Am I the only one who feels like Schrödinger's cat? 100% agree with Doug on the fundamentals but can't dismiss the fact that everything is a meme now and Elon is a grandmaster of trolling.

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Feb 1, 2022·edited Feb 1, 2022

Love the newsletter Doug!

Not my opinion, but just as a thought: how about if Tesla achieves level 5 autonomy by 2030 and has a robotaxi network that allows owners to earn revenue with their cars? They could charge for FSD based on revenue/mile with a take rate that would still leave owners with a 7% yield and probably achieve 80%+ attach rates over the entire fleet. Cool to think about.

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A sound commentary on future expectations and how stock prices get determined.

I think the writer mistakenly leaves out the Tesla potential on energy storage which is just starting to take off for the company.The stated corporate aim is for energy storage to attain 50% of company turnover.It will be a far larger revenue earner in the next few years than the much touted FSD or insurance.

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This is all very nice, but what is your actual investment performance overall over the time Tesla has been a public company vs. someone who just bought Tesla in the early years and held on?

There are a number of errors in your assumptions and modelling (e.g. assuming that currently existing OEMs will be Tesla's major competition in the future, assuming that there is such a thing as existing "averages" for a heretofore non-existent EV industry, assuming that car ownership and usage will not evolve with new functionality and pricing-per-mile), but they're not worth going through if you haven't learned them over this entire past decade. You're apparently still writing for an income, whereas those of us who took the time to understand the disruption no longer have to worry about an income. It's not clear why we (meaning long-term Tesla investors) should be listening to *you* when we're the ones with the actual results in hand.

It's great to brand yourself as contrarian, but claiming Tesla is overvalued is emphatically not a contrarian stock, it's a mainstream opinion which long-term investors have been swimming against for close to a decade.

If you want to make money investing in a company redefining what's possible in actual engineering, then you can open your mind. Otherwise, just keep doing you, but it's a shame to be misleading others.

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You assume there will be competition but do not say who. So… who?

In an era of high demand for autonomous EV’s and low demand for gas cars, with what products are Toyota, Ford and GM avoiding bankruptcy?

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Did you address solar? Energy storage? HVAC? (yes they are doing HVAC)

Your model assumes Optimus will generate $0 of revenue in 2031?

Is this a troll?

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Doug, you've made several errors.

You assume they don't have FSD on every car in the next two years. Every car will have it once FSD is solved, max 2 years. So you need 98% of cars made from 2024 onwards with FSD Subs applied. Also you need to then include the per mile platform fee too.

This is one point, there are many more I could explain. But expect about 20% of global Auto TAM just for Tesla.

You've reasoned by analogy throughout your thesis. It's not a criticism it's a very common misunderstanding when evaluating Tesla.

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Thank you, Doug. Fascinating read. Always good to understand a more bearish analysis. You’re right, however, about people not changing their mind on this one. In my view, the market keeps underestimating the top & bottom line growth opportunities for Tesla. Of course, as you rightfully point out, opportunity does not equal guarantee, but we’re likely talking a >50% chance of reaching a $10T+ market cap in 10 years. When discounted to today even the part that is the current core business (EV hardware) is drastically undervalued (at 2-2.5% interest rate). In other words, it’s very reasonable to assume that today Tesla is a 8,000 lbs (electric ;) truck driving across a bridge built for a 15,000 lbs max load.

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To build a safety margin into your investment strategy, in my opinion the price is the wrong candidate to concentrate on. Because nobody knows whether the current price is too high or too low. I know of a guy who never bought a computer because prices are dropping every year and he is still waiting for the perfect deal ... Better build the safety margin into the sum you are going to invest: If you believe in Tesla and can afford to buy two shares - just buy one. If TSLA doubles - fine. If TSLA drops 80%, buy 5 shares more. Then, your average price is (($900 x 1)+($180x5)) = $1,800/6 = $300 per share, which might be enough of a safety margin. If you happen to be a strong believer, you may buy the dip at 60% down, if you are a very strong believer, you may buy the dip at 40% down. But regardless how strong your belief is - stay disciplined.

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