374bf7da4b7b1\" alt=\"\"/>GameStop (GME) and AMC (AMC) weren&#39;t the only stocks caught up in this week&#39;s meme craze. While shares of the short-lived rally&#39;s flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.</p><p style=\"text-align: start;\">For example, EV-related startup Faraday Future (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/7e08b997968e777fbc4f18017bd4739f\" tg-width=\"732\" tg-height=\"596\"/></p><h2 id=\"id_1898331808\">GameStop Issues Profit Warning, Files to Issue More Shares</h2><p>GameStop Corp.’s stock fell 20% on Friday, after the videogame retailer and key meme stock issued a profit and sales warning for the first quarter and also filed to sell more shares.</p><p>Grapevine, Texas-based GameStop said it expects its first-quarter net loss to range from $27 million to $37 million, narrower than the loss of $50.5 million posted in the year-earlier quarter. The company’s first quarter ended May 4.</p><p>Sales are expected to range from $872 million to $892 million, down from $1.237 billion a year ago.</p><h2 id=\"id_1692616779\">AMC Discloses Debt-for-Equity Swap That Will See It Issue 23.3 Million Shares</h2><p>AMC Entertainment Holdings disclosed that it will issue 23.3 million shares in a debt-for-equity exchange for $163.9 million of bonds that mature in 2026 on Wednesday.</p><p style=\"text-align: start;\">The 10%/12% cash/PIK toggle bonds — PIK stands for payment-in-kind — offer an issuer the ability to defer interest payments in return for a higher coupon later.</p><h2 id=\"id_830057657\">Bill Gross Sells GameStop, AMC Options to Cash In on Meme Mania</h2><p>Bill Gross is making a habit of selling options on meme stocks, and his latest trades center on GameStop Corp. and AMC Entertainment Holdings Inc. The legendary investor said he sold calls and puts on the poster children of the meme stock mania, as the shares of both companies take off with speculators using the retail trader favorites as a way to treat the stock market as a casino.</p><p>In a critique of the latest trading flurry, in which GameStop has soared 179% in two days while AMC has jumped 135%, Gross posted on X that “Gamestonk” is passe. “Buy? Sell? Not me,” he wrote on the social media platform Tuesday.</p><p>His strategy centers on selling what he describes as “400% annualized volatility.” </p><h2 id=\"caas-lead-header-undefined\">These stocks ripped even higher than GameStop in the meme rally</h2><p>GameStop (GME) and AMC (AMC) weren&#39;t the only stocks caught up in this week&#39;s meme craze. While shares of the short-lived rally&#39;s flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.</p><p>For example, EV-related startup <strong>Faraday Future</strong> (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.</p><p>Over the past 24 hours, Faraday Future was the third-most-mentioned stock on Reddit&#39;s WallStreetBets forum behind the SPDR S&amp;P 500 ETF (SPY) and Nvidia (NVDA), according to web data company Thinknum.</p><p>Retail trader and YouTuber Matt Kohrs told Yahoo Finance, &#34;Similar to 2021 [during the meme rally], people seem to be targeting equities with high short interest,&#34; noting Faraday Future&#39;s short interest sits at roughly 92% of the float.</p><p>Other heavily shorted stocks that were volatile during the session include <strong>Crown ElectroKinetics</strong> (CRKN). The Oregon-based smart glass micro-cap company gained nearly 300% over the past five days.</p><p><strong>Greenwave Technology Solutions</strong> (GWAV) was up more than 250% for the week. The small, Virginia-based metal recycling company added to prior session gains as shares of GameStop and AMC were unraveling.</p></body></html>\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"GWAV":"Greenwave Technology Solutions Inc.","AMC":"AMC院线","GME":"游戏驿站","FFIE":"Faraday Future","CRKN":"Crown Electrokinetics Corp."},"source_url":"","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1135619293","content_text":"It was the week the meme-stock frenzy from 2021 returned with a vengeance - and it may all be over already.All it took was a tweet from the long-dormant X account associated with investor Keith Gill, aka Roaring Kitty, last Sunday to spark a fresh frenzy of buying of videogame retailer GameStop Corp.'s (GME) and cinema chain AMC Entertainment Holdings Inc.'s (AMC) stocks that lasted through Tuesday.GameStop (GME) and AMC (AMC) weren't the only stocks caught up in this week's meme craze. While shares of the short-lived rally's flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.For example, EV-related startup Faraday Future (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.GameStop Issues Profit Warning, Files to Issue More SharesGameStop Corp.’s stock fell 20% on Friday, after the videogame retailer and key meme stock issued a profit and sales warning for the first quarter and also filed to sell more shares.Grapevine, Texas-based GameStop said it expects its first-quarter net loss to range from $27 million to $37 million, narrower than the loss of $50.5 million posted in the year-earlier quarter. The company’s first quarter ended May 4.Sales are expected to range from $872 million to $892 million, down from $1.237 billion a year ago.AMC Discloses Debt-for-Equity Swap That Will See It Issue 23.3 Million SharesAMC Entertainment Holdings disclosed that it will issue 23.3 million shares in a debt-for-equity exchange for $163.9 million of bonds that mature in 2026 on Wednesday.The 10%/12% cash/PIK toggle bonds — PIK stands for payment-in-kind — offer an issuer the ability to defer interest payments in return for a higher coupon later.Bill Gross Sells GameStop, AMC Options to Cash In on Meme ManiaBill Gross is making a habit of selling options on meme stocks, and his latest trades center on GameStop Corp. and AMC Entertainment Holdings Inc. The legendary investor said he sold calls and puts on the poster children of the meme stock mania, as the shares of both companies take off with speculators using the retail trader favorites as a way to treat the stock market as a casino.In a critique of the latest trading flurry, in which GameStop has soared 179% in two days while AMC has jumped 135%, Gross posted on X that “Gamestonk” is passe. “Buy? Sell? Not me,” he wrote on the social media platform Tuesday.His strategy centers on selling what he describes as “400% annualized volatility.” These stocks ripped even higher than GameStop in the meme rallyGameStop (GME) and AMC (AMC) weren't the only stocks caught up in this week's meme craze. While shares of the short-lived rally's flag bearers continued to unravel Friday, smaller meme-related equities ended the week with higher gains.For example, EV-related startup Faraday Future (FFIE) soared as much as 122% Friday before crashing into red territory. The stock still gained more than 2,000% over the past five days.Over the past 24 hours, Faraday Future was the third-most-mentioned stock on Reddit's WallStreetBets forum behind the SPDR S&P 500 ETF (SPY) and Nvidia (NVDA), according to web data company Thinknum.Retail trader and YouTuber Matt Kohrs told Yahoo Finance, \"Similar to 2021 [during the meme rally], people seem to be targeting equities with high short interest,\" noting Faraday Future's short interest sits at roughly 92% of the float.Other heavily shorted stocks that were volatile during the session include Crown ElectroKinetics (CRKN). The Oregon-based smart glass micro-cap company gained nearly 300% over the past five days.Greenwave Technology Solutions (GWAV) was up more than 250% for the week. The small, Virginia-based metal recycling company added to prior session gains as shares of GameStop and AMC were unraveling.","news_type":1},"isVote":1,"tweetType":1,"viewCount":100,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":326650471809104,"gmtCreate":1720782130372,"gmtModify":1720782145286,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"authorIdStr":"4119166036703922","idStr":"4119166036703922"},"themes":[],"htmlText":"&nbsp;","listText":"&nbsp;","text":"","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/326650471809104","repostId":"1195381387","repostType":2,"repost":{"id":"1195381387","weMediaInfo":{"introduction":"Providing stock market headlines, business news, financials and earnings ","home_visible":1,"media_name":"Tiger Newspress","id":"1079075236","head_image":"https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba"},"pubTimestamp":1720772009,"share":"https://ttm.financial/m/news/1195381387?lang=&edition=fundamental","pubTime":"2024-07-12 16:13","market":"us","language":"en","title":"UBS Cuts Tesla to Sell on Concern Over AI-Driven Share Rally; Raises Target Price to $197 From $147","url":"https://stock-news.laohu8.com/highlight/detail?id=1195381387","media":"Tiger Newspress","summary":"1) TSLA price disconnecting from fundamentals has occurred in the past and can persist for a while. 2) 2Q24 results may be above expectations, causing positive revisions to 25/26F helping to sustain momentum. 3) Investor tepidness to be negative into “robo-taxi” day, and/or there is a true upside surprise at the event. In our view, we believe TSLA is making good technological progress, but the challenge is hard and may face operational challenges . More meaningful than robo-taxi is showing the n","content":"<html><head></head><body><ul style=\"\"><li><p>Tesla Inc.’s stock is downgraded by UBS Group, on concerns that the US electric carmaker’s shares have risen “too much, too soon” on optimism over its artificial intelligence plans. </p></li></ul><p><strong>Increasingly difficult to justify valuation</strong></p><p>UBS downgrades TSLA from Neutral to Sell. TSLA is more than just an auto company, and there are some positive developments (e.g. Energy, FSD) that add additional support. This is increasingly important as expectations for the core Auto business deteriorate. TSLA has always had a premium attached to it for other, future, growth initiatives. Properly valuing that optionality is difficult. This premium has widened of late, we believe, on AI enthusiasm. After going through the different businesses we can more substantially value, at current levels, we are still left with a &gt;$500bn “stub” for that future growth. Even if we give that “stub” a 5-year time horizon, that implies a 5-year future value of $1T. And this is just to justify current levels; one would need to see an even larger opportunity to justify a Buy rating. While TSLA is investing heavily in AI and the tech is making progress, investment is costly, pace of improvement may slow and the payoff is long dated. If market enthusiasm for AI diminishes, this may impact TSLA&#39;s multiple. Given the lack of visibility and the risk that growth opportunities materialize on a longer time horizon (or not at all), with the stock at 86x NTM P/E, downgrade to Sell.</p><p><strong>When ex-auto contribution to price nears the highs, good opportunity to sell</strong></p><p>Our valuation attribution analysis shows that the market has (fairly consistently) valued TSLA’s core auto business between $60-$90/share. The “other attribution” has been volatile but past 2 year average is ~$140/share. With the recent rally, it’s now nearly ~$175/share. Fig. 3 shows when other becomes larger contributor to price, stock starts to trend down. O ur SOTP view values auto at ~$57, Energy, which has shown recent strong growth (and higher margin) is worth ~$18. We estimate FSD/robo-taxi could be ~$18 (see UBS Evidence Lab FSD survey inside), but that&#39;s only ~$93 of the more easily identifiable value, implying a premium/future option value that is ~61% of today’s price.</p><p><strong>Where could we be wrong?</strong> 1) TSLA price disconnecting from fundamentals has occurred in the past and can persist for a while. 2) 2Q24 results may be above expectations, causing positive revisions to 25/26F helping to sustain momentum. 3) Investor tepidness to be negative into “robo-taxi” day, and/or there is a true upside surprise at the event. In our view, we believe TSLA is making good technological progress, but the challenge is hard and may face operational challenges (regulatory, etc.). More meaningful than robo-taxi is showing the new vehicle, as that could change 25/26F numbers. But consensus already considers higher units, and we believe the vehicle could pressure auto margins.</p><p><strong>Valuation: PT to $ 197 from $147 based on 55x P/E (45x prior)</strong></p><p>55x is at the high end of the past 2-year range and is supported by our SOTP analysis.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/45954af4dbf44b11676fefa1e474d3bb\" title=\"\" tg-width=\"772\" tg-height=\"226\"/></p><h3 id=\"id_1093952194\">Pivotal Questions</h3><p><strong>Q: Can TSLA get to &gt;5mm v ehicle deliveries by 2030?</strong></p><p>No. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for the current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving &gt;3mm units for delivery when max capacity may be ~3mm could be challenging.</p><p><strong>Q: Can Energy grow at a ~30% CAGR through 2030?</strong></p><p>Potentially. TSLA Energy has grown impressively of late, and importantly, this is currently a high margin business for the company. However, we caution that energy storage deployments can be lumpy. Looking ahead, the opportunity for stationary storage is large, so a ~30% CAGR through 2030 to get to ~$42bn in 2030 revenue is possible. However, more capacity investment would be needed, the timing of which isn&#39;t clear, and the law of large numbers may come into play as we move through the decade. We model a ~22% CAGR through 2030E.</p><p><strong>UBS VIEW</strong></p><p>We are Sell rated on TSLA. TSLA is more than just an auto company, and there are some positive developments in other areas such as Energy and FSD. Further, TSLA has always traded with a premium attached to it for other, future growth initiatives. Properly valuing that optionality is difficult. However, at current levels, we believe that unidentifiable premium is too significant. Given the lack of visibility and the risk that these growth opportunities materialize on a longer time horizon (or don’t materialize at all), we rate the stock Sell.</p><p><strong>EVIDENCE</strong></p><p>We created a proprietary valuation attribution analysis to better understand TSLA valuation. We took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla&#39;s perception in China. We also utilized a UBS Evidence Lab survey to help us better understand the FSD opportunity.</p><p><strong>WHAT´S PRICED IN?</strong></p><p>Tesla has many factors driving its price action, but at current levels and all else equal, we believe 2030 auto units deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/07f529112d054be2170f604f3a3e20e7\" title=\"\" tg-width=\"595\" tg-height=\"312\"/></p><p><strong>Company Description</strong></p><p>Tesla, Inc. manufactures and sells fully electric vehicles and energy generation and storage systems, and related services. The company&#39;s mission is to accelerate the world’s transition to sustainable energy. T he company is also working on automated driving technology and Optimus, a robotic humanoid.</p><h2 id=\"id_3819601884\">More than an auto company, but how much more?</h2><p>TSLA is often labeled “not an auto company” or “more than an auto company”. We are more inclined to agree with the latter considering the vast majority of today’s revenue/profits are related to the manufacturing and selling of vehicles. This makes valuing TSLA stock challenging at times. We are not here to say that TSLA should be valued as an auto company as there are other initiatives. Some of these initiatives may have payoffs way out in the future. TSLA stock price been sensitive to future businesses, opportunities and TAMs (i.e. the potential of what TSLA could become). Some premium for this potential is fair, but we do believe investors should be cognizant of how much the auto business and other more readily valuable businesses contributes to the stock price to help ground the valuation and select entry and exit points.</p><h2 id=\"id_3099312274\">UBS&#39; TSLA valuation attribution analysis</h2><p>Below, we took a look at the historical contribution of TSLA’s automotive business to TSLA’s total market value. We specifically focus on auto only for this analysis as for a large period of time, this has been, and remains, the company&#39;s primary driver. A uto also has the richest data for historical consensus expectations. For this analysis, we took consensus 2030 auto delivery expectations (at that time) and consistently applied a $40k ASP, a normalized Auto EBIT margin of 15% and 20x forward P/E multiple. Yes, some will quibble with our assumptions, particularly the multiple considering legacy OEMs trade at single-digit P/Es and Toyota, as a best in class OEM, historically may trade closer to~10x. However, we’d a) argue that TSLA&#39;s auto business still has more growth potential ahead vs. a more mature Toyota and b) we believe we are being somewhat generous to auto for this analysis. We then discount that nominal auto value at the cost of equity (at that time) to that period. We then compare the implied auto contribution to the total market capitalization of TSLA at that time.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/5c1da45256b06a41729fadf0b64bf3d9\" title=\"\" tg-width=\"634\" tg-height=\"403\"/></p><p>A few things from this analysis surprised us:</p><ul style=\"\"><li><p>The market value attributable to auto was more consistent than we expected. It has generally been between $200-$300bn since 2021 or ~$60-$90 in per share terms. This surprised us because consensus 2030 deliveries used to be &gt;7mm and now stand &gt;30% lower at ~4.8mm units. Mitigating the impact of this negative revision is the discounting (i.e. we are now closer to 2030). Bears may argue even current 2030 expectations are too high, which may be warranted (UBS is at ~3.9mm). However, we felt using consensus expectations to figure out market expectations was more appropriate.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/824940f43a694f9bbfbd3094c34acda4\" title=\"\" tg-width=\"634\" tg-height=\"406\"/></p><ul style=\"\"><li><p>How much of TSLA&#39;s valuation is attributable to “other” initiatives? Over the past 4 years, on average only ~30% of TSLA’s stock price is attributable to core auto, again using our assumptions from above (less if one were to assume a lower margin or multiple). Over the past two years, this has been closer to ~36%. At TSLA’s current price, only 28% of TSLA’s current value is attributable to core auto, an 8pp swing since the end of June and at the lows over the past 2 years.</p></li></ul><p>While valuation disconnections from more tangible fundamentals have occurred in TSLA’s history, and it can persist for extended periods of times, we believe that when these hopes get elevated, it is not a good time to initiate or add to positions. Rather, it’s a time to sell. Over the past two years, when the percent of the stock price that our analysis shows is attributable to auto dips below the 30% average, the stock has entered downward trend channels (see 6/22 and 6/23).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/91e873407ad615e28f97130ffdfe1f69\" title=\"\" tg-width=\"654\" tg-height=\"466\"/></p><h2 id=\"id_3206630880\">What about TSLA’s other endeavors?</h2><p>With our attribution analysis showing less than 30% of the current stock price is attributable to core auto, we asked ourselves, did something change? While the recent 2Q24 auto deliveries of ~444k was better than expectations, it was still down -5% y/y and was likely supported by some promotional activity. Further, in our view, quarterly deliveries coming in 20-25k (~5%) better doesn’t warrant a 15% rally since the delivery print (and a ~22% rally over the past 10 days). So, is there reason to be more optimistic on some of TSLA’s other initiatives?</p><h3 id=\"id_2406147011\">Tesla Energy</h3><p>One area that the market may have gotten more excited about, that also came out with the deliveries release, is Tesla Energy, which reported 9.4 GWh of energy storage product deployment in the quarter (+157% y/y and +132% q/q). At their annual meeting, Elon Musk also indicated the company was tracking towards 200-300% y/y growth in energy storage. This is important since Energy is currently higher gross margin than Auto (Energy was 24.6% in 1Q24), so this could help stem negative revisions from the pricing/promotion actions taken to stimulate auto demand. While we are more positive on Energy and raise our Energy sales forecasts, we caution that Energy sales tend to be lumpy.</p><p>Tesla currently has their Megafactory in Lathrop, California, which has an annual capacity to build 10,000 Megapacks or ~40 GWh of storage. During 1Q24 earnings, TSLA announced that they had commissioned their second general assembly line as they look to ramp Lathrop to full capacity. TSLA is also opening their Megafactory in Shanghai which will add an additional 40 GWh of energy storage capacity. We expect this facility to be operational in 1H25. We now forecast TSLA will deploy ~27 GWh of storage this year, and ramp to ~37 GWh next year.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/2235a9dce09f3858e83800a2c8b54fef\" title=\"\" tg-width=\"778\" tg-height=\"712\"/></p><h3 id=\"id_1152913170\">AI</h3><p>Tesla is investing heavily in AI. Earlier this year, Musk announced that TSLA had installed and commissioned 35k Nvidia H100 GPUs and are aiming for 85k GPUs by the end of the year. Musk has also talked about spending ~$10bn on combined training and inference AI this year, the latter being primarily in the car. Tesla is also is developing their own silicon for their Dojo supercomputer, though in January 2024, Musk stated Dojo was “a long shot worth taking because the payoff is potentially very high. But it&#39;s not something that is a high probability.&#34;</p><p>The fruits of AI investment at Tesla would be related to Full Self Driving (FSD), which is their current advanced driving assistant, their robo-taxi initiative (planned robo-taxi day, now reportedly postponed to October), and Optimus, their humanoid robot initiative.</p><p>We believe TSLA stock price has gotten caught up in the AI trade/phenomenon. While we don’t doubt Tesla is making very good progress on such initiatives, aside from FSD (we were impressed by recent improvement), the other initiatives are purely R&amp;D. Large TAMs for sure, and we have more confidence in Tesla being able to manifest the power of AI in the physical world than we do for other companies. But, these are complex issues, that will take a long time to play out and success is not a certainty. As AI enthusiasm fades, we believe this can impact TSLA&#39;s multiple.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c5d81786f308252683379c4c0c26fe48\" title=\"\" tg-width=\"450\" tg-height=\"310\"/></p><h3 id=\"id_3277089746\">Full Self Driving (FSD)</h3><p>Of large debate is Tesla’s ability to charge, on a monthly recurring basis, for their advanced driver assistance system: FSD (supervised). Earlier this year, Tesla started rolling out the new version of FSD based on an end-to-end AI learning system. Tesla offered a 1-month free trial to all US Tesla vehicles with the proper hardware. They then lowered the monthly subscription cost to $99/month from $199/month.</p><p>We conducted a survey on 306 Tesla owners, ran over June 10-28th, to gauge customer reception and perception to FSD. Key points:</p><ul style=\"\"><li><p>A caveat, we believe our survey skews high to consumers that currently have (pay for) FSD vs. the reality of the marketplace. T his in part may be driven by ~53% of our respondents indicated that a Model S/X was their primary Tesla vs. S/X making up only ~6% of Tesla&#39;s 2023 US sales. S till, we are able to gather some insights from looking only at 3/Y owners and, in particular, respondents who don&#39;t currently own/subscribe to FSD to see what future &#34;take rates&#34; might be (though admittedly this is a smaller sample size).</p></li><li><p>Overall, we would say consumers are satisfied with FSD functionality (62% very satisfied) and feel safe using it (64% completely safe).</p></li><li><p>Of those that are not currently paying for FSD (so either free trial is over or still on free trial) 17% indicated they were likely to pay for FSD over the next 6 months, while 33% said somewhat likely.</p></li><li><p>However, our respondents did over-index to Model S/X vs. 3/Y when in reality, 3/Y is a significantly larger pool (and given the price point of the vehicle, points to a different willingness to pay, in our view). <strong>So, when we look only at respondents who said their main vehicle was a 3 or Y, very likely to pay for FSD over next 6 months dropped to 9% and Net Likely vs. Unlikely is only +3% (Figure 15).</strong></p></li><li><p>At the current $99/month level, 43% of Tesla customers surveyed (that indicated they are likely to continue to pay or will be likely to pay for FSD) indicated they would be willing to pay around this price ($76-$100/month). This dropped to 35% when only looking at Model 3/Y users. To us, this suggests that significantly higher adoption levels may need further price reductions.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b5d55bb0563a4f66a132b16a8deab211\" title=\"\" tg-width=\"793\" tg-height=\"601\"/></p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/af47480c103d4f6e2b0af57737985d8d\" title=\"\" tg-width=\"799\" tg-height=\"274\"/></p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/325c4b93ce1fca3b093525dc33bb296b\" title=\"\" tg-width=\"804\" tg-height=\"639\"/></p><p>The willingness (and ability) to pay for FSD matters to us as we think about future, low cost Tesla models. These new lower cost models will have a less expensive monthly vehicle payment. But, that also means that adding an additional $99/month to that payment for FSD will be a significant increase.</p><p>In China, while Tesla is making a push to be able to make FSD available, we have doubts over Tesla&#39;s ability to charge for FSD given many competitors already offer an autonomous solution without charging a monthly fee (or some even an upfront fee). Rather, we view FSD in China as almost a necessity to remain competitive with domestic Chinese offerings that have similar functionality.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b17104146f0628867d84b93db9210fa2\" title=\"\" tg-width=\"783\" tg-height=\"163\"/></p><h3 id=\"id_1267251312\">Robo-taxi</h3><p>We believe robo-taxis are a difficult technological endeavor and the business model also may face regulatory hurdles as well as questions around consumer adoption. Thus, we believe a meaningful r obo-taxi operation in the US is further out (not this decade). Tesla reportedly/recently pushed the planned 8/8 robo-taxi day to October. A subtle reminder that Tesla has had difficulty meeting timelines.</p><p>On the technology side, TSLA&#39;s move to an end-to-end (GenAI) approach has allowed for meaningful improvement in the FSD product. But the FSD product is a very good advanced driving assistant system (L2+). To move to a robo-taxi solution, the march of 9s must continue to be able to operate in all conditions within the operational design domain (ODD). We believe the end-to-end approach, on it&#39;s own, will eventually start to show slowing improvement and diminishing returns. Further, the cost for this improvement can be high. More, unique data is needed to continue the system improvement. TSLA does have access to a lot of data from their fleet, and they employ simulation. But, we believe that, similar to what is seen in GenAI with large language models (LLMs), progress can slow, and each additional improvement to the model can become increasingly more expensive to take (obtaining that new data to get the improvement and the compute to process it).</p><p>The other challenge with an end-to-end approach could be a regulatory one. There will inevitably be accidents and with an end-to-end approach without guard rails, it is difficult to understand why the system made a decision it did, thus difficult to correct for the problem (as rare as the specific event might be). We recently held an expert call on Gen AI for autonomous driving that highlighted the issue regulators may have with the lack of traceability and transparency that comes with an end-to-end approach that TSLA currently utilizes. Further, in certain geographies,TSLA still needs to test their robo-taxi with a driver before being permitted to test autonomously and then to offer driverless rides (see Waymo and Cruise).</p><h3 id=\"id_2212439252\">Optimus</h3><p>While we are excited about the progress Tesla is making on their humanoid robot, we believe this opportunity is much further out. At their annual shareholder meeting, Elon Musk helped frame the long-term opportunity. H e mentioned there could be, one day, 10bn humanoid robots, so if TSLA gets 10% share, that is 100mm Optimus units a year, and if sold for $20k, suggests a $2T revenue opportunity, $1T profit opportunity and a $20T market value opportunity (20x). However, we have difficulty underwriting significant (or specific) value to this opportunity today given the many uncertain variables, the probability of success and the unknown time frame.</p><h2 id=\"id_1024744650\">Sum-of-the-parts</h2><p>Below we take a look at a sum-of-the-parts (SOTP) for TSLA to support our P/E based valuation. We also show an upside and downside scenario.</p><ul style=\"\"><li><p><strong>Auto.</strong> We forecast 2030 units at 3.9mm units and ~$146bn in auto revenue. Applying a 15% “normalized” EBIT margin, applying a 20x P/E multiple and discounting that back to a year from now (mid-2025E) at ~13% cost of equity gives us $57/share value. 20x is above traditional OEMs in the mid-single-digits P/E and Toyota at ~10x but warranted given Tesla would still have more room for growth and the &#34;normalized&#34; Auto EBIT margins for TSLA (especially relative to legacy OEMs) could be higher.</p></li><li><p><strong>Energy.</strong> We forecast 113 GWh storage deployment and ~$28bn in Energy revenue (22% 2024-2030E CAGR). Applying a 20% “normalized” EBIT margin, applying a near-market multiple of 25x P/E multiple and discounting that back to a year from now (mid-2025E) gives us $18/share value.</p></li><li><p><strong>FSD.</strong> We forecast ~$1.5bn in 2030 revenue, which equates to ~$0.33 in EPS, and apply a software like 50x multiple, which discounted back to a year from now (mid-2025E) gives us a $9/share value.</p></li></ul><ul style=\"\"><li><p><strong>Robo-taxi.</strong> According to CNBC, Waymo, which actually gives driverless rides/operates a robo-taxi service today, latest valuation (2020) was $30bn. GM’s Cruise similarly once had a $30bn valuation, though we believe a current mark could be lower. In our base case, we apply the latest Waymo valuation of $30bn or $9/share. Our upside case more than triples the Waymo valuation to ~$100bn (we&#39;d also note that Uber has a ~$144bn market value). Our downside case assumes no value. We note that Baidu has recently been in the news as their Apollo Go robotaxi autonomous ride-hailing platform has been gaining attention and is piloting in areas such as Wuhan. However, we note that the entire Baidu market cap is ~$35bn. T he stock has rallied of late (~14%) on some of this robotaxi optimism, but that rally only contributed ~$4bn to the market cap.</p></li><li><p><strong>The TSLA Premium (AI, Optimus, other initiatives).</strong> These are difficult to value given they are, at best, R&amp;D today. Here, we are relying on the &#34;collective wisdom of markets&#34;. Going back to our earlier TSLA valuation attribution analysis, on average over the past 2-years, the market has assigned ~$490bn of value (~$141/share) to ex-auto initiatives. Between Energy, FSD and robo-taxi, we only identified $36/share of that, leaving the TSLA premium at $105/share. Note, that assuming the 13% cost of equity, the 5-year future value of that premium is $672bn and the 10-year future value is $1.2T. Given that many of these initiatives are likely to take time to materialize, we believe this seems more than fair. In our upside case, we use the more recent (high) level from our valuation attribution analysis while our downside case assumes no premium, which is closer to the minimum we&#39;ve seen vs identifiable valuations.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3618826a24dbabcfdf1557a12da5e9f1\" title=\"\" tg-width=\"574\" tg-height=\"708\"/></p><h2 id=\"id_3243539219\">VALUATION</h2><p>We value TSLA shares using a 55x P/E multiple and apply that to our current 3Q25-2Q26 TSLA EPS forecast. This yields our new $197 price target. 55x (45x prior) is at the high-end of the NTM P/E valuation range over the past 2-years but is supported by our SOTP work above.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/6a53beb83537bb6c04d35aab5ff5521b\" title=\"\" tg-width=\"421\" tg-height=\"270\"/></p><h2 id=\"id_3010455971\">Pivotal Questions</h2><h3 id=\"id_1253584077\">Q: Can TSLA get to &gt;5mm vehicle deliveries by 2030?</h3><p><strong>UBS VIEW</strong></p><p>No. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving &gt;3mm units for delivery when max capacity may be ~3mm could be challenging.</p><p><strong>EVIDENCE</strong></p><p>We took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla&#39;s perception in China.</p><p><strong>WHAT´S PRICED IN?</strong></p><p>At current levels, all else equal, we believe 2030 deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.</p><h2 id=\"id_2646094200\">How impactful will the &#39;Model 2.5&#39; be?</h2><p>Tesla’s eventful robo-taxi day may get most of the fanfare, focusing on AI and a robo-taxi service. However, in our view, a robo-taxi and other AI initiatives are still much further out. That is why we are focused on the “new” vehicle that Tesla plans to introduce, which we dub the &#39;Model 2.5&#39;. To us, this new vehicle could be the only data point to come out of the event (now expected in Oct) that can materially get investors to revise 2025/26 estimates.</p><p>Recall, Tesla scrapped the Model 2, which was expected to use a brand new unboxed manufacturing process to significantly lower the cost to produce the vehicle and offer a “$25k EV”. In their 1Q24 earnings release, Tesla indicated they plan to launch new vehicles, including more affordable models that utilize aspects of that next generation platform as well as aspects of their existing platform and will be able to be produced on the same manufacturing lines as Tesla’s current vehicle line-up.</p><p>We expect the Model 2.5 to look meaningfully different from the Model 3/Y silhouette as to differentiate the vehicle from potential Model 3/Y buyers. We also expect the starting price to be materially lower, potentially down to $25k (though we’d expect few variants to actually transact at that price).</p><p>What is the opportunity for the Model 2.5? In the US, the small standard car category (featuring the likes of the Toyota Corolla and Honda Civic) has accounted for ~7% of total sales over the past 5 years, or ~1mm units, on average. The Toyota Corolla is the current segment leader at ~23% share.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/756bc5e5ecd7afbf233418072962ec34\" title=\"\" tg-width=\"784\" tg-height=\"369\"/></p><p>When we look at the Model 3/Y and their segments, small premium II car and small premium II SUV, respectively, these Tesla models have been able to garner 40-50% share of those segments over time. If Tesla were able to garner similar share in the small standard car category, that would yield a ~450k annual sales opportunity for the Model 2.5 in the US. However, appealing to a lower tier consumer may yield additional challenges for that consumer to go electric. For instance, access to at home charging may be more limited for lower income buyers.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4adab9bc7ccdb9925ee45a4524dd4f28\" title=\"\" tg-width=\"787\" tg-height=\"316\"/></p><p>In Europe and China, smaller entry vehicles may appeal to those consumers relative to the US. I n 2023, European sales of small entry level cars was ~1.1mm or ~6% of sales. However, Eastern &amp; Central Europe made up about ~600k of that figure. W e believe these regions are likely to lag Western Europe on electrification. The Model 2.5 is also likely to face more competition in Europe as legacy OEMs look to electrify their small, affordable vehicle offerings. Further, smaller EVs from China are likely to enter the European market.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3e4fddc5de56a38ee01de16ee69e36d5\" title=\"\" tg-width=\"792\" tg-height=\"310\"/></p><p>In 2023, the Chinese affordable entry car market was ~1.7mm units, or ~6% of sales. However, t he Model 2.5 is likely to face intense competition as well, as even today, competitors for a low cost BEVs in China exist.</p><p>To further show the competitive challenge Tesla has in China, we looked to UBS Evidence Lab and China 360, who recently published a brand perception survey which surveyed 1,800 Chinese customers. In regards to Autos, the survey highlighted that the top 5 factors of importance for Chinese customers are safety, trustworthiness, high quality, value for money and versatility. T he survey highlighted that Chinese customers view Tesla&#39;s brand image as one more of p remiumness, trendiness and innovation. On the top 5 factors, Tesla only screened well on high quality.</p><h2 id=\"id_2997648751\">Guided by capacity</h2><p>While the market opportunity may be there globally, we must always keep in mind that production and deliveries must be guided by capacity. We currently forecast TSLA 2024 production at 1.78mm and deliveries at 1.69mm. As of 1Q24, Tesla’s stated installed capacity is 2.35mm units. Tesla has indicated that the move to utilize the same manufacturing lines as their current vehicle lineup would enable them to fully utilize their expected maximum capacity of close to 3mm units. We believe this means utilizing more of the space at their Austin and Berlin facilities. We note Tesla recently received approval to expand capacity in Berlin to increase manufacturing capacity to ~1mm units. Europe imported ~170k TSLA vehicles from China last year, but in light of potential tariffs on EVs made in China, this could make manufacturing more vehicles in Europe more attractive. TSLA produced ~200k vehicles in Germany last year according to S&amp;P Mobility. We believe Tesla may eventually explore expanded capacity at Shanghai, but for now, we believe that facility is operating at max capacity.</p><p>Tesla indicated that they will utilize that ~3mm of capacity before investing in new manufacturing lines. We would assume this means new manufacturing facilities as well. Consensus is currently looking for ~3.1mm unit deliveries in 2027, which likely means production has to be higher than that. Further, operating at 100% utilization is very difficult. So, we see risk to current unit expectations over the coming years.</p><h2 id=\"id_2569836359\">New models important as current demand stagnates</h2><p>The reason why the new model is so critical to TSLA growth is that demand looks more challenging in Tesla’s major regions of the US, China and Europe.</p><h3 id=\"id_2364838120\">US - Is Tesla demand saturated?</h3><p>In the US, YTD BEV penetration is 7.7%, up from 7.6% in 2023. TSLA&#39;s current share of the BEV market in the US is ~51%, which has come down from ~56% in 2023.</p><p>In the US, even recent levels of demand for TSLA vehicles seems to be driven by pricing actions. This is not just price cuts but now also financing actions. In May, TSLA lowered the APR for the Model Y to 0.99% (from a market rate of closer to 6.39%) and lowered the monthly lease payment for the Model 3 to $299 from $329.</p><h3 id=\"id_2405590704\">Europe - demand lower y/y</h3><p>In Europe, BEV penetration YTD is 12.1% (fairly flat y/y), and TSLA has ~17% share, which is down from ~19% last year while penetration has remained relatively flat. This is driven primarily by falling demand in Germany, France and Norway. We believe BEV penetration has stalled, in part because there is no regulatory need for OEMs to push higher BEV mix this year. That should change next year, which could mean we see BEV penetration in Europe increase, but TSLA share decrease further.</p><h3 id=\"id_678076539\">China - A very competitive market</h3><p>In China, YTD NEV retail penetration is ~40%, TSLA&#39;s share of the NEV market being ~7%, with TSLA losing 100bps of share vs 2023. China remains a very competitive market with a multitude of new entrants and new models being brought to production a lot faster than in other parts of the world.</p><h2 id=\"id_3022804001\">Can the Model 2.5 deliver on margin expectations?</h2><p>This remains a key and open question, but the math seems difficult. For instance, if we assume that a Model Y sells for ~$45k and has 20% gross margins, then the COGS/unit is ~$36k. The Model 2 was expected to start at a $25k price point but was also supposed to use an unboxed manufacturing concept that was expected to reduce COGS by ~50% vs. Model 3/Y or call it ~$20k of COGS for the original Model 2 plan. If we assume the plan was for the Model 2 to have had similar gross margins to the Model Y, Model 2 COGS would need to be ~$20k. Part of this reduction is from a smaller battery, reduced content (i.e. no glass roof) as well as better integration and controller reduction, etc. However, we believe roughly 1/3rd was due to the new unboxed manufacturing process. This means Tesla would need to find an additional $5k in cost to get the targeted gross margins of the original Model 2 plan. If we assume Tesla were able to get half of the savings from the originally planned unboxed manufacturing benefit, then, that would imply a gross margin of 10%. Of course, pricing could be higher (and effective pricing will likely be higher from differing trims). However, the higher the price of the Model 2.5 goes and the closer it gets to Model 3/Y pricing, the differentiation and cannibalization problem gets larger.</p><h3 id=\"id_130370043\">Risk to the current share price is currently at 1:1.8 to the downside</h3><p><strong>UPSIDE ($338):</strong> Our upside case uses a 79x PE on our 3Q25-2Q26 EPS estimate of $4.29. This is supported by our SOTP analysis that attributes $106 to Auto, $30 to Energy, $13 to FSD, $29 to Robo-taxi and $160 as a Tesla premium for all other initiatives. This implies a value per share of $338.</p><p><strong>BASE ($197):</strong> Our valuation uses 55x PE on our 3Q25-2Q26 EPS estimate of $3.57. This is supported by our SOTP analysis that attributes $57 to Auto, $18 to Energy, $9 to FSD, $9 to Robo-taxi and a $105 TSLA premium for other initiatives in line with market implied average over past 2-years. This gets us to our $197 PT.</p><p><strong>DOWNSIDE ($67):</strong> Our downside case uses 23x PE on our 3Q25-2Q26 EPS estimate of $2.86. This is supported by our SOTP analysis that attributes $48 to Auto, $14 to Energy, $5 to FSD. In our downside we do not attribute value to Robo-taxi or include a TSLA premium in our valuation, which is closer to the minimum we&#39;ve seen vs identifiable value. This implies a value per share of $67.</p></body></html>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>UBS Cuts Tesla to Sell on Concern Over AI-Driven Share Rally; Raises Target Price to $197 From $147</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUBS Cuts Tesla to Sell on Concern Over AI-Driven Share Rally; Raises Target Price to $197 From $147\n</h2>\n\n<h4 class=\"meta\">\n\n\n<a class=\"head\" href=\"https://laohu8.com/wemedia/1079075236\">\n\n\n<div class=\"h-thumb\" style=\"background-image:url(https://static.tigerbbs.com/8274c5b9d4c2852bfb1c4d6ce16c68ba);background-size:cover;\"></div>\n\n<div class=\"h-content\">\n<p class=\"h-name\">Tiger Newspress </p>\n<p class=\"h-time\">2024-07-12 16:13</p>\n</div>\n\n</a>\n\n\n</h4>\n\n</header>\n<article>\n<html><head></head><body><ul style=\"\"><li><p>Tesla Inc.’s stock is downgraded by UBS Group, on concerns that the US electric carmaker’s shares have risen “too much, too soon” on optimism over its artificial intelligence plans. </p></li></ul><p><strong>Increasingly difficult to justify valuation</strong></p><p>UBS downgrades TSLA from Neutral to Sell. TSLA is more than just an auto company, and there are some positive developments (e.g. Energy, FSD) that add additional support. This is increasingly important as expectations for the core Auto business deteriorate. TSLA has always had a premium attached to it for other, future, growth initiatives. Properly valuing that optionality is difficult. This premium has widened of late, we believe, on AI enthusiasm. After going through the different businesses we can more substantially value, at current levels, we are still left with a &gt;$500bn “stub” for that future growth. Even if we give that “stub” a 5-year time horizon, that implies a 5-year future value of $1T. And this is just to justify current levels; one would need to see an even larger opportunity to justify a Buy rating. While TSLA is investing heavily in AI and the tech is making progress, investment is costly, pace of improvement may slow and the payoff is long dated. If market enthusiasm for AI diminishes, this may impact TSLA&#39;s multiple. Given the lack of visibility and the risk that growth opportunities materialize on a longer time horizon (or not at all), with the stock at 86x NTM P/E, downgrade to Sell.</p><p><strong>When ex-auto contribution to price nears the highs, good opportunity to sell</strong></p><p>Our valuation attribution analysis shows that the market has (fairly consistently) valued TSLA’s core auto business between $60-$90/share. The “other attribution” has been volatile but past 2 year average is ~$140/share. With the recent rally, it’s now nearly ~$175/share. Fig. 3 shows when other becomes larger contributor to price, stock starts to trend down. O ur SOTP view values auto at ~$57, Energy, which has shown recent strong growth (and higher margin) is worth ~$18. We estimate FSD/robo-taxi could be ~$18 (see UBS Evidence Lab FSD survey inside), but that&#39;s only ~$93 of the more easily identifiable value, implying a premium/future option value that is ~61% of today’s price.</p><p><strong>Where could we be wrong?</strong> 1) TSLA price disconnecting from fundamentals has occurred in the past and can persist for a while. 2) 2Q24 results may be above expectations, causing positive revisions to 25/26F helping to sustain momentum. 3) Investor tepidness to be negative into “robo-taxi” day, and/or there is a true upside surprise at the event. In our view, we believe TSLA is making good technological progress, but the challenge is hard and may face operational challenges (regulatory, etc.). More meaningful than robo-taxi is showing the new vehicle, as that could change 25/26F numbers. But consensus already considers higher units, and we believe the vehicle could pressure auto margins.</p><p><strong>Valuation: PT to $ 197 from $147 based on 55x P/E (45x prior)</strong></p><p>55x is at the high end of the past 2-year range and is supported by our SOTP analysis.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/45954af4dbf44b11676fefa1e474d3bb\" title=\"\" tg-width=\"772\" tg-height=\"226\"/></p><h3 id=\"id_1093952194\">Pivotal Questions</h3><p><strong>Q: Can TSLA get to &gt;5mm v ehicle deliveries by 2030?</strong></p><p>No. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for the current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving &gt;3mm units for delivery when max capacity may be ~3mm could be challenging.</p><p><strong>Q: Can Energy grow at a ~30% CAGR through 2030?</strong></p><p>Potentially. TSLA Energy has grown impressively of late, and importantly, this is currently a high margin business for the company. However, we caution that energy storage deployments can be lumpy. Looking ahead, the opportunity for stationary storage is large, so a ~30% CAGR through 2030 to get to ~$42bn in 2030 revenue is possible. However, more capacity investment would be needed, the timing of which isn&#39;t clear, and the law of large numbers may come into play as we move through the decade. We model a ~22% CAGR through 2030E.</p><p><strong>UBS VIEW</strong></p><p>We are Sell rated on TSLA. TSLA is more than just an auto company, and there are some positive developments in other areas such as Energy and FSD. Further, TSLA has always traded with a premium attached to it for other, future growth initiatives. Properly valuing that optionality is difficult. However, at current levels, we believe that unidentifiable premium is too significant. Given the lack of visibility and the risk that these growth opportunities materialize on a longer time horizon (or don’t materialize at all), we rate the stock Sell.</p><p><strong>EVIDENCE</strong></p><p>We created a proprietary valuation attribution analysis to better understand TSLA valuation. We took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla&#39;s perception in China. We also utilized a UBS Evidence Lab survey to help us better understand the FSD opportunity.</p><p><strong>WHAT´S PRICED IN?</strong></p><p>Tesla has many factors driving its price action, but at current levels and all else equal, we believe 2030 auto units deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/07f529112d054be2170f604f3a3e20e7\" title=\"\" tg-width=\"595\" tg-height=\"312\"/></p><p><strong>Company Description</strong></p><p>Tesla, Inc. manufactures and sells fully electric vehicles and energy generation and storage systems, and related services. The company&#39;s mission is to accelerate the world’s transition to sustainable energy. T he company is also working on automated driving technology and Optimus, a robotic humanoid.</p><h2 id=\"id_3819601884\">More than an auto company, but how much more?</h2><p>TSLA is often labeled “not an auto company” or “more than an auto company”. We are more inclined to agree with the latter considering the vast majority of today’s revenue/profits are related to the manufacturing and selling of vehicles. This makes valuing TSLA stock challenging at times. We are not here to say that TSLA should be valued as an auto company as there are other initiatives. Some of these initiatives may have payoffs way out in the future. TSLA stock price been sensitive to future businesses, opportunities and TAMs (i.e. the potential of what TSLA could become). Some premium for this potential is fair, but we do believe investors should be cognizant of how much the auto business and other more readily valuable businesses contributes to the stock price to help ground the valuation and select entry and exit points.</p><h2 id=\"id_3099312274\">UBS&#39; TSLA valuation attribution analysis</h2><p>Below, we took a look at the historical contribution of TSLA’s automotive business to TSLA’s total market value. We specifically focus on auto only for this analysis as for a large period of time, this has been, and remains, the company&#39;s primary driver. A uto also has the richest data for historical consensus expectations. For this analysis, we took consensus 2030 auto delivery expectations (at that time) and consistently applied a $40k ASP, a normalized Auto EBIT margin of 15% and 20x forward P/E multiple. Yes, some will quibble with our assumptions, particularly the multiple considering legacy OEMs trade at single-digit P/Es and Toyota, as a best in class OEM, historically may trade closer to~10x. However, we’d a) argue that TSLA&#39;s auto business still has more growth potential ahead vs. a more mature Toyota and b) we believe we are being somewhat generous to auto for this analysis. We then discount that nominal auto value at the cost of equity (at that time) to that period. We then compare the implied auto contribution to the total market capitalization of TSLA at that time.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/5c1da45256b06a41729fadf0b64bf3d9\" title=\"\" tg-width=\"634\" tg-height=\"403\"/></p><p>A few things from this analysis surprised us:</p><ul style=\"\"><li><p>The market value attributable to auto was more consistent than we expected. It has generally been between $200-$300bn since 2021 or ~$60-$90 in per share terms. This surprised us because consensus 2030 deliveries used to be &gt;7mm and now stand &gt;30% lower at ~4.8mm units. Mitigating the impact of this negative revision is the discounting (i.e. we are now closer to 2030). Bears may argue even current 2030 expectations are too high, which may be warranted (UBS is at ~3.9mm). However, we felt using consensus expectations to figure out market expectations was more appropriate.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/824940f43a694f9bbfbd3094c34acda4\" title=\"\" tg-width=\"634\" tg-height=\"406\"/></p><ul style=\"\"><li><p>How much of TSLA&#39;s valuation is attributable to “other” initiatives? Over the past 4 years, on average only ~30% of TSLA’s stock price is attributable to core auto, again using our assumptions from above (less if one were to assume a lower margin or multiple). Over the past two years, this has been closer to ~36%. At TSLA’s current price, only 28% of TSLA’s current value is attributable to core auto, an 8pp swing since the end of June and at the lows over the past 2 years.</p></li></ul><p>While valuation disconnections from more tangible fundamentals have occurred in TSLA’s history, and it can persist for extended periods of times, we believe that when these hopes get elevated, it is not a good time to initiate or add to positions. Rather, it’s a time to sell. Over the past two years, when the percent of the stock price that our analysis shows is attributable to auto dips below the 30% average, the stock has entered downward trend channels (see 6/22 and 6/23).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/91e873407ad615e28f97130ffdfe1f69\" title=\"\" tg-width=\"654\" tg-height=\"466\"/></p><h2 id=\"id_3206630880\">What about TSLA’s other endeavors?</h2><p>With our attribution analysis showing less than 30% of the current stock price is attributable to core auto, we asked ourselves, did something change? While the recent 2Q24 auto deliveries of ~444k was better than expectations, it was still down -5% y/y and was likely supported by some promotional activity. Further, in our view, quarterly deliveries coming in 20-25k (~5%) better doesn’t warrant a 15% rally since the delivery print (and a ~22% rally over the past 10 days). So, is there reason to be more optimistic on some of TSLA’s other initiatives?</p><h3 id=\"id_2406147011\">Tesla Energy</h3><p>One area that the market may have gotten more excited about, that also came out with the deliveries release, is Tesla Energy, which reported 9.4 GWh of energy storage product deployment in the quarter (+157% y/y and +132% q/q). At their annual meeting, Elon Musk also indicated the company was tracking towards 200-300% y/y growth in energy storage. This is important since Energy is currently higher gross margin than Auto (Energy was 24.6% in 1Q24), so this could help stem negative revisions from the pricing/promotion actions taken to stimulate auto demand. While we are more positive on Energy and raise our Energy sales forecasts, we caution that Energy sales tend to be lumpy.</p><p>Tesla currently has their Megafactory in Lathrop, California, which has an annual capacity to build 10,000 Megapacks or ~40 GWh of storage. During 1Q24 earnings, TSLA announced that they had commissioned their second general assembly line as they look to ramp Lathrop to full capacity. TSLA is also opening their Megafactory in Shanghai which will add an additional 40 GWh of energy storage capacity. We expect this facility to be operational in 1H25. We now forecast TSLA will deploy ~27 GWh of storage this year, and ramp to ~37 GWh next year.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/2235a9dce09f3858e83800a2c8b54fef\" title=\"\" tg-width=\"778\" tg-height=\"712\"/></p><h3 id=\"id_1152913170\">AI</h3><p>Tesla is investing heavily in AI. Earlier this year, Musk announced that TSLA had installed and commissioned 35k Nvidia H100 GPUs and are aiming for 85k GPUs by the end of the year. Musk has also talked about spending ~$10bn on combined training and inference AI this year, the latter being primarily in the car. Tesla is also is developing their own silicon for their Dojo supercomputer, though in January 2024, Musk stated Dojo was “a long shot worth taking because the payoff is potentially very high. But it&#39;s not something that is a high probability.&#34;</p><p>The fruits of AI investment at Tesla would be related to Full Self Driving (FSD), which is their current advanced driving assistant, their robo-taxi initiative (planned robo-taxi day, now reportedly postponed to October), and Optimus, their humanoid robot initiative.</p><p>We believe TSLA stock price has gotten caught up in the AI trade/phenomenon. While we don’t doubt Tesla is making very good progress on such initiatives, aside from FSD (we were impressed by recent improvement), the other initiatives are purely R&amp;D. Large TAMs for sure, and we have more confidence in Tesla being able to manifest the power of AI in the physical world than we do for other companies. But, these are complex issues, that will take a long time to play out and success is not a certainty. As AI enthusiasm fades, we believe this can impact TSLA&#39;s multiple.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c5d81786f308252683379c4c0c26fe48\" title=\"\" tg-width=\"450\" tg-height=\"310\"/></p><h3 id=\"id_3277089746\">Full Self Driving (FSD)</h3><p>Of large debate is Tesla’s ability to charge, on a monthly recurring basis, for their advanced driver assistance system: FSD (supervised). Earlier this year, Tesla started rolling out the new version of FSD based on an end-to-end AI learning system. Tesla offered a 1-month free trial to all US Tesla vehicles with the proper hardware. They then lowered the monthly subscription cost to $99/month from $199/month.</p><p>We conducted a survey on 306 Tesla owners, ran over June 10-28th, to gauge customer reception and perception to FSD. Key points:</p><ul style=\"\"><li><p>A caveat, we believe our survey skews high to consumers that currently have (pay for) FSD vs. the reality of the marketplace. T his in part may be driven by ~53% of our respondents indicated that a Model S/X was their primary Tesla vs. S/X making up only ~6% of Tesla&#39;s 2023 US sales. S till, we are able to gather some insights from looking only at 3/Y owners and, in particular, respondents who don&#39;t currently own/subscribe to FSD to see what future &#34;take rates&#34; might be (though admittedly this is a smaller sample size).</p></li><li><p>Overall, we would say consumers are satisfied with FSD functionality (62% very satisfied) and feel safe using it (64% completely safe).</p></li><li><p>Of those that are not currently paying for FSD (so either free trial is over or still on free trial) 17% indicated they were likely to pay for FSD over the next 6 months, while 33% said somewhat likely.</p></li><li><p>However, our respondents did over-index to Model S/X vs. 3/Y when in reality, 3/Y is a significantly larger pool (and given the price point of the vehicle, points to a different willingness to pay, in our view). <strong>So, when we look only at respondents who said their main vehicle was a 3 or Y, very likely to pay for FSD over next 6 months dropped to 9% and Net Likely vs. Unlikely is only +3% (Figure 15).</strong></p></li><li><p>At the current $99/month level, 43% of Tesla customers surveyed (that indicated they are likely to continue to pay or will be likely to pay for FSD) indicated they would be willing to pay around this price ($76-$100/month). This dropped to 35% when only looking at Model 3/Y users. To us, this suggests that significantly higher adoption levels may need further price reductions.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b5d55bb0563a4f66a132b16a8deab211\" title=\"\" tg-width=\"793\" tg-height=\"601\"/></p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/af47480c103d4f6e2b0af57737985d8d\" title=\"\" tg-width=\"799\" tg-height=\"274\"/></p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/325c4b93ce1fca3b093525dc33bb296b\" title=\"\" tg-width=\"804\" tg-height=\"639\"/></p><p>The willingness (and ability) to pay for FSD matters to us as we think about future, low cost Tesla models. These new lower cost models will have a less expensive monthly vehicle payment. But, that also means that adding an additional $99/month to that payment for FSD will be a significant increase.</p><p>In China, while Tesla is making a push to be able to make FSD available, we have doubts over Tesla&#39;s ability to charge for FSD given many competitors already offer an autonomous solution without charging a monthly fee (or some even an upfront fee). Rather, we view FSD in China as almost a necessity to remain competitive with domestic Chinese offerings that have similar functionality.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b17104146f0628867d84b93db9210fa2\" title=\"\" tg-width=\"783\" tg-height=\"163\"/></p><h3 id=\"id_1267251312\">Robo-taxi</h3><p>We believe robo-taxis are a difficult technological endeavor and the business model also may face regulatory hurdles as well as questions around consumer adoption. Thus, we believe a meaningful r obo-taxi operation in the US is further out (not this decade). Tesla reportedly/recently pushed the planned 8/8 robo-taxi day to October. A subtle reminder that Tesla has had difficulty meeting timelines.</p><p>On the technology side, TSLA&#39;s move to an end-to-end (GenAI) approach has allowed for meaningful improvement in the FSD product. But the FSD product is a very good advanced driving assistant system (L2+). To move to a robo-taxi solution, the march of 9s must continue to be able to operate in all conditions within the operational design domain (ODD). We believe the end-to-end approach, on it&#39;s own, will eventually start to show slowing improvement and diminishing returns. Further, the cost for this improvement can be high. More, unique data is needed to continue the system improvement. TSLA does have access to a lot of data from their fleet, and they employ simulation. But, we believe that, similar to what is seen in GenAI with large language models (LLMs), progress can slow, and each additional improvement to the model can become increasingly more expensive to take (obtaining that new data to get the improvement and the compute to process it).</p><p>The other challenge with an end-to-end approach could be a regulatory one. There will inevitably be accidents and with an end-to-end approach without guard rails, it is difficult to understand why the system made a decision it did, thus difficult to correct for the problem (as rare as the specific event might be). We recently held an expert call on Gen AI for autonomous driving that highlighted the issue regulators may have with the lack of traceability and transparency that comes with an end-to-end approach that TSLA currently utilizes. Further, in certain geographies,TSLA still needs to test their robo-taxi with a driver before being permitted to test autonomously and then to offer driverless rides (see Waymo and Cruise).</p><h3 id=\"id_2212439252\">Optimus</h3><p>While we are excited about the progress Tesla is making on their humanoid robot, we believe this opportunity is much further out. At their annual shareholder meeting, Elon Musk helped frame the long-term opportunity. H e mentioned there could be, one day, 10bn humanoid robots, so if TSLA gets 10% share, that is 100mm Optimus units a year, and if sold for $20k, suggests a $2T revenue opportunity, $1T profit opportunity and a $20T market value opportunity (20x). However, we have difficulty underwriting significant (or specific) value to this opportunity today given the many uncertain variables, the probability of success and the unknown time frame.</p><h2 id=\"id_1024744650\">Sum-of-the-parts</h2><p>Below we take a look at a sum-of-the-parts (SOTP) for TSLA to support our P/E based valuation. We also show an upside and downside scenario.</p><ul style=\"\"><li><p><strong>Auto.</strong> We forecast 2030 units at 3.9mm units and ~$146bn in auto revenue. Applying a 15% “normalized” EBIT margin, applying a 20x P/E multiple and discounting that back to a year from now (mid-2025E) at ~13% cost of equity gives us $57/share value. 20x is above traditional OEMs in the mid-single-digits P/E and Toyota at ~10x but warranted given Tesla would still have more room for growth and the &#34;normalized&#34; Auto EBIT margins for TSLA (especially relative to legacy OEMs) could be higher.</p></li><li><p><strong>Energy.</strong> We forecast 113 GWh storage deployment and ~$28bn in Energy revenue (22% 2024-2030E CAGR). Applying a 20% “normalized” EBIT margin, applying a near-market multiple of 25x P/E multiple and discounting that back to a year from now (mid-2025E) gives us $18/share value.</p></li><li><p><strong>FSD.</strong> We forecast ~$1.5bn in 2030 revenue, which equates to ~$0.33 in EPS, and apply a software like 50x multiple, which discounted back to a year from now (mid-2025E) gives us a $9/share value.</p></li></ul><ul style=\"\"><li><p><strong>Robo-taxi.</strong> According to CNBC, Waymo, which actually gives driverless rides/operates a robo-taxi service today, latest valuation (2020) was $30bn. GM’s Cruise similarly once had a $30bn valuation, though we believe a current mark could be lower. In our base case, we apply the latest Waymo valuation of $30bn or $9/share. Our upside case more than triples the Waymo valuation to ~$100bn (we&#39;d also note that Uber has a ~$144bn market value). Our downside case assumes no value. We note that Baidu has recently been in the news as their Apollo Go robotaxi autonomous ride-hailing platform has been gaining attention and is piloting in areas such as Wuhan. However, we note that the entire Baidu market cap is ~$35bn. T he stock has rallied of late (~14%) on some of this robotaxi optimism, but that rally only contributed ~$4bn to the market cap.</p></li><li><p><strong>The TSLA Premium (AI, Optimus, other initiatives).</strong> These are difficult to value given they are, at best, R&amp;D today. Here, we are relying on the &#34;collective wisdom of markets&#34;. Going back to our earlier TSLA valuation attribution analysis, on average over the past 2-years, the market has assigned ~$490bn of value (~$141/share) to ex-auto initiatives. Between Energy, FSD and robo-taxi, we only identified $36/share of that, leaving the TSLA premium at $105/share. Note, that assuming the 13% cost of equity, the 5-year future value of that premium is $672bn and the 10-year future value is $1.2T. Given that many of these initiatives are likely to take time to materialize, we believe this seems more than fair. In our upside case, we use the more recent (high) level from our valuation attribution analysis while our downside case assumes no premium, which is closer to the minimum we&#39;ve seen vs identifiable valuations.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3618826a24dbabcfdf1557a12da5e9f1\" title=\"\" tg-width=\"574\" tg-height=\"708\"/></p><h2 id=\"id_3243539219\">VALUATION</h2><p>We value TSLA shares using a 55x P/E multiple and apply that to our current 3Q25-2Q26 TSLA EPS forecast. This yields our new $197 price target. 55x (45x prior) is at the high-end of the NTM P/E valuation range over the past 2-years but is supported by our SOTP work above.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/6a53beb83537bb6c04d35aab5ff5521b\" title=\"\" tg-width=\"421\" tg-height=\"270\"/></p><h2 id=\"id_3010455971\">Pivotal Questions</h2><h3 id=\"id_1253584077\">Q: Can TSLA get to &gt;5mm vehicle deliveries by 2030?</h3><p><strong>UBS VIEW</strong></p><p>No. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving &gt;3mm units for delivery when max capacity may be ~3mm could be challenging.</p><p><strong>EVIDENCE</strong></p><p>We took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla&#39;s perception in China.</p><p><strong>WHAT´S PRICED IN?</strong></p><p>At current levels, all else equal, we believe 2030 deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.</p><h2 id=\"id_2646094200\">How impactful will the &#39;Model 2.5&#39; be?</h2><p>Tesla’s eventful robo-taxi day may get most of the fanfare, focusing on AI and a robo-taxi service. However, in our view, a robo-taxi and other AI initiatives are still much further out. That is why we are focused on the “new” vehicle that Tesla plans to introduce, which we dub the &#39;Model 2.5&#39;. To us, this new vehicle could be the only data point to come out of the event (now expected in Oct) that can materially get investors to revise 2025/26 estimates.</p><p>Recall, Tesla scrapped the Model 2, which was expected to use a brand new unboxed manufacturing process to significantly lower the cost to produce the vehicle and offer a “$25k EV”. In their 1Q24 earnings release, Tesla indicated they plan to launch new vehicles, including more affordable models that utilize aspects of that next generation platform as well as aspects of their existing platform and will be able to be produced on the same manufacturing lines as Tesla’s current vehicle line-up.</p><p>We expect the Model 2.5 to look meaningfully different from the Model 3/Y silhouette as to differentiate the vehicle from potential Model 3/Y buyers. We also expect the starting price to be materially lower, potentially down to $25k (though we’d expect few variants to actually transact at that price).</p><p>What is the opportunity for the Model 2.5? In the US, the small standard car category (featuring the likes of the Toyota Corolla and Honda Civic) has accounted for ~7% of total sales over the past 5 years, or ~1mm units, on average. The Toyota Corolla is the current segment leader at ~23% share.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/756bc5e5ecd7afbf233418072962ec34\" title=\"\" tg-width=\"784\" tg-height=\"369\"/></p><p>When we look at the Model 3/Y and their segments, small premium II car and small premium II SUV, respectively, these Tesla models have been able to garner 40-50% share of those segments over time. If Tesla were able to garner similar share in the small standard car category, that would yield a ~450k annual sales opportunity for the Model 2.5 in the US. However, appealing to a lower tier consumer may yield additional challenges for that consumer to go electric. For instance, access to at home charging may be more limited for lower income buyers.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4adab9bc7ccdb9925ee45a4524dd4f28\" title=\"\" tg-width=\"787\" tg-height=\"316\"/></p><p>In Europe and China, smaller entry vehicles may appeal to those consumers relative to the US. I n 2023, European sales of small entry level cars was ~1.1mm or ~6% of sales. However, Eastern &amp; Central Europe made up about ~600k of that figure. W e believe these regions are likely to lag Western Europe on electrification. The Model 2.5 is also likely to face more competition in Europe as legacy OEMs look to electrify their small, affordable vehicle offerings. Further, smaller EVs from China are likely to enter the European market.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3e4fddc5de56a38ee01de16ee69e36d5\" title=\"\" tg-width=\"792\" tg-height=\"310\"/></p><p>In 2023, the Chinese affordable entry car market was ~1.7mm units, or ~6% of sales. However, t he Model 2.5 is likely to face intense competition as well, as even today, competitors for a low cost BEVs in China exist.</p><p>To further show the competitive challenge Tesla has in China, we looked to UBS Evidence Lab and China 360, who recently published a brand perception survey which surveyed 1,800 Chinese customers. In regards to Autos, the survey highlighted that the top 5 factors of importance for Chinese customers are safety, trustworthiness, high quality, value for money and versatility. T he survey highlighted that Chinese customers view Tesla&#39;s brand image as one more of p remiumness, trendiness and innovation. On the top 5 factors, Tesla only screened well on high quality.</p><h2 id=\"id_2997648751\">Guided by capacity</h2><p>While the market opportunity may be there globally, we must always keep in mind that production and deliveries must be guided by capacity. We currently forecast TSLA 2024 production at 1.78mm and deliveries at 1.69mm. As of 1Q24, Tesla’s stated installed capacity is 2.35mm units. Tesla has indicated that the move to utilize the same manufacturing lines as their current vehicle lineup would enable them to fully utilize their expected maximum capacity of close to 3mm units. We believe this means utilizing more of the space at their Austin and Berlin facilities. We note Tesla recently received approval to expand capacity in Berlin to increase manufacturing capacity to ~1mm units. Europe imported ~170k TSLA vehicles from China last year, but in light of potential tariffs on EVs made in China, this could make manufacturing more vehicles in Europe more attractive. TSLA produced ~200k vehicles in Germany last year according to S&amp;P Mobility. We believe Tesla may eventually explore expanded capacity at Shanghai, but for now, we believe that facility is operating at max capacity.</p><p>Tesla indicated that they will utilize that ~3mm of capacity before investing in new manufacturing lines. We would assume this means new manufacturing facilities as well. Consensus is currently looking for ~3.1mm unit deliveries in 2027, which likely means production has to be higher than that. Further, operating at 100% utilization is very difficult. So, we see risk to current unit expectations over the coming years.</p><h2 id=\"id_2569836359\">New models important as current demand stagnates</h2><p>The reason why the new model is so critical to TSLA growth is that demand looks more challenging in Tesla’s major regions of the US, China and Europe.</p><h3 id=\"id_2364838120\">US - Is Tesla demand saturated?</h3><p>In the US, YTD BEV penetration is 7.7%, up from 7.6% in 2023. TSLA&#39;s current share of the BEV market in the US is ~51%, which has come down from ~56% in 2023.</p><p>In the US, even recent levels of demand for TSLA vehicles seems to be driven by pricing actions. This is not just price cuts but now also financing actions. In May, TSLA lowered the APR for the Model Y to 0.99% (from a market rate of closer to 6.39%) and lowered the monthly lease payment for the Model 3 to $299 from $329.</p><h3 id=\"id_2405590704\">Europe - demand lower y/y</h3><p>In Europe, BEV penetration YTD is 12.1% (fairly flat y/y), and TSLA has ~17% share, which is down from ~19% last year while penetration has remained relatively flat. This is driven primarily by falling demand in Germany, France and Norway. We believe BEV penetration has stalled, in part because there is no regulatory need for OEMs to push higher BEV mix this year. That should change next year, which could mean we see BEV penetration in Europe increase, but TSLA share decrease further.</p><h3 id=\"id_678076539\">China - A very competitive market</h3><p>In China, YTD NEV retail penetration is ~40%, TSLA&#39;s share of the NEV market being ~7%, with TSLA losing 100bps of share vs 2023. China remains a very competitive market with a multitude of new entrants and new models being brought to production a lot faster than in other parts of the world.</p><h2 id=\"id_3022804001\">Can the Model 2.5 deliver on margin expectations?</h2><p>This remains a key and open question, but the math seems difficult. For instance, if we assume that a Model Y sells for ~$45k and has 20% gross margins, then the COGS/unit is ~$36k. The Model 2 was expected to start at a $25k price point but was also supposed to use an unboxed manufacturing concept that was expected to reduce COGS by ~50% vs. Model 3/Y or call it ~$20k of COGS for the original Model 2 plan. If we assume the plan was for the Model 2 to have had similar gross margins to the Model Y, Model 2 COGS would need to be ~$20k. Part of this reduction is from a smaller battery, reduced content (i.e. no glass roof) as well as better integration and controller reduction, etc. However, we believe roughly 1/3rd was due to the new unboxed manufacturing process. This means Tesla would need to find an additional $5k in cost to get the targeted gross margins of the original Model 2 plan. If we assume Tesla were able to get half of the savings from the originally planned unboxed manufacturing benefit, then, that would imply a gross margin of 10%. Of course, pricing could be higher (and effective pricing will likely be higher from differing trims). However, the higher the price of the Model 2.5 goes and the closer it gets to Model 3/Y pricing, the differentiation and cannibalization problem gets larger.</p><h3 id=\"id_130370043\">Risk to the current share price is currently at 1:1.8 to the downside</h3><p><strong>UPSIDE ($338):</strong> Our upside case uses a 79x PE on our 3Q25-2Q26 EPS estimate of $4.29. This is supported by our SOTP analysis that attributes $106 to Auto, $30 to Energy, $13 to FSD, $29 to Robo-taxi and $160 as a Tesla premium for all other initiatives. This implies a value per share of $338.</p><p><strong>BASE ($197):</strong> Our valuation uses 55x PE on our 3Q25-2Q26 EPS estimate of $3.57. This is supported by our SOTP analysis that attributes $57 to Auto, $18 to Energy, $9 to FSD, $9 to Robo-taxi and a $105 TSLA premium for other initiatives in line with market implied average over past 2-years. This gets us to our $197 PT.</p><p><strong>DOWNSIDE ($67):</strong> Our downside case uses 23x PE on our 3Q25-2Q26 EPS estimate of $2.86. This is supported by our SOTP analysis that attributes $48 to Auto, $14 to Energy, $5 to FSD. In our downside we do not attribute value to Robo-taxi or include a TSLA premium in our valuation, which is closer to the minimum we&#39;ve seen vs identifiable value. This implies a value per share of $67.</p></body></html>\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"TSLA":"特斯拉"},"source_url":"","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1195381387","content_text":"Tesla Inc.’s stock is downgraded by UBS Group, on concerns that the US electric carmaker’s shares have risen “too much, too soon” on optimism over its artificial intelligence plans. Increasingly difficult to justify valuationUBS downgrades TSLA from Neutral to Sell. TSLA is more than just an auto company, and there are some positive developments (e.g. Energy, FSD) that add additional support. This is increasingly important as expectations for the core Auto business deteriorate. TSLA has always had a premium attached to it for other, future, growth initiatives. Properly valuing that optionality is difficult. This premium has widened of late, we believe, on AI enthusiasm. After going through the different businesses we can more substantially value, at current levels, we are still left with a >$500bn “stub” for that future growth. Even if we give that “stub” a 5-year time horizon, that implies a 5-year future value of $1T. And this is just to justify current levels; one would need to see an even larger opportunity to justify a Buy rating. While TSLA is investing heavily in AI and the tech is making progress, investment is costly, pace of improvement may slow and the payoff is long dated. If market enthusiasm for AI diminishes, this may impact TSLA's multiple. Given the lack of visibility and the risk that growth opportunities materialize on a longer time horizon (or not at all), with the stock at 86x NTM P/E, downgrade to Sell.When ex-auto contribution to price nears the highs, good opportunity to sellOur valuation attribution analysis shows that the market has (fairly consistently) valued TSLA’s core auto business between $60-$90/share. The “other attribution” has been volatile but past 2 year average is ~$140/share. With the recent rally, it’s now nearly ~$175/share. Fig. 3 shows when other becomes larger contributor to price, stock starts to trend down. O ur SOTP view values auto at ~$57, Energy, which has shown recent strong growth (and higher margin) is worth ~$18. We estimate FSD/robo-taxi could be ~$18 (see UBS Evidence Lab FSD survey inside), but that's only ~$93 of the more easily identifiable value, implying a premium/future option value that is ~61% of today’s price.Where could we be wrong? 1) TSLA price disconnecting from fundamentals has occurred in the past and can persist for a while. 2) 2Q24 results may be above expectations, causing positive revisions to 25/26F helping to sustain momentum. 3) Investor tepidness to be negative into “robo-taxi” day, and/or there is a true upside surprise at the event. In our view, we believe TSLA is making good technological progress, but the challenge is hard and may face operational challenges (regulatory, etc.). More meaningful than robo-taxi is showing the new vehicle, as that could change 25/26F numbers. But consensus already considers higher units, and we believe the vehicle could pressure auto margins.Valuation: PT to $ 197 from $147 based on 55x P/E (45x prior)55x is at the high end of the past 2-year range and is supported by our SOTP analysis.Pivotal QuestionsQ: Can TSLA get to >5mm v ehicle deliveries by 2030?No. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for the current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving >3mm units for delivery when max capacity may be ~3mm could be challenging.Q: Can Energy grow at a ~30% CAGR through 2030?Potentially. TSLA Energy has grown impressively of late, and importantly, this is currently a high margin business for the company. However, we caution that energy storage deployments can be lumpy. Looking ahead, the opportunity for stationary storage is large, so a ~30% CAGR through 2030 to get to ~$42bn in 2030 revenue is possible. However, more capacity investment would be needed, the timing of which isn't clear, and the law of large numbers may come into play as we move through the decade. We model a ~22% CAGR through 2030E.UBS VIEWWe are Sell rated on TSLA. TSLA is more than just an auto company, and there are some positive developments in other areas such as Energy and FSD. Further, TSLA has always traded with a premium attached to it for other, future growth initiatives. Properly valuing that optionality is difficult. However, at current levels, we believe that unidentifiable premium is too significant. Given the lack of visibility and the risk that these growth opportunities materialize on a longer time horizon (or don’t materialize at all), we rate the stock Sell.EVIDENCEWe created a proprietary valuation attribution analysis to better understand TSLA valuation. We took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla's perception in China. We also utilized a UBS Evidence Lab survey to help us better understand the FSD opportunity.WHAT´S PRICED IN?Tesla has many factors driving its price action, but at current levels and all else equal, we believe 2030 auto units deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.Company DescriptionTesla, Inc. manufactures and sells fully electric vehicles and energy generation and storage systems, and related services. The company's mission is to accelerate the world’s transition to sustainable energy. T he company is also working on automated driving technology and Optimus, a robotic humanoid.More than an auto company, but how much more?TSLA is often labeled “not an auto company” or “more than an auto company”. We are more inclined to agree with the latter considering the vast majority of today’s revenue/profits are related to the manufacturing and selling of vehicles. This makes valuing TSLA stock challenging at times. We are not here to say that TSLA should be valued as an auto company as there are other initiatives. Some of these initiatives may have payoffs way out in the future. TSLA stock price been sensitive to future businesses, opportunities and TAMs (i.e. the potential of what TSLA could become). Some premium for this potential is fair, but we do believe investors should be cognizant of how much the auto business and other more readily valuable businesses contributes to the stock price to help ground the valuation and select entry and exit points.UBS' TSLA valuation attribution analysisBelow, we took a look at the historical contribution of TSLA’s automotive business to TSLA’s total market value. We specifically focus on auto only for this analysis as for a large period of time, this has been, and remains, the company's primary driver. A uto also has the richest data for historical consensus expectations. For this analysis, we took consensus 2030 auto delivery expectations (at that time) and consistently applied a $40k ASP, a normalized Auto EBIT margin of 15% and 20x forward P/E multiple. Yes, some will quibble with our assumptions, particularly the multiple considering legacy OEMs trade at single-digit P/Es and Toyota, as a best in class OEM, historically may trade closer to~10x. However, we’d a) argue that TSLA's auto business still has more growth potential ahead vs. a more mature Toyota and b) we believe we are being somewhat generous to auto for this analysis. We then discount that nominal auto value at the cost of equity (at that time) to that period. We then compare the implied auto contribution to the total market capitalization of TSLA at that time.A few things from this analysis surprised us:The market value attributable to auto was more consistent than we expected. It has generally been between $200-$300bn since 2021 or ~$60-$90 in per share terms. This surprised us because consensus 2030 deliveries used to be >7mm and now stand >30% lower at ~4.8mm units. Mitigating the impact of this negative revision is the discounting (i.e. we are now closer to 2030). Bears may argue even current 2030 expectations are too high, which may be warranted (UBS is at ~3.9mm). However, we felt using consensus expectations to figure out market expectations was more appropriate.How much of TSLA's valuation is attributable to “other” initiatives? Over the past 4 years, on average only ~30% of TSLA’s stock price is attributable to core auto, again using our assumptions from above (less if one were to assume a lower margin or multiple). Over the past two years, this has been closer to ~36%. At TSLA’s current price, only 28% of TSLA’s current value is attributable to core auto, an 8pp swing since the end of June and at the lows over the past 2 years.While valuation disconnections from more tangible fundamentals have occurred in TSLA’s history, and it can persist for extended periods of times, we believe that when these hopes get elevated, it is not a good time to initiate or add to positions. Rather, it’s a time to sell. Over the past two years, when the percent of the stock price that our analysis shows is attributable to auto dips below the 30% average, the stock has entered downward trend channels (see 6/22 and 6/23).What about TSLA’s other endeavors?With our attribution analysis showing less than 30% of the current stock price is attributable to core auto, we asked ourselves, did something change? While the recent 2Q24 auto deliveries of ~444k was better than expectations, it was still down -5% y/y and was likely supported by some promotional activity. Further, in our view, quarterly deliveries coming in 20-25k (~5%) better doesn’t warrant a 15% rally since the delivery print (and a ~22% rally over the past 10 days). So, is there reason to be more optimistic on some of TSLA’s other initiatives?Tesla EnergyOne area that the market may have gotten more excited about, that also came out with the deliveries release, is Tesla Energy, which reported 9.4 GWh of energy storage product deployment in the quarter (+157% y/y and +132% q/q). At their annual meeting, Elon Musk also indicated the company was tracking towards 200-300% y/y growth in energy storage. This is important since Energy is currently higher gross margin than Auto (Energy was 24.6% in 1Q24), so this could help stem negative revisions from the pricing/promotion actions taken to stimulate auto demand. While we are more positive on Energy and raise our Energy sales forecasts, we caution that Energy sales tend to be lumpy.Tesla currently has their Megafactory in Lathrop, California, which has an annual capacity to build 10,000 Megapacks or ~40 GWh of storage. During 1Q24 earnings, TSLA announced that they had commissioned their second general assembly line as they look to ramp Lathrop to full capacity. TSLA is also opening their Megafactory in Shanghai which will add an additional 40 GWh of energy storage capacity. We expect this facility to be operational in 1H25. We now forecast TSLA will deploy ~27 GWh of storage this year, and ramp to ~37 GWh next year.AITesla is investing heavily in AI. Earlier this year, Musk announced that TSLA had installed and commissioned 35k Nvidia H100 GPUs and are aiming for 85k GPUs by the end of the year. Musk has also talked about spending ~$10bn on combined training and inference AI this year, the latter being primarily in the car. Tesla is also is developing their own silicon for their Dojo supercomputer, though in January 2024, Musk stated Dojo was “a long shot worth taking because the payoff is potentially very high. But it's not something that is a high probability.\"The fruits of AI investment at Tesla would be related to Full Self Driving (FSD), which is their current advanced driving assistant, their robo-taxi initiative (planned robo-taxi day, now reportedly postponed to October), and Optimus, their humanoid robot initiative.We believe TSLA stock price has gotten caught up in the AI trade/phenomenon. While we don’t doubt Tesla is making very good progress on such initiatives, aside from FSD (we were impressed by recent improvement), the other initiatives are purely R&D. Large TAMs for sure, and we have more confidence in Tesla being able to manifest the power of AI in the physical world than we do for other companies. But, these are complex issues, that will take a long time to play out and success is not a certainty. As AI enthusiasm fades, we believe this can impact TSLA's multiple.Full Self Driving (FSD)Of large debate is Tesla’s ability to charge, on a monthly recurring basis, for their advanced driver assistance system: FSD (supervised). Earlier this year, Tesla started rolling out the new version of FSD based on an end-to-end AI learning system. Tesla offered a 1-month free trial to all US Tesla vehicles with the proper hardware. They then lowered the monthly subscription cost to $99/month from $199/month.We conducted a survey on 306 Tesla owners, ran over June 10-28th, to gauge customer reception and perception to FSD. Key points:A caveat, we believe our survey skews high to consumers that currently have (pay for) FSD vs. the reality of the marketplace. T his in part may be driven by ~53% of our respondents indicated that a Model S/X was their primary Tesla vs. S/X making up only ~6% of Tesla's 2023 US sales. S till, we are able to gather some insights from looking only at 3/Y owners and, in particular, respondents who don't currently own/subscribe to FSD to see what future \"take rates\" might be (though admittedly this is a smaller sample size).Overall, we would say consumers are satisfied with FSD functionality (62% very satisfied) and feel safe using it (64% completely safe).Of those that are not currently paying for FSD (so either free trial is over or still on free trial) 17% indicated they were likely to pay for FSD over the next 6 months, while 33% said somewhat likely.However, our respondents did over-index to Model S/X vs. 3/Y when in reality, 3/Y is a significantly larger pool (and given the price point of the vehicle, points to a different willingness to pay, in our view). So, when we look only at respondents who said their main vehicle was a 3 or Y, very likely to pay for FSD over next 6 months dropped to 9% and Net Likely vs. Unlikely is only +3% (Figure 15).At the current $99/month level, 43% of Tesla customers surveyed (that indicated they are likely to continue to pay or will be likely to pay for FSD) indicated they would be willing to pay around this price ($76-$100/month). This dropped to 35% when only looking at Model 3/Y users. To us, this suggests that significantly higher adoption levels may need further price reductions.The willingness (and ability) to pay for FSD matters to us as we think about future, low cost Tesla models. These new lower cost models will have a less expensive monthly vehicle payment. But, that also means that adding an additional $99/month to that payment for FSD will be a significant increase.In China, while Tesla is making a push to be able to make FSD available, we have doubts over Tesla's ability to charge for FSD given many competitors already offer an autonomous solution without charging a monthly fee (or some even an upfront fee). Rather, we view FSD in China as almost a necessity to remain competitive with domestic Chinese offerings that have similar functionality.Robo-taxiWe believe robo-taxis are a difficult technological endeavor and the business model also may face regulatory hurdles as well as questions around consumer adoption. Thus, we believe a meaningful r obo-taxi operation in the US is further out (not this decade). Tesla reportedly/recently pushed the planned 8/8 robo-taxi day to October. A subtle reminder that Tesla has had difficulty meeting timelines.On the technology side, TSLA's move to an end-to-end (GenAI) approach has allowed for meaningful improvement in the FSD product. But the FSD product is a very good advanced driving assistant system (L2+). To move to a robo-taxi solution, the march of 9s must continue to be able to operate in all conditions within the operational design domain (ODD). We believe the end-to-end approach, on it's own, will eventually start to show slowing improvement and diminishing returns. Further, the cost for this improvement can be high. More, unique data is needed to continue the system improvement. TSLA does have access to a lot of data from their fleet, and they employ simulation. But, we believe that, similar to what is seen in GenAI with large language models (LLMs), progress can slow, and each additional improvement to the model can become increasingly more expensive to take (obtaining that new data to get the improvement and the compute to process it).The other challenge with an end-to-end approach could be a regulatory one. There will inevitably be accidents and with an end-to-end approach without guard rails, it is difficult to understand why the system made a decision it did, thus difficult to correct for the problem (as rare as the specific event might be). We recently held an expert call on Gen AI for autonomous driving that highlighted the issue regulators may have with the lack of traceability and transparency that comes with an end-to-end approach that TSLA currently utilizes. Further, in certain geographies,TSLA still needs to test their robo-taxi with a driver before being permitted to test autonomously and then to offer driverless rides (see Waymo and Cruise).OptimusWhile we are excited about the progress Tesla is making on their humanoid robot, we believe this opportunity is much further out. At their annual shareholder meeting, Elon Musk helped frame the long-term opportunity. H e mentioned there could be, one day, 10bn humanoid robots, so if TSLA gets 10% share, that is 100mm Optimus units a year, and if sold for $20k, suggests a $2T revenue opportunity, $1T profit opportunity and a $20T market value opportunity (20x). However, we have difficulty underwriting significant (or specific) value to this opportunity today given the many uncertain variables, the probability of success and the unknown time frame.Sum-of-the-partsBelow we take a look at a sum-of-the-parts (SOTP) for TSLA to support our P/E based valuation. We also show an upside and downside scenario.Auto. We forecast 2030 units at 3.9mm units and ~$146bn in auto revenue. Applying a 15% “normalized” EBIT margin, applying a 20x P/E multiple and discounting that back to a year from now (mid-2025E) at ~13% cost of equity gives us $57/share value. 20x is above traditional OEMs in the mid-single-digits P/E and Toyota at ~10x but warranted given Tesla would still have more room for growth and the \"normalized\" Auto EBIT margins for TSLA (especially relative to legacy OEMs) could be higher.Energy. We forecast 113 GWh storage deployment and ~$28bn in Energy revenue (22% 2024-2030E CAGR). Applying a 20% “normalized” EBIT margin, applying a near-market multiple of 25x P/E multiple and discounting that back to a year from now (mid-2025E) gives us $18/share value.FSD. We forecast ~$1.5bn in 2030 revenue, which equates to ~$0.33 in EPS, and apply a software like 50x multiple, which discounted back to a year from now (mid-2025E) gives us a $9/share value.Robo-taxi. According to CNBC, Waymo, which actually gives driverless rides/operates a robo-taxi service today, latest valuation (2020) was $30bn. GM’s Cruise similarly once had a $30bn valuation, though we believe a current mark could be lower. In our base case, we apply the latest Waymo valuation of $30bn or $9/share. Our upside case more than triples the Waymo valuation to ~$100bn (we'd also note that Uber has a ~$144bn market value). Our downside case assumes no value. We note that Baidu has recently been in the news as their Apollo Go robotaxi autonomous ride-hailing platform has been gaining attention and is piloting in areas such as Wuhan. However, we note that the entire Baidu market cap is ~$35bn. T he stock has rallied of late (~14%) on some of this robotaxi optimism, but that rally only contributed ~$4bn to the market cap.The TSLA Premium (AI, Optimus, other initiatives). These are difficult to value given they are, at best, R&D today. Here, we are relying on the \"collective wisdom of markets\". Going back to our earlier TSLA valuation attribution analysis, on average over the past 2-years, the market has assigned ~$490bn of value (~$141/share) to ex-auto initiatives. Between Energy, FSD and robo-taxi, we only identified $36/share of that, leaving the TSLA premium at $105/share. Note, that assuming the 13% cost of equity, the 5-year future value of that premium is $672bn and the 10-year future value is $1.2T. Given that many of these initiatives are likely to take time to materialize, we believe this seems more than fair. In our upside case, we use the more recent (high) level from our valuation attribution analysis while our downside case assumes no premium, which is closer to the minimum we've seen vs identifiable valuations.VALUATIONWe value TSLA shares using a 55x P/E multiple and apply that to our current 3Q25-2Q26 TSLA EPS forecast. This yields our new $197 price target. 55x (45x prior) is at the high-end of the NTM P/E valuation range over the past 2-years but is supported by our SOTP work above.Pivotal QuestionsQ: Can TSLA get to >5mm vehicle deliveries by 2030?UBS VIEWNo. We currently forecast 2030 units at ~3.9mm, 19% below consensus. More mid-term, we are also, on average, ~11% below consensus on 2025-27 deliveries. Our view is informed by more tepid demand for EVs (and demand saturation for current model lineup) in the US and more competitive markets in Europe and especially China. New and refreshed models are needed for higher levels of demand, but this is already considered in our forecast. Further, in the mid-term (~2027), achieving >3mm units for delivery when max capacity may be ~3mm could be challenging.EVIDENCEWe took a detailed look at the addressable market for the upcoming lower-cost vehicle. We utilize the UBS Evidence Lab Global EV Survey to support our view on demographics in the US and their willingness/ability to use an EV. We also looked at various UBS Evidence Lab datasets on Tesla's perception in China.WHAT´S PRICED IN?At current levels, all else equal, we believe 2030 deliveries would need to be ~6.9mm units vs. UBS forecast of ~3.9mm and consensus of ~4.8mm.How impactful will the 'Model 2.5' be?Tesla’s eventful robo-taxi day may get most of the fanfare, focusing on AI and a robo-taxi service. However, in our view, a robo-taxi and other AI initiatives are still much further out. That is why we are focused on the “new” vehicle that Tesla plans to introduce, which we dub the 'Model 2.5'. To us, this new vehicle could be the only data point to come out of the event (now expected in Oct) that can materially get investors to revise 2025/26 estimates.Recall, Tesla scrapped the Model 2, which was expected to use a brand new unboxed manufacturing process to significantly lower the cost to produce the vehicle and offer a “$25k EV”. In their 1Q24 earnings release, Tesla indicated they plan to launch new vehicles, including more affordable models that utilize aspects of that next generation platform as well as aspects of their existing platform and will be able to be produced on the same manufacturing lines as Tesla’s current vehicle line-up.We expect the Model 2.5 to look meaningfully different from the Model 3/Y silhouette as to differentiate the vehicle from potential Model 3/Y buyers. We also expect the starting price to be materially lower, potentially down to $25k (though we’d expect few variants to actually transact at that price).What is the opportunity for the Model 2.5? In the US, the small standard car category (featuring the likes of the Toyota Corolla and Honda Civic) has accounted for ~7% of total sales over the past 5 years, or ~1mm units, on average. The Toyota Corolla is the current segment leader at ~23% share.When we look at the Model 3/Y and their segments, small premium II car and small premium II SUV, respectively, these Tesla models have been able to garner 40-50% share of those segments over time. If Tesla were able to garner similar share in the small standard car category, that would yield a ~450k annual sales opportunity for the Model 2.5 in the US. However, appealing to a lower tier consumer may yield additional challenges for that consumer to go electric. For instance, access to at home charging may be more limited for lower income buyers.In Europe and China, smaller entry vehicles may appeal to those consumers relative to the US. I n 2023, European sales of small entry level cars was ~1.1mm or ~6% of sales. However, Eastern & Central Europe made up about ~600k of that figure. W e believe these regions are likely to lag Western Europe on electrification. The Model 2.5 is also likely to face more competition in Europe as legacy OEMs look to electrify their small, affordable vehicle offerings. Further, smaller EVs from China are likely to enter the European market.In 2023, the Chinese affordable entry car market was ~1.7mm units, or ~6% of sales. However, t he Model 2.5 is likely to face intense competition as well, as even today, competitors for a low cost BEVs in China exist.To further show the competitive challenge Tesla has in China, we looked to UBS Evidence Lab and China 360, who recently published a brand perception survey which surveyed 1,800 Chinese customers. In regards to Autos, the survey highlighted that the top 5 factors of importance for Chinese customers are safety, trustworthiness, high quality, value for money and versatility. T he survey highlighted that Chinese customers view Tesla's brand image as one more of p remiumness, trendiness and innovation. On the top 5 factors, Tesla only screened well on high quality.Guided by capacityWhile the market opportunity may be there globally, we must always keep in mind that production and deliveries must be guided by capacity. We currently forecast TSLA 2024 production at 1.78mm and deliveries at 1.69mm. As of 1Q24, Tesla’s stated installed capacity is 2.35mm units. Tesla has indicated that the move to utilize the same manufacturing lines as their current vehicle lineup would enable them to fully utilize their expected maximum capacity of close to 3mm units. We believe this means utilizing more of the space at their Austin and Berlin facilities. We note Tesla recently received approval to expand capacity in Berlin to increase manufacturing capacity to ~1mm units. Europe imported ~170k TSLA vehicles from China last year, but in light of potential tariffs on EVs made in China, this could make manufacturing more vehicles in Europe more attractive. TSLA produced ~200k vehicles in Germany last year according to S&P Mobility. We believe Tesla may eventually explore expanded capacity at Shanghai, but for now, we believe that facility is operating at max capacity.Tesla indicated that they will utilize that ~3mm of capacity before investing in new manufacturing lines. We would assume this means new manufacturing facilities as well. Consensus is currently looking for ~3.1mm unit deliveries in 2027, which likely means production has to be higher than that. Further, operating at 100% utilization is very difficult. So, we see risk to current unit expectations over the coming years.New models important as current demand stagnatesThe reason why the new model is so critical to TSLA growth is that demand looks more challenging in Tesla’s major regions of the US, China and Europe.US - Is Tesla demand saturated?In the US, YTD BEV penetration is 7.7%, up from 7.6% in 2023. TSLA's current share of the BEV market in the US is ~51%, which has come down from ~56% in 2023.In the US, even recent levels of demand for TSLA vehicles seems to be driven by pricing actions. This is not just price cuts but now also financing actions. In May, TSLA lowered the APR for the Model Y to 0.99% (from a market rate of closer to 6.39%) and lowered the monthly lease payment for the Model 3 to $299 from $329.Europe - demand lower y/yIn Europe, BEV penetration YTD is 12.1% (fairly flat y/y), and TSLA has ~17% share, which is down from ~19% last year while penetration has remained relatively flat. This is driven primarily by falling demand in Germany, France and Norway. We believe BEV penetration has stalled, in part because there is no regulatory need for OEMs to push higher BEV mix this year. That should change next year, which could mean we see BEV penetration in Europe increase, but TSLA share decrease further.China - A very competitive marketIn China, YTD NEV retail penetration is ~40%, TSLA's share of the NEV market being ~7%, with TSLA losing 100bps of share vs 2023. China remains a very competitive market with a multitude of new entrants and new models being brought to production a lot faster than in other parts of the world.Can the Model 2.5 deliver on margin expectations?This remains a key and open question, but the math seems difficult. For instance, if we assume that a Model Y sells for ~$45k and has 20% gross margins, then the COGS/unit is ~$36k. The Model 2 was expected to start at a $25k price point but was also supposed to use an unboxed manufacturing concept that was expected to reduce COGS by ~50% vs. Model 3/Y or call it ~$20k of COGS for the original Model 2 plan. If we assume the plan was for the Model 2 to have had similar gross margins to the Model Y, Model 2 COGS would need to be ~$20k. Part of this reduction is from a smaller battery, reduced content (i.e. no glass roof) as well as better integration and controller reduction, etc. However, we believe roughly 1/3rd was due to the new unboxed manufacturing process. This means Tesla would need to find an additional $5k in cost to get the targeted gross margins of the original Model 2 plan. If we assume Tesla were able to get half of the savings from the originally planned unboxed manufacturing benefit, then, that would imply a gross margin of 10%. Of course, pricing could be higher (and effective pricing will likely be higher from differing trims). However, the higher the price of the Model 2.5 goes and the closer it gets to Model 3/Y pricing, the differentiation and cannibalization problem gets larger.Risk to the current share price is currently at 1:1.8 to the downsideUPSIDE ($338): Our upside case uses a 79x PE on our 3Q25-2Q26 EPS estimate of $4.29. This is supported by our SOTP analysis that attributes $106 to Auto, $30 to Energy, $13 to FSD, $29 to Robo-taxi and $160 as a Tesla premium for all other initiatives. This implies a value per share of $338.BASE ($197): Our valuation uses 55x PE on our 3Q25-2Q26 EPS estimate of $3.57. This is supported by our SOTP analysis that attributes $57 to Auto, $18 to Energy, $9 to FSD, $9 to Robo-taxi and a $105 TSLA premium for other initiatives in line with market implied average over past 2-years. This gets us to our $197 PT.DOWNSIDE ($67): Our downside case uses 23x PE on our 3Q25-2Q26 EPS estimate of $2.86. This is supported by our SOTP analysis that attributes $48 to Auto, $14 to Energy, $5 to FSD. In our downside we do not attribute value to Robo-taxi or include a TSLA premium in our valuation, which is closer to the minimum we've seen vs identifiable value. This implies a value per share of $67.","news_type":1},"isVote":1,"tweetType":1,"viewCount":36,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":279440066322584,"gmtCreate":1709244275366,"gmtModify":1709257499603,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"authorIdStr":"4119166036703922","idStr":"4119166036703922"},"themes":[],"htmlText":"<a href=\"https://ttm.financial/S/HPE\">$Hewlett Packard Enterprise(HPE)$ </a>&nbsp;","listText":"<a href=\"https://ttm.financial/S/HPE\">$Hewlett Packard Enterprise(HPE)$ </a>&nbsp;","text":"$Hewlett Packard Enterprise(HPE)$","images":[{"img":"https://community-static.tradeup.com/news/b82c338571a0acdc203e8086cc4ad8a5","width":"858","height":"1809"}],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/279440066322584","isVote":1,"tweetType":1,"viewCount":238,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":1,"langContent":"EN","totalScore":0},{"id":314140905893976,"gmtCreate":1717714866876,"gmtModify":1717714868970,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"authorIdStr":"4119166036703922","idStr":"4119166036703922"},"themes":[],"htmlText":"Great article, would you like to share it?","listText":"Great article, would you like to share it?","text":"Great article, would you like to share it?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/314140905893976","repostId":"2441171474","repostType":2,"repost":{"id":"2441171474","pubTimestamp":1717679531,"share":"https://ttm.financial/m/news/2441171474?lang=&edition=fundamental","pubTime":"2024-06-06 21:12","market":"sh","language":"en","title":"Shopify: Beyond The Short-Term Noise, A Long-Term Growth Story, Buy","url":"https://stock-news.laohu8.com/highlight/detail?id=2441171474","media":"seekingalpha","summary":"Shopify's recent earnings report showed a net loss due to the sale of its logistics business, causing a decline in share price.The company's guidance for the current quarter fell short of expectations","content":"<html><body><ul><li>Shopify's recent earnings report showed a net loss due to the sale of its logistics business, causing a decline in share price.</li><li>The company's guidance for the current quarter fell short of expectations, with projected revenue growth and operating expenses not meeting analyst predictions.</li><li>Despite short-term headwinds, Shopify's strong market position, diversified revenue stream, and focus on innovation make it an undervalued stock with long-term growth potential.</li><li>Initiating coverage with a long-term Buy based on Shopify's healthy financials and growth potential. However, near-term volatility is possible due to the economic cycle and management's lack of a clear growth strategy.</li><li>My analysis specializes in identifying companies that are experiencing growth at a reasonable price. Rating systems don't consider time horizons or investment strategies. My articles aim to inform, not to make decisions.</li></ul><p><figure><picture><img fetchpriority=\"high\" height=\"1024px\" sizes=\"(max-width: 768px) calc(100vw - 36px), (max-width: 1024px) calc(100vw - 132px), (max-width: 1200px) calc(66.6vw - 72px), 600px\" src=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w750\" srcset=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w1536 1536w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w1280 1280w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w1080 1080w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w750 750w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w640 640w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w480 480w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w320 320w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg?io=getty-c-w240 240w\" width=\"1536px\"/></picture><figcaption><p>The Good Brigade/DigitalVision via Getty Images</p></figcaption></figure></p> <h2><strong>Investment Thesis</strong></h2> <p>Shopify (<span>NYSE:SHOP</span>) shares experienced a steep decline after the company released its first quarter earnings for 2024. While revenues of $1.86 billion surpassed analyst expectations, the company reported a net loss compared to<span> a profit in the same period last year. However, this loss stemmed from a charge associated with the sale of Shopify's logistics business.</span></p> <blockquote><p><em>The decline year-over-year was primarily due to the sale of the logistics business and lower headcount, partially offset by increases in marketing spend.</em></p></blockquote> <p>Investors were most concerned by Shopify's guidance for the current quarter. Revenue growth is projected to be in the high teens YoY, which represents a slowdown compared to recent quarters. This fell short of expectations for continued high-growth performance. Additionally, the company anticipates operating expenses to rise at a rate exceeding analysts' predictions. Gross margin is also expected to decrease<span> slightly due to the divestiture of the logistics business.</span></p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176242024881852.png\"/></span></picture><figcaption><p>Shopify earnings presentation</p></figcaption></figure></p> <p>I believe this is a challenging economic scenario with a slowdown in economic spending; however, I believe Shopify is still well-positioned for long-term success. However, factors like revenue growth over time and rising expenses need to be monitored. The combination of the mixed earnings report and cautious guidance resulted in a significant drop of 18% in the share price.</p> <p>In this article, I will go into the details of the company and see if it's a candidate for my growth at reasonable price portfolio over the long term. To accomplish this, I will review factors including, management, corporate strategy, and financial health.</p> <p>At the end, you will read that I find Shopify undervalued with growth potential. I find that while Shopify's current performance and guidance suggest short-term headwinds, I remain positive on its long-term prospects. The economic cycle can certainly pressure stock prices, especially for companies exposed to consumer spending. However, Shopify's core business- e-commerce- is poised for continued growth thanks to the ever-increasing shift to online shopping worldwide, as reflected by Shopify's increase in Gross Merchandise Value (GMV) and international growth.</p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176246908421538.png\"/></span></picture><figcaption><p>Shopify earnings presentation</p></figcaption></figure></p> <p>Additionally, the company boasts characteristics that indicate its potential to thrive for the next decade. These include a strong market position, a diversified revenue stream, and a focus on innovation. Therefore, despite current volatility, I'm initiating coverage of Shopify with a Buy rating.</p> <h2><strong>Management Evaluation</strong></h2> <p>Shopify's CEO, Tobias Lutke, cofounded the company in 2004 and has been instrumental in its growth, serving as both CTO and CEO. Despite a low Glassdoor rating, likely due to workforce reductions last year, his long-term commitment is evident. Lutke owns a significant 6% portion of the company with 40% voting power and receives most of his compensation in stock awards with $20 million in the last two years and $15 million the year before rather than taking a cash salary which is just $1 (yes, $1). This strong alignment with shareholders' interests suggests he's invested in Shopify's success for the long haul, and therefore I find he has a \"high alignment ratio\" with the company's long-term success. Although, I believe he should let someone with more management experience run the company growth strategy.</p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176232456592731.png\"/></span></picture><figcaption><p>simplywall.st</p></figcaption></figure></p> <p>Jeff Hoffmeister, Shopify's CFO since 2022, has a background in managing high-growth tech companies. Despite joining during a period of layoffs that impacted employee morale as seen in the company reviews on Glassdoor, he's overseen positive financial trends. Under his leadership, Shopify has managed debt effectively to finance projects, and both FCF and ROE have been steadily increasing. I find this financial performance might be adept at balancing growth with responsible financial management.</p> <p><figure contenteditable=\"false\"><picture><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-1717623245350983.png\"/></picture><figcaption><p>Seeking Alpha</p></figcaption></figure></p> <p>Overall, I find Shopify leadership a mixed bag. CEO, Tobias Lutke, has deep company knowledge and shareholder alignment. However, layoffs under his watch likely contributed to the low Glassdoor rating. CFO Hoffmeister brings tech finance experience, managing debt and boosting FCF and ROE. Yet, his arrival coincides with layoffs and his impact on long-term growth strategy remains unclear.</p> <p><figure contenteditable=\"false\"><picture><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176232454775417.png\"/></picture><figcaption><p>Glassdoor</p></figcaption></figure></p> <p>Shopify management have strengths, but I find that they fall short of expectations for a growth company, and therefore I give them a rating of just \"Meets Expectations\". Lutke commitment is admirable, but his experience might be insufficient for Shopify's current growth phase. Hoffmeister's financial skills are valuable, but his recent appointment leaves his strategic influence uncertain. Further, the biggest challenge I find is the need for a clear growth strategy.</p> <h2><strong>Corporate Strategy</strong></h2> <p>Shopify's growth hinges on expanding its ecosystem. They focus on adding new stores to their marketplace, giving merchants more sales channels like social commerce, and enabling omnichannel experiences. They contrast with Amazon's strategy of leveraging its massive customer base to grow its marketplace and prioritize cloud computing services (AWS) for additional revenue streams.</p> <p>I have created the table below comparing Costco current strategy to some of it current competitors:</p> <span><span><span></span><table> <tr> <td> </td> <td><p>Shopify</p></td> <td><p>Amazon (AMZN)</p></td> <td><p><a href=\"https://laohu8.com/S/EBAY\">eBay</a> (EBAY)</p></td> <td><p>Wix (WIX)</p></td> </tr> <tr> <td><p>Corporate Strategy</p></td> <td><p>Ecommerce platform for SMB to sell directly to consumers-Focus on expanding its app marketplace and offering additional sales channels, including social commerce.</p></td> <td><p>Online marketplace offering a platform for third-party sellers-Growth strategy emphasizes cloud computing services (AWS) and expansion into new markets</p></td> <td><p>Online marketplace for buyers and sellers-Focuses on attracting new sellers through lower fees and improving user experience.</p></td> <td><p>Website creation platform with ecommerce functionality- Growth strategy emphasizes increasing international sales and building stronger community for sellers.</p></td> </tr> <tr> <td><p>Advantages</p></td> <td><p>Easy to set up and use, customizable stores, strong app marketplace for additional features.</p></td> <td><p>Massive customer base, fulfillment and logistics services. Brand recognition.</p></td> <td><p>Established brand, large buyer base, wide variety of products, lower fees for high-volume sellers.</p></td> <td><p>Easy to use drag-and-drop website builder, beautiful design templates, affordable pricing</p></td> </tr> <tr> <td><p>Disadvantages</p></td> <td><p>Transaction fees can be expensive for high-volume sellers, limited control over fulfillment.</p></td> <td><p>Highly competitive, strict seller guidelines, high fees for FBA sellers.</p></td> <td><p>Highly competitive, lower margins due to auction format, less control over branding</p></td> <td><p>Limited customization, compared to Shopify, may not be ideal for complex e-commerce needs.</p></td> </tr> </table> <span></span></span><button><svg viewbox=\"0 0 16 16\" xmlns=\"http://www.w3.org/2000/svg\"><path clip-rule=\"evenodd\" d=\"M16 11a5 5 0 0 1-5 5H5a5 5 0 0 1-5-5V5a5 5 0 0 1 5-5h6a5 5 0 0 1 5 5v6zm-4.5-2.5h2v-6h-6v2h4v4zm-9-1h2v4h4v2h-6v-6z\" fill-rule=\"evenodd\"></path></svg>Click to enlarge</button></span> <p>Source: From companies' website, presentations, Seeking Alpha</p> <p>I believe that while Shopify offers ease of use and customization, it charges transaction fees and may not be ideal for high-volume sellers due to limited fulfillment control. It's hard to compare market share as Shopify model is not the same as traditional online marketplaces like Amazon's, eBay's or Etsy (ETSY). Shopify aims to empower merchants by offering all the tools to allow them to set up an independent online shop.</p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-1717625411390814.png\"/></span></picture><figcaption><p>Shopify.com</p></figcaption></figure></p> <p>Shopify's competitive advantage is its financial strength and dedication to independent online stores to build their brand and sell exclusive products that otherwise wouldn't' be able to do in the Amazon marketplace.</p> <p>Further, their financial strengths give it a strategic advantage for growth. This focus allows them to invest heavily in growth initiatives like international access compared to smaller competitors like Wix Stores (WIX), BigCommerce (BIGC), Squarespace (SQSP), and open-source solutions like WooCommerce.</p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176256393825946.png\"/></span></picture><figcaption><p>Shopify website</p></figcaption></figure></p> <h2><strong>Valuation</strong></h2> <p>Shopify currently trades at around $61.25, still down around -20% since its last reported earnings in early May.</p> <p>To assess its value, I employed a conservative 11% discount rate, this rate reflects the minimum return an investor expects to receive for their investments. Here, I am using a 5% risk-free rate, combined with the additional risk premium for holding stocks versus risk-free investments, I'm using 6% for this risk premium. While this could be further refined, lower or higher, I'm using it as a starting point only to get a gauge for unbiased market expectations.</p> <p>Then, using a simple 10-year two staged DCF model, I reversed the formula to solve for the high-growth rate. To achieve this, I assumed a terminal growth rate of 4% in the second stage. Predicting growth beyond a 10-year horizon is challenging, but in my experience, a 4% rate reflects a more sustainable long-term trajectory for mature companies. You can find historical GDP growth data to explore past trends here. Again, these assumptions can be higher or lower, but from my experience I feel comfortable using a 4% rate as a base case scenario. The formula used is:</p> <p>$61 = (sum^10 EPS (1 + \"X\") / 1+r)) + TV (sum^10 EPS (1+g) / (1+r))</p> <p>Solving for g = 28%</p> <p>This suggests that the market currently prices SHOP EPS to grow at a rate of 28%. According to Seeking Alpha, analyst consensus EPS is expected to grow at a 44.25% and its FCF is trending higher.</p> <p><figure contenteditable=\"false\"><picture><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176232455076082.png\"/></picture><figcaption><p>Seeking Alpha</p></figcaption></figure></p> <p>Therefore, I believe SHOP is undervalued at this point. However, it's important to note that despite this undervaluation, I am expecting a clearer message from management about a more concrete growth strategy. I will be a buyer on this weakness as I believe they will figure it out, and I also understand that the stock might be pressured due to the current uncertainty in the economic cycle.</p> <h2><strong>Technical Analysis</strong></h2> <p>SHOP has had a hard time bouncing after it reported earnings, creating a support level at around $57-$60. Its RSI is at around 46, having crossed it 14-day average of 36 and pointing to keep increasing, indicating that the stock might increase in value. However, momentum according to Seeking Alpha still neutral:</p> <p><figure contenteditable=\"false\"><picture><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176232454450643.png\"/></picture><figcaption><p>Seeking Alpha</p></figcaption></figure></p> <p>I believe the market is waiting for concrete evidence of Shopify's growth initiatives translating into results. The current uncertainty surrounding the company, coupled with the broader headwinds in consumer discretionary stocks, is creating a volatile environment. Shopify's reliance on consumer spending add another layer of complexity. However, I believe in the company long-term potential success due to its strong market position and healthy financials.</p> <p><figure contenteditable=\"false\"><picture><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/6/5/11887671-17176232456282568.png\"/></span></picture><figcaption><p>TradingView</p></figcaption></figure></p> <p>Therefore, I expect some short-term volatility in the stock price, potentially ranging between $60-$68 until the next earnings report. While cautiously optimistic, I consider the company as a growth at a reasonable price over the long term.</p> <p>Next earnings are July 26th</p> <h2><strong>Takeaway</strong></h2> <div></div> <p>Shopify's recent earnings miss and cautious guidance caused a drop, but a closer look reveals a potential long-term winner growing at a reasonable price. Strong fundamentals like a dominant market position and focus on innovation positions them for future growth in the booming e-commerce market. I consider the stock undervalued due to short-term headwinds from an economy slowdown, and I'm also adding to this an unclear growth strategy from management. However, I am confident management will eventually figure it out and believe in Shopify's long-term potential, starting my coverage with a cautious Buy.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Shopify: Beyond The Short-Term Noise, A Long-Term Growth Story, Buy</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nShopify: Beyond The Short-Term Noise, A Long-Term Growth Story, Buy\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-06 21:12 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4697756-shopify-beyond-the-short-term-noise-a-long-term-growth-story-buy><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Shopify's recent earnings report showed a net loss due to the sale of its logistics business, causing a decline in share price.The company's guidance for the current quarter fell short of expectations...</p>\n\n<a href=\"https://seekingalpha.com/article/4697756-shopify-beyond-the-short-term-noise-a-long-term-growth-story-buy\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1303032598/image_1303032598.jpg","relate_stocks":{"BK4220":"综合零售","BK4535":"淡马锡持仓","LU0082616367.USD":"摩根大通美国科技A（dist）","GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","LU0079474960.USD":"联博美国增长基金A","LU0080751232.USD":"富达环球多元动力基金A","BK4538":"云计算","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","BK4116":"互联网服务与基础架构","LU0061474960.USD":"天利环球焦点基金AU Acc","LU0308772762.SGD":"Blackrock Global Allocation A2 SGD-H","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","IE00BKDWB100.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","LU0234572021.USD":"高盛美国核心股票组合Acc","LU1804176565.USD":"EASTSPRING INV GLOBAL GROWTH EQUITY \"A\" (USD) ACC","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","BIGC":"BigCommerce Holdings","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","SHOP":"Shopify Inc","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","WIX":"Wix.Com Ltd","BK4548":"巴美列捷福持仓","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","BYON":"BEYOND","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU0211327993.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (USD) ACC","LU0130103400.USD":"Natixis Harris Associates Global Equity RA USD","SQSP":"Squarespace Inc.","ETSY":"Etsy, Inc.","BK4539":"次新股","EBAY":"eBay","BK4554":"元宇宙及AR概念","BK4178":"家庭装饰零售","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","BK4532":"文艺复兴科技持仓","IE00BJTD4N35.SGD":"Neuberger Berman US Long Short Equity A1  Acc SGD-H","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","AMZN":"亚马逊","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","BK4534":"瑞士信贷持仓","BK4533":"AQR资本管理(全球第二大对冲基金)","LU2357305700.SGD":"Allianz Global Artificial Intelligence ET H2-SGD","LU0109391861.USD":"富兰克林美国机遇基金A Acc","IE00B3S45H60.SGD":"Neuberger Berman US Multicap Opportunities A Acc SGD-H","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元"},"source_url":"https://seekingalpha.com/article/4697756-shopify-beyond-the-short-term-noise-a-long-term-growth-story-buy","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2441171474","content_text":"Shopify's recent earnings report showed a net loss due to the sale of its logistics business, causing a decline in share price.The company's guidance for the current quarter fell short of expectations, with projected revenue growth and operating expenses not meeting analyst predictions.Despite short-term headwinds, Shopify's strong market position, diversified revenue stream, and focus on innovation make it an undervalued stock with long-term growth potential.Initiating coverage with a long-term Buy based on Shopify's healthy financials and growth potential. However, near-term volatility is possible due to the economic cycle and management's lack of a clear growth strategy.My analysis specializes in identifying companies that are experiencing growth at a reasonable price. Rating systems don't consider time horizons or investment strategies. My articles aim to inform, not to make decisions.The Good Brigade/DigitalVision via Getty Images Investment Thesis Shopify (NYSE:SHOP) shares experienced a steep decline after the company released its first quarter earnings for 2024. While revenues of $1.86 billion surpassed analyst expectations, the company reported a net loss compared to a profit in the same period last year. However, this loss stemmed from a charge associated with the sale of Shopify's logistics business. The decline year-over-year was primarily due to the sale of the logistics business and lower headcount, partially offset by increases in marketing spend. Investors were most concerned by Shopify's guidance for the current quarter. Revenue growth is projected to be in the high teens YoY, which represents a slowdown compared to recent quarters. This fell short of expectations for continued high-growth performance. Additionally, the company anticipates operating expenses to rise at a rate exceeding analysts' predictions. Gross margin is also expected to decrease slightly due to the divestiture of the logistics business. Shopify earnings presentation I believe this is a challenging economic scenario with a slowdown in economic spending; however, I believe Shopify is still well-positioned for long-term success. However, factors like revenue growth over time and rising expenses need to be monitored. The combination of the mixed earnings report and cautious guidance resulted in a significant drop of 18% in the share price. In this article, I will go into the details of the company and see if it's a candidate for my growth at reasonable price portfolio over the long term. To accomplish this, I will review factors including, management, corporate strategy, and financial health. At the end, you will read that I find Shopify undervalued with growth potential. I find that while Shopify's current performance and guidance suggest short-term headwinds, I remain positive on its long-term prospects. The economic cycle can certainly pressure stock prices, especially for companies exposed to consumer spending. However, Shopify's core business- e-commerce- is poised for continued growth thanks to the ever-increasing shift to online shopping worldwide, as reflected by Shopify's increase in Gross Merchandise Value (GMV) and international growth. Shopify earnings presentation Additionally, the company boasts characteristics that indicate its potential to thrive for the next decade. These include a strong market position, a diversified revenue stream, and a focus on innovation. Therefore, despite current volatility, I'm initiating coverage of Shopify with a Buy rating. Management Evaluation Shopify's CEO, Tobias Lutke, cofounded the company in 2004 and has been instrumental in its growth, serving as both CTO and CEO. Despite a low Glassdoor rating, likely due to workforce reductions last year, his long-term commitment is evident. Lutke owns a significant 6% portion of the company with 40% voting power and receives most of his compensation in stock awards with $20 million in the last two years and $15 million the year before rather than taking a cash salary which is just $1 (yes, $1). This strong alignment with shareholders' interests suggests he's invested in Shopify's success for the long haul, and therefore I find he has a \"high alignment ratio\" with the company's long-term success. Although, I believe he should let someone with more management experience run the company growth strategy. simplywall.st Jeff Hoffmeister, Shopify's CFO since 2022, has a background in managing high-growth tech companies. Despite joining during a period of layoffs that impacted employee morale as seen in the company reviews on Glassdoor, he's overseen positive financial trends. Under his leadership, Shopify has managed debt effectively to finance projects, and both FCF and ROE have been steadily increasing. I find this financial performance might be adept at balancing growth with responsible financial management. Seeking Alpha Overall, I find Shopify leadership a mixed bag. CEO, Tobias Lutke, has deep company knowledge and shareholder alignment. However, layoffs under his watch likely contributed to the low Glassdoor rating. CFO Hoffmeister brings tech finance experience, managing debt and boosting FCF and ROE. Yet, his arrival coincides with layoffs and his impact on long-term growth strategy remains unclear. Glassdoor Shopify management have strengths, but I find that they fall short of expectations for a growth company, and therefore I give them a rating of just \"Meets Expectations\". Lutke commitment is admirable, but his experience might be insufficient for Shopify's current growth phase. Hoffmeister's financial skills are valuable, but his recent appointment leaves his strategic influence uncertain. Further, the biggest challenge I find is the need for a clear growth strategy. Corporate Strategy Shopify's growth hinges on expanding its ecosystem. They focus on adding new stores to their marketplace, giving merchants more sales channels like social commerce, and enabling omnichannel experiences. They contrast with Amazon's strategy of leveraging its massive customer base to grow its marketplace and prioritize cloud computing services (AWS) for additional revenue streams. I have created the table below comparing Costco current strategy to some of it current competitors:     Shopify Amazon (AMZN) eBay (EBAY) Wix (WIX)   Corporate Strategy Ecommerce platform for SMB to sell directly to consumers-Focus on expanding its app marketplace and offering additional sales channels, including social commerce. Online marketplace offering a platform for third-party sellers-Growth strategy emphasizes cloud computing services (AWS) and expansion into new markets Online marketplace for buyers and sellers-Focuses on attracting new sellers through lower fees and improving user experience. Website creation platform with ecommerce functionality- Growth strategy emphasizes increasing international sales and building stronger community for sellers.   Advantages Easy to set up and use, customizable stores, strong app marketplace for additional features. Massive customer base, fulfillment and logistics services. Brand recognition. Established brand, large buyer base, wide variety of products, lower fees for high-volume sellers. Easy to use drag-and-drop website builder, beautiful design templates, affordable pricing   Disadvantages Transaction fees can be expensive for high-volume sellers, limited control over fulfillment. Highly competitive, strict seller guidelines, high fees for FBA sellers. Highly competitive, lower margins due to auction format, less control over branding Limited customization, compared to Shopify, may not be ideal for complex e-commerce needs.   Click to enlarge Source: From companies' website, presentations, Seeking Alpha I believe that while Shopify offers ease of use and customization, it charges transaction fees and may not be ideal for high-volume sellers due to limited fulfillment control. It's hard to compare market share as Shopify model is not the same as traditional online marketplaces like Amazon's, eBay's or Etsy (ETSY). Shopify aims to empower merchants by offering all the tools to allow them to set up an independent online shop. Shopify.com Shopify's competitive advantage is its financial strength and dedication to independent online stores to build their brand and sell exclusive products that otherwise wouldn't' be able to do in the Amazon marketplace. Further, their financial strengths give it a strategic advantage for growth. This focus allows them to invest heavily in growth initiatives like international access compared to smaller competitors like Wix Stores (WIX), BigCommerce (BIGC), Squarespace (SQSP), and open-source solutions like WooCommerce. Shopify website Valuation Shopify currently trades at around $61.25, still down around -20% since its last reported earnings in early May. To assess its value, I employed a conservative 11% discount rate, this rate reflects the minimum return an investor expects to receive for their investments. Here, I am using a 5% risk-free rate, combined with the additional risk premium for holding stocks versus risk-free investments, I'm using 6% for this risk premium. While this could be further refined, lower or higher, I'm using it as a starting point only to get a gauge for unbiased market expectations. Then, using a simple 10-year two staged DCF model, I reversed the formula to solve for the high-growth rate. To achieve this, I assumed a terminal growth rate of 4% in the second stage. Predicting growth beyond a 10-year horizon is challenging, but in my experience, a 4% rate reflects a more sustainable long-term trajectory for mature companies. You can find historical GDP growth data to explore past trends here. Again, these assumptions can be higher or lower, but from my experience I feel comfortable using a 4% rate as a base case scenario. The formula used is: $61 = (sum^10 EPS (1 + \"X\") / 1+r)) + TV (sum^10 EPS (1+g) / (1+r)) Solving for g = 28% This suggests that the market currently prices SHOP EPS to grow at a rate of 28%. According to Seeking Alpha, analyst consensus EPS is expected to grow at a 44.25% and its FCF is trending higher. Seeking Alpha Therefore, I believe SHOP is undervalued at this point. However, it's important to note that despite this undervaluation, I am expecting a clearer message from management about a more concrete growth strategy. I will be a buyer on this weakness as I believe they will figure it out, and I also understand that the stock might be pressured due to the current uncertainty in the economic cycle. Technical Analysis SHOP has had a hard time bouncing after it reported earnings, creating a support level at around $57-$60. Its RSI is at around 46, having crossed it 14-day average of 36 and pointing to keep increasing, indicating that the stock might increase in value. However, momentum according to Seeking Alpha still neutral: Seeking Alpha I believe the market is waiting for concrete evidence of Shopify's growth initiatives translating into results. The current uncertainty surrounding the company, coupled with the broader headwinds in consumer discretionary stocks, is creating a volatile environment. Shopify's reliance on consumer spending add another layer of complexity. However, I believe in the company long-term potential success due to its strong market position and healthy financials. TradingView Therefore, I expect some short-term volatility in the stock price, potentially ranging between $60-$68 until the next earnings report. While cautiously optimistic, I consider the company as a growth at a reasonable price over the long term. Next earnings are July 26th Takeaway  Shopify's recent earnings miss and cautious guidance caused a drop, but a closer look reveals a potential long-term winner growing at a reasonable price. Strong fundamentals like a dominant market position and focus on innovation positions them for future growth in the booming e-commerce market. I consider the stock undervalued due to short-term headwinds from an economy slowdown, and I'm also adding to this an unclear growth strategy from management. However, I am confident management will eventually figure it out and believe in Shopify's long-term potential, starting my coverage with a cautious Buy.","news_type":1},"isVote":1,"tweetType":1,"viewCount":158,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":271242332406000,"gmtCreate":1707259243490,"gmtModify":1707271495168,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"authorIdStr":"4119166036703922","idStr":"4119166036703922"},"themes":[],"title":"Start from Small","htmlText":"<a href=\"https://ttm.financial/S/SE\">$Sea Ltd(SE)$ </a>&nbsp;[Grin]&nbsp;&nbsp;[Grin]&nbsp;&nbsp;","listText":"<a href=\"https://ttm.financial/S/SE\">$Sea Ltd(SE)$ </a>&nbsp;[Grin]&nbsp;&nbsp;[Grin]&nbsp;&nbsp;","text":"$Sea Ltd(SE)$ [Grin] [Grin]","images":[{"img":"https://community-static.tradeup.com/news/9ab2a52df0783aeed19a0bdef929fd2a","width":"858","height":"1809"}],"top":1,"highlighted":1,"essential":1,"paper":2,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/271242332406000","isVote":1,"tweetType":1,"viewCount":327,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":1,"langContent":"EN","totalScore":0},{"id":271242329911576,"gmtCreate":1707259067456,"gmtModify":1707271473432,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"authorIdStr":"4119166036703922","idStr":"4119166036703922"},"themes":[],"htmlText":"<a href=\"https://ttm.financial/S/SE\">$Sea Ltd(SE)$ </a>&nbsp;","listText":"<a href=\"https://ttm.financial/S/SE\">$Sea Ltd(SE)$ </a>&nbsp;","text":"$Sea Ltd(SE)$","images":[{"img":"https://community-static.tradeup.com/news/aa1d1a8c69dd047238992cc0d89c4a04","width":"858","height":"1809"}],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/271242329911576","isVote":1,"tweetType":1,"viewCount":187,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":1,"langContent":"EN","totalScore":0},{"id":239063735255120,"gmtCreate":1699402485826,"gmtModify":1699408825173,"author":{"id":"4119166036703922","authorId":"4119166036703922","name":"Susan Chia","avatar":"https://community-static.tradeup.com/news/4e6cae4295157af8b3b269baa8f186a0","crmLevel":6,"crmLevelSwitch":1,"followedFlag":false,"authorIdStr":"4119166036703922","idStr":"4119166036703922"},"themes":[],"htmlText":"Great ariticle, would you like to share it?","listText":"Great ariticle, would you like to share it?","text":"Great ariticle, would you like to share it?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/239063735255120","repostId":"2381178554","repostType":2,"repost":{"id":"2381178554","pubTimestamp":1699408498,"share":"https://ttm.financial/m/news/2381178554?lang=&edition=fundamental","pubTime":"2023-11-08 09:54","market":"us","language":"en","title":"Datadog's Strong Q3, Outlook Prompts JP Morgan Upgrade","url":"https://stock-news.laohu8.com/highlight/detail?id=2381178554","media":"Seekingalpha","summary":"Cloud monitoring company Datadog (NASDAQ:DDOG) reported strong third-quarter results and a healthy outlook for the coming quarter on Tuesday, prompting an upgrade from investment firm JP Morgan. Analy","content":"<html><head></head><body><p>Cloud monitoring company <a href=\"https://laohu8.com/S/DDOG\">Datadog</a> (NASDAQ: DDOG) reported strong third-quarter results and a healthy outlook for the coming quarter on Tuesday, prompting an upgrade from investment firm JP Morgan.</p><p>Analyst Mark Murphy raised his rating on Datadog (DDOG) shares to overweight from neutral and boosted his price target to $115 from $90, noting that after a period of weak guidance, the company has proven its worth in the observability platform space.</p><p>&#34;We appreciate that DDOG shares are likely seeing short-squeeze activity today due to a string of very recent downgrades and broader disappointments among cloud consumption names, and this poses some near-term risk, but our view is longer-term, and we do not see the stock revisiting its prior lows again in the near-term horizon,&#34; Murphy wrote in an investor note.</p><p>Datadog (DDOG) shares jumped more than 28% on Tuesday following the results.</p><p>Murphy added that Datadog&#39;s (DDOG) valuation is &#34;somewhat challenging,&#34; so in the short-term, he advised investors to be patient and accumulate shares during pullbacks, especially below the $100 level.</p><p>In addition, Murphy said that after a period of cloud customers at the big hyperscalers, such as Amazon (AMZN) Web Services, Microsoft (MSFT) Azure and Google (GOOG) (GOOGL) Cloud Platform, focusing on optimization, it looks as if this is likely to end by the end of the year, or at worst, &#34;very early&#34; in 2024.</p><p>&#34;[It] is not a dramatic, wholesale change in the environment, but this signaling and the Q3 results seem to support a view that the worst period of revenue [deceleration] for Datadog is probably behind us,&#34; Murphy explained.</p><p>Analysts are largely bullish on Datadog (DDOG). It has a <strong>BUY</strong> rating from Seeking Alpha authors, while Wall Street analysts rate it a <strong>BUY</strong>. Conversely, Seeking Alpha&#39;s quant system, which consistently beats the market, rates DDOG a <strong>HOLD</strong>.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Datadog's Strong Q3, Outlook Prompts JP Morgan Upgrade</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDatadog's Strong Q3, Outlook Prompts JP Morgan Upgrade\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-11-08 09:54 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/news/4032253-datadogs-strong-q3-outlook-prompts-jp-morgan-upgrade><strong>Seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Cloud monitoring company Datadog (NASDAQ: DDOG) reported strong third-quarter results and a healthy outlook for the coming quarter on Tuesday, prompting an upgrade from investment firm JP Morgan....</p>\n\n<a href=\"https://seekingalpha.com/news/4032253-datadogs-strong-q3-outlook-prompts-jp-morgan-upgrade\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"DDOG":"Datadog"},"source_url":"https://seekingalpha.com/news/4032253-datadogs-strong-q3-outlook-prompts-jp-morgan-upgrade","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2381178554","content_text":"Cloud monitoring company Datadog (NASDAQ: DDOG) reported strong third-quarter results and a healthy outlook for the coming quarter on Tuesday, prompting an upgrade from investment firm JP Morgan.Analyst Mark Murphy raised his rating on Datadog (DDOG) shares to overweight from neutral and boosted his price target to $115 from $90, noting that after a period of weak guidance, the company has proven its worth in the observability platform space.\"We appreciate that DDOG shares are likely seeing short-squeeze activity today due to a string of very recent downgrades and broader disappointments among cloud consumption names, and this poses some near-term risk, but our view is longer-term, and we do not see the stock revisiting its prior lows again in the near-term horizon,\" Murphy wrote in an investor note.Datadog (DDOG) shares jumped more than 28% on Tuesday following the results.Murphy added that Datadog's (DDOG) valuation is \"somewhat challenging,\" so in the short-term, he advised investors to be patient and accumulate shares during pullbacks, especially below the $100 level.In addition, Murphy said that after a period of cloud customers at the big hyperscalers, such as Amazon (AMZN) Web Services, Microsoft (MSFT) Azure and Google (GOOG) (GOOGL) Cloud Platform, focusing on optimization, it looks as if this is likely to end by the end of the year, or at worst, \"very early\" in 2024.\"[It] is not a dramatic, wholesale change in the environment, but this signaling and the Q3 results seem to support a view that the worst period of revenue [deceleration] for Datadog is probably behind us,\" Murphy explained.Analysts are largely bullish on Datadog (DDOG). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates DDOG a HOLD.","news_type":1},"isVote":1,"tweetType":1,"viewCount":303,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"lives":[]}