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guys Tesla just reported yesterday after hours and they miss big as of after hours 30 minutes later they were up about 7% they reported 45 cents earnings per share versus 51 cents expected that's a drop of 48% versus the quarter one year ago Revenue came in at 21.3 billion versus an estimated 22.3 billion now guys we talk about Tesla a lot and the reason being is Tesla is a company that was so hyped at 414 per share just 2 and a half years ago has fallen from grace to 150 per share 150 per share it is absolutely insane now the question becomes why is this revenue's gone up profits gone up this quarter was really bad but overall you sit there and say why well guys because of hype it is possible to overpay for a good thing I have videos in which people criticizing me and I said I bet there'll be a time when we don't see 10 years from now we still haven't seen the same price on Tesla I don't know if that's going to happen or not but it wouldn't shock me because markets are irrational in which you send a company like Nvidia up 10x in a matter of a year and a half that is not a rational Market you don't send a $2 billion company up 10x in a year and a half from rationality when you look at Tesla Tesla's had all these distractions but keep in mind great news great news great news bad news bad news bad news but this bad news is only because the stock went down news follows the stock price I cannot stress this enough I started to think that good investing was 90% fundamentals 10% emotion it's exactly flipped great investing is 90% emotion 10% fundamentals that's why we have these tools here I want you to be able to look at the fundamentals of the business that's why I make these videos let's focus on the fundamentals remember guys if you're an investor and you don't own Tesla here you're pretty excited at this you're like oh my God the stock is down so so much 60 70% down but the same person if they' bought here would not be as excited anymore why because they have this sunk cost like oh my God I just paid $400 for this company I hate this but you got to evaluate the companies based on where they stand at that given time and right now the news on Tesla is not great they just recalled every cyber truck that's out there granted it's not many they just laid off a ton of employees they just cut price again and cut production on some cars so let's go check out their press release to see some of the things that they're announcing first off total Automotive revenues down 133% and guys this tech company everybody speaks of 17.4 of their 21.3 billion in revenue is from Cars this number here includes their full self-driving software but I haven't seen where they split that out yet so 80 some per of their revenue comes from Cars how is it a software business I see this all the time in our 247 Channel yesterday after hours I sat there and said guys if you go to high school and you see a star player who's who everybody thinks for sure is going to go pro you don't call him a pro-athlete yet you wait for him to become a pro athlete because these things happen markets shift momentum shifts people's love shifts that's so important to understand energy and services up 7% Serv sorry energy and storage services and other Revenue up 25% okay not bad overall Revenue down 9% here's the things that scares me gross profit 17.4 down two whole percent from 19.3 that bothers me guys their gross margin keeps becoming more and more like a car company a car company because software businesses would blow their brains out if they had 17.4% gross margins a bad software business is 50 plus% gross margin this is not looks like a duck walks like a duck talks like a duck guess what it is it's Tesla and keep in mind I love Tesla I have a cyber truck in order I had a model X Mo has a has a Tesla we love Tesla but I'm separating the car company from the stock that's so important if you attach those two things together you're going to make a lot of bad decisions you've got to be completely agnostic as to what the company is not completely you got to factor in the growth but don't fall in love with the company don't fall in love with the company because you'll just look for any reason to buy it and that's what was happening right here that's what happening right here I love it I love it I see the stock price go up and guys guess what I was wrong all along this way because that company is still fundamentally we'll get into that our stock analyzer tool is worth more than when I was saying it was overpriced back here so I get that but you still have to remember that if you bought it here good for you but I hate to say you probably didn't buy it based on fundamentals and that's okay but you can always change that methodology and that's what I'm here for I'm here to teach you these fundamentals but more importantly I'm here to teach you the emotional side of investing that way if you love the company now at 150 and you sit there and think it's a buy friend of the channel professor aswath aswath says that he likes it sub 180 right dton he's buying it so he likes it sub 180 if it goes to 90 and by the way for those of you who think it's not going to go to 90 guys it was 101 just like a year and a half ago but anyhow at 90 he should love it and buy more of it unless his thesis is cheap changed and the thesis shouldn't be changed based on emotional garbage coming out in the media the the way the thesis changes the fundamentals have substantially changed the future 10 years down the road has substantially changed that's the reason you change your thesis but that emotional ride to be able to watch you go from 150 down to 90 it's a tough go and you're not alone if you think it's tough we've all been there we've all bought companies and see them go down guys Joel greenblat says it is nearly impossible and he's right to buy a company at the bottom when you buy a company invariably at some point you will be down but keep in mind I give this example all the time I bought Carnival Cruise Line and I made money on it and guess what I was wrong about Carnival Cruise Line literally wrong they took on way more debt than I expected and they issued way more shares than I expected them to do that totally butchered my thesis and guess what I still made money why because the emotional whims of the market drove the stock price up that by the time I realized my thesis had changed the stock was up great I got lucky just like I bought stocks where they go down do I think I was wrong because of that absolutely not if you understand the fundamentals you're going to be able to handle your emotions and you're going to be around a community of people here in our community to be able to sit there and say guys what am I missing I still think this company is good and you have that conversation and that's all I'm asking you to do is to understand that investing is 90% emotion it absolutely is all about handling your emotions to be able to compound and keep on to companies that might be down like this if you truly believe their good values if you believe Tesla was at 414 please tell me you've been unloading on it you have to because buying it at 414 the fundament the revenue is higher yes they might have gross profit issues and things like that that's temporary they can get through that the question is is the business fundamentally sound so if you want to understand more about the emotions and be able to handle your emotions better click the link below $7 for 7 Days join the the community you get the tools to make the right fundamental decision and you have the community to help guide you and feel more confident and be able to handle your emotions to ride great companies up to higher prices over the years $7 to 7 Days Make sure you shine sign up because we have a weight list starting soon so beat the weit list now a $500 billion market cap business price to sales ratio 5.2 why do I point this out well a typical car company car company average for for price of sales is 0 .5 to one this is at 5.2 that is 5 to 10 times higher again people are going to say software Guys somebody tell me the breakdown of the software Revenue in their car Revenue I want to know that but the fact they don't break that out is easily even it's somewhere buried it's like well guys if it's such a big driver of value separate it usually companies separate numbers after they've had the company for a while like Facebook and things like that and things have slowed down that's when they stop reporting so if things slowed down well guess what they've also dropped the price on their on their FSD quite considerably quite considerably I don't know it makes me wonder about the company guys free cash flow 4.36 billion last year but let's go check out their current release their press release this is what's scary here net cash by operating activities down 90% year-over-year 2.5 billion to 240 billion 240 million last last quarter it was 4.4 free cash flow went from 440 Million last the same quarter last year to negative $2.5 billion but their cash and cash equivalence Investments went up went up 22.4 to 26.83 billion 20% increase okay not bad from a revenue standpoint Revenue down 9% to 21.3 we talked about reduced vehicle average selling price year-over-year they reduce the prices on cars they want to Spur demand that's what they did decline in vehicle deliveries partially due to the model 3 update in the Fremont Factory and the Giga Berlin production disruptions these things happen to companies that's why you need that margin of safety that's why you can't assume that you need the rosies assumptions to make your money and at $414 per per share you need the rosies assumptions but in your defense if you bought paid 414 for it you saw them hit those Rosy assumptions for 10 years so of course you're like listen they'll still keep doing it guys taking a company from a million units a year to 10 million year that's not easy that's very difficult do I think Tesla can do it if anybody can it's Elon but he's got a lot of distractions out there he's trying to go to space he has starlink he has the boring company he has building tunnels all these things are going on Twitter X these are the things to remember and those things were existing except for Twitter two and a half years ago so you can't now sit there and say wait a second he's distracted um he was distracted two and a half years ago guys he has 11 kids he's too busy paying child support of course he's distracted reduce vehicle ASP increase in operating expenses partly driven by AI the first person to blame AI for operating expenses being higher the production ramp for cyber truck was increased decline in vehicle deliveries partial due to model 3 update like we talked about before H now they did have a benefit lower cost per vehicle including lower material cost Freights and duties that's good gross profit growth and energy generation storage higher FSD Revenue recognition year-over-year due to release of Auto Park feature oh that's good let's see what those numbers are higher FSD revenue generated great how much higher we need to know these things if you think Tesla is a software business the first thing you need to do is know exactly how much they sell in software what's that gross margin and how is it growing let's see that if you don't know that number and you think Tesla's a software company you need to burn your money you don't know what you're doing go buy ETFs and just stick with them you can't make your entire thesis on a company something and then not know about it I believe Southwest and Disney will get back to normal margins and I understand how that happens okay don't tell me that you don't know the exact Revenue dring I'm just going to start saying that to everybody on Twitter who says it's software business great tell me their software sales tell me the gross in the software sales what is the gross margin in their software sales that's what's important here now some some other exciting news for Tesla Tesla locations Mobile service Fleet supercharger stations supercharger connectors all these things up big 26 12 26 and 27% storage deployed up 4% okay couple pieces of bad news total production of model total production down 2% total deliver is down 9% 422,000 down to 368 even though production is only down 2% hm I you ask questions and these are the questions have to ask and these are the things to take into consideration when you're buying a company when you buy them at absurd valuations you like meet Kevin you have to understand what is going to drive this value the end of the day profit and revenue are going to drive the value that's what's going to drive the value as long as they're not as long as they're not diluting shareholders let's see what they're doing well guys they've increased their share count in the last five years by 18% that's why it's one of my eight pillars because dilution kills investors free cash flow is up net income is up even higher but look at this 5year PE and 5year price of free cash flow 76 on the PE 132 on the pre free cash flow this doesn't even include this quarter this is it's updated this will update in a couple days so it's going to be even worse than this did a decent roicc guys you're looking at Tesla the car company here I hate to break it to you looking at Tesla the car company bring the hate on I love it I absolutely love it this is a car company and I hope someday they do become a software business because I'm quite sure there'll be a time in the future I'm going I love this stock at some point there will be as of right now I'm sitting there going let's go check it out let's see what it's actually let's see what analyst estimates are 378 per share this year is the estimate leading going to 809 by December of 2028 that's over double that's great what about revenue from 114 billion this year to 260 now the issue is they missed by a billion dollars so maybe this comes in at one I don't know what's going to happen but still some great growth here let's check out the stock analyzer tool and see exactly what we think it's worth let me pull the last time I did it May 22nd wait that was Z yesterday so Revenue growth assumptions I did seven on the low side 12% in the middle 17 on the high that's for 10 years Guys these are Big Numbers 17% Revenue growth for 10 years is a lot of Revenue growth just to show you what that is let me show you 17% is 1.17 to the power of 10 which is 4.8x they did like roughly $100 billion in the last year so they expect to do $480 billion in 10 years completely plausible the question is is it probable if they want to become the number one car manufacturer in 10 years that would happen at a much lower price per car and that's a criticism we got three years ago I said guys they can't sell 15 million cars at $100,000 a car it's got to be 15 million cars at a 30 or $40,000 price and that's going to hurt margins in all likelihood but nobody wants to hear it when you love a company so much so back to the stock analyzer tool for profit margin I did higher than most car companies I did six n and 12% maybe that's not enough to factor in the full self-driving margins but again what are those margins we don't know so could you go higher listen I'll go higher on this one I'm going to go seven 11 and 15 let's give it the benefit of the doubt now PE and price of cash flow I did 15 20 and 25 that seems reasonable for because remember in 10 years if they're the number one carbon manufacturer in the world are you giving them a 20 PE guys we've already seen that other manufacturers came in electric what's the novelty then I don't know and again 9% return the market return what this means is there's no margin of safety in here for margin of safety you got to put a higher return here than that and remember we need margin safety for three reasons valuation is an imprecise art the future is unknown and we're humans going to make mistakes and before I hit the analyze button I want to remind you guys the emotional part of investing is the hardest part so click that link join for $7 to 7 days it'll change the way in which you view money and I'm guessing it'll probably make you a better investor hit the analyze button and I'll leave you with this a low price of 40 high price of 265 middle price of 111 assuming no margin of safety I am U on Tesla thank you for your time
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