[00:00] Today was a big day for Tesla, and it comes the same week that we're going to get a delivery's amount from Tesla. This is all a big deal for the stock, and we've got to talk about it.
[00:12] First, we're going to talk about hardware 14 light. Then we're going to talk about how that could end up affecting the stock. And what kind of cost differentials there could be for Tesla.
[00:26] Why this matters? So hey, everyone, I'm meet Kevin. Let's get right into this. So today, Tesla saw an 8.46 stock price pump. We literally moved from $379 per share at market open all the way up to rejecting my famed 414 trendline.
[00:49] We can see this rejection here within 73 cents for those of you who like TA right towards the end of the day. And we settled at about 411. And so the big question is why did Tesla move this much?
[01:02] Keep in mind, it's worth noting the alpha report this morning that we put out suggested that if the cues were going to trend positive, hardware companies like Tesla that have recently been selling off, might actually see a short-term rally on top of that in the alpha report this morning.
[01:17] We also talked about SpaceX and said this was when SpaceX was up like 2%. It said, look, SpaceX has its July 7th inclusion date into the NASDAQ 100 and a lot of lockups don't happen until August.
[01:29] Whereas the people who made a quick buck on their $135 acquisitions at IPO were able to sell after the stock ran up to 220 and who cares if they got a little penalty, they weren't locked up.
[01:41] I think that selling pressure in the short term is over. Now we have hype for SpaceX, which is really exciting. So you could have a few weeks here where we actually trend up over the next year, though, thanks to lockups, I'm a little more bearish on SpaceX stock price.
[01:57] And so that's why in this video we're going to be focusing on Tesla. Now remember, if you want these sort of calls, like the two I just gave you every single day, the market is open, almost every single day, the market is open. Join us over at mekevin.com, we've got an expiring coupon code Pope tomorrow.
[02:11] And that is because the Pope gave me a nod. And I feel really happy about that. I remember you could potentially write this off. You get all nine courses, every trade alert, every private live stream, every alpha report, short term medium term, long term trade alerts, the reinvest course, diversification, debt trading, insurance, liabilities, entities, real estate, finance for your children, you name it.
[02:31] But for now, let's get into what matters and that is Tesla. So Tesla hardware three has been what? Well, people have been stuck with for about 15 months. Well, or longer, I mean, people who have had hardware three have been stuck on version 12, six of FSD for about 15 months.
[02:49] That's quite a long time to kind of sit around wondering, hey, are we ever going to get an update on FSD? And today, Tesla announced the release of a version 14 light for full self driving.
[03:02] And it was specifically for the hardware three folks. So in other words, people who've got the older generation vehicles, like prior to about 2024, those folks just got a really big update.
[03:15] This also comes just about three weeks after Tesla got into an unfortunate class action lawsuit where the individual who put together the class action lawsuit claims
[03:28] that Elon's Q1 earnings call on April 22nd was basically an admission that full self driving will never end up coming to hardware three users.
[03:41] This pissed a lot of people off and a lot of people turn bearish on Tesla at that moment because they thought crap. Now, many people from 2017 really on have been sold this idea that we're going to have full self driving computers.
[03:56] Some of the older computers have already been upgraded to newer versions, but not to hardware four because as Elon puts them, that would require establishing many factories basically in cities across the United States.
[04:11] He said we're going to have to set up micro factories and major metro areas and Elon admitted that hardware three just quote simply does not have the capability to achieve unsupervised full self driving that admission likely led to this class action lawsuit.
[04:26] And so now in response to the class action lawsuit, it seems like well, it might just be convenient timing, but it seems like Tesla is finally saying all right, we're going to take care of the hardware three folks. Otherwise, now if you don't pay for this or if you don't end up getting this sort of upgrade, you probably be stuck twiddle in your thumbs waiting for some kind of hardware upgrade for your hardware three vehicle, which might end up costing somewhere between three to $5,000 and a lot of you are like, look, I already paid five grand or seven grand or eight grand or 10 grand or whatever was for FSD.
[04:59] Why don't I have FSD? Why am I getting left behind on the updates? And of course, that's why this class action lawsuit has been spawned. Now, what is version 14 light and how does it actually change the fundamentals of the stock? Well, it does make a difference. It is a good thing. So what it is is hardware four is the more advanced hardware. We already know that five megapixel cameras are in hardware four. You know how many megapixels are in hardware three.
[05:28] 1.2. So a fraction of the resolution hardware four is considered on a compute basis to be about three and a half some say up to five times as fast on processing full self driving workloads, just because the chips are better.
[05:42] But the thing about full self driving is it's not all about the tops or how much compute you can have. It often comes down to memory. It seems like everything comes down to memory these days. And hardware three only has one eighth of the memory bandwidth of hardware four.
[06:00] One eight isn't great, right? One divided by eight is about 12.5%. And so what is version 14 light that has just been released for the hardware three folks?
[06:14] Well, after 15 months of being stuck on version 12.6 and getting skipped for version 13, they get version 14 light. And this is expected to be it. I've seen this quoted a couple different ways.
[06:26] About 14 to 15% of the size of the hardware four neural net. And this was basically done through distillation. In other words, the model was compressed through distillation.
[06:38] distillation is kind of like the deep seeking of Tesla. Am I opinion that's kind of brilliant? distillation learning has been done for like a decade. So it's not like super novel in itself.
[06:52] But the fact that Tesla is distilling their own advanced full self driving to help guide the old and dated. Sometimes you know seven eight year old vehicle hardware as well.
[07:06] Some of them have updated computers already inside like my dad's model X, which is a 2017. That's what got me into Tesla the first place. That's how to hardware upgrade between them now. But the point is he now gets an upgrade for what's actually coming up on a nine year old car.
[07:22] And he loves full self driving 12.6. But now he's getting upgraded in sort of a teacher to student model via distillation. Let me re-explain that a little bit because I know this whole like teacher to student thing might sound a little
[07:36] complicated. So let's come up with a scenario to just explain distillation really quick. Basically, let's say you're driving through an neighborhood going 30 miles an hour. You're going to speed limit. Maybe it's 25, whatever. An experienced driver sees a row of cars stacked up on the right
[07:52] side that wasn't there before. Just a bunch of people parked on the right side. And there's a ball rolling around and somebody's front lawn. An experienced driver goes, all right, there's a chance the child's going to come darting out of his row of cars over here. Let's slow down. At least sort of take the
[08:09] foot off the gas here. That is sort of an experienced teacher's mindset in a scenario, right? It's intuition. We have situational awareness. So you go, you know, we should probably do X, Y, Z to minimize the risk
[08:24] of a, somebody getting hurt and be just a headache. All right. Hardware three basically learns, okay, all right. I don't understand all that crime. You just said Kevin, but I got it. If I see
[08:37] a bunch of cars stacked up in the neighborhood, I'll just take my foot off the gas and slow down a little bit. Got it. That's distilling the intuition. It's not teaching how to be that intuitive.
[08:50] I'm just saying, hey, man, you know, in these 50,000 scenarios, various different scenarios, you might consider acting like this. One quick other example I like to think of as flying as a pilot
[09:04] when I learned how to fly a jet aircraft. These things are freaking fast. You know, there are times where I'll be flying and I'm doing my checklist or I'm getting the weather for the airport where we're coming in land at. And then the other pilot says, hey, we're at the XYZ waypoint, you know, anything
[09:19] we should be doing here. You know, they maybe have 10 years of flying on me where I got one year of flying. And I'm like, oh, yeah. Of course, we should be starting the arrival procedure, right,
[09:31] for this area. So why don't we start on that? Set the nav in that way, whatever, right? A major oversimplifying here. But the point is next time you go to that intersection, my instinct should be,
[09:43] oh, yeah, that's right. I should be doing something at this point. That's right. I should be doing the arrival procedure at this point. That's one way a teacher teaches, right? That's distillation. So it's not as good, but it's pretty good because a lot of the scenarios and that data that people
[09:59] talk up that Tesla has that other car manufacturers don't. And that honestly, even in video with it, with its drive platform, wishes they had, Tesla has and can now offer distillation to the other vehicles
[10:13] and it's fleet. And it's great. Now, that doesn't mean we're in a place where yay, we have cybercaps now, but there might be a hint of cybercaps coming in. I'm going to show you that data in just a moment.
[10:26] So that's version 14 light. And I think this person did a, you know, pretty decent little initial impression video here, techie, Tesla. I'll just give them a little like over here. So they gave
[10:40] some first impressions here. They seem to be impressed with it. I'm not going to obviously play this whole video here, but here's just an example where he talks about, you know, he can now, which he couldn't previously do, drive up and the car will park itself in the driveway. He was trying to
[10:55] coax it to get in the garage, but it just ended up going into park instead. And he was a little frustrated that it just went into park. Then there was a, this is actually the scenario where it didn't go into park, where in order to get the car to go in, he has to tap the accelerator, but then it stops like halfway
[11:09] through. And so obviously it's, it's not perfect. Yeah, it's not going to be like 14, but frankly, to me, I've got version 14 in the cyber truck. I freaking love it. I'm a big bull on FSD. I think
[11:22] they're the, they're just the best product that exists for full self driving. Hands down, full stop. And I don't use FSD 14 to park. Maybe I should. I usually, I just have this habit. Maybe because
[11:34] I've been using FSD vehicles for nine years now. You know, I started back in 2017 on this, back when I just autopilot. And I have a habit of just taking over and parking myself. And I also
[11:46] don't have a driveway or garage that I park in. So, you know, maybe I'm not the best to say that I don't really think this matters that much. For a lot of people, maybe it does. It's extra convenience and it's comfort. That's great. But I think really where it matters is in places like unprotected
[12:01] left turns, you know, going through parking lots. And it seems like the person here at least is pretty impressed with 14 light. Now, there are some people who are unimpressed with 14 light. Some people
[12:14] say that the reaction time of 14 light is just too slow. I kind of don't know if this is a 14 issue or if this is just a scenario based issue. For example, here's somebody on X who posted this video.
[12:29] And they said that the vehicle brake lights come on and there's a delay in when the brake lights come on and when the vehicle responds and that delay in the response time ends up causing an accident.
[12:41] Now, I personally disagree with that because just because a car's brake lights come on does not mean that the vehicle has actually physically started decelerating. Usually, if you just tap the
[12:56] brakes a little bit, you can actually get the lights to turn on without actually slowing the vehicle. It's sort of like you're activating the light actuator for the brake lights before the brakes
[13:08] are actually even making contact to slow your vehicle down. So since brakes and vehicles are physical, I think that matters. And that could be some of the explanation of the six seven second, you know,
[13:22] 0.67 second latency delay here. But I don't know. It depends on how fast they trumped on it. You know, for example, if you go fly a jet, a lot of jets, well, the phenom specifically has electronic braking. It's break by wire, which is really weird because you go to step on the brakes
[13:38] and it's got these ceramic brakes that got to heat up. It like, there's a delay. And if you play with the pedals to break the car because there are two brake pedals left and right. If you play with them, the plane will go like this as you're stopping. It's like the phenom feet they call it. It's weird.
[13:53] Anyway, so point is that is an electronic style braking. Vehicles don't have electronic style braking. So there could be a timing latency gap there. I'm not as jaded, I think, as this poster here,
[14:06] but maybe hardware three is slower. But that's about the jade that I've seen on it so far. Comment here. I'm seeing, hey, you can park itself. Cool. Excited. I'm personally excited to see my dad's comments on it. You know, again, it's a nine year old car. Some people say smoother traffic
[14:20] handling and the rollout is broadening. Okay, cool. Great. So does this move the needle for the stock? In my opinion, yes. So first of all, this reduces the potential need for micro factories.
[14:34] I think that micro factories would be a massive distraction and extremely expensive for Tesla. If they shift the cost to the consumer, the consumer's going to get pissed and then they're going to sue Tesla as they already are. This all comes on the back of Elon Musk in quarter one saying that
[14:49] hardware three quote simply does not have the capability to achieve unsupervised FSD. We're going to have to set up micro factories in major metropolitan areas and quote essentially to retrofit the older vehicles. That's not good, especially since there are a lot of Tesla bulls that are circulating around
[15:05] the world that are like, I can't wait to submit my Tesla to the fleet so it can mine Bitcoin while I'm not using my car and drive itself around and be a robot taxi for me and my car can go be my slave
[15:19] for me. I think we're quite far away from that. But let's just say this V14 light release is probably going to reduce a lot of the anxiety that people have had not getting updates for the last
[15:32] 15 months. And it's going to save EPS at Tesla retrofit kits probably wouldn't come out for version 14 like real version 14 until mid 2027 at the earliest. And honestly, I don't think they'll ever
[15:45] come out. I'm still waiting for my toe hitch that I ordered in 2017, which Tesla sold me as an option. And then it didn't come with the car. And then they said they would send it to me and then ever did. I don't want it anymore. That off chance somebody from Tesla is watching. I don't want it.
[16:00] It's fine. I'm over it. I've been way over it for a long time. My dad drives my black X now anyway and loves it. It's actually really incredible to see it as somebody who's 40 years older than me so excited
[16:14] about full self driving and he's really, really gung ho about it. But anyway, the website electric, which is typically a Tesla bear, they argue this is just a way of moving the goalposts.
[16:26] Personally, I think this is a great move. And it's actually very impressive by Tesla. I did, again, argue in the alpha report this morning that Tesla had a good shop of shot at running up today. And the fact that it moved 8% is great. I hope a lot of y'all made a lot of money on that.
[16:42] I'm not always perfect, but I do my best on my callouts. And this is something that I've been watching. It's kind of Tesla's turn, if you will. Now, if we look at the valuation for Tesla, they are pretty dang expensive. Now, this is a, this is pretty much just an auto valuation for the company,
[16:59] right? So if you only multiply them by about a 1.67 peg, the valuation's pretty insulting right now for Tesla. It's fair value, just as an auto and energy company, assuming next four years of growth rates
[17:12] is 124. That's very, very low. Obviously, if we actually price in Optimus and CyberCab, that's where the extra $300 comes from. Now, when we look at deliveries, this is maybe where we
[17:27] could see some CyberCabs coming, maybe, but look at this. What I did is I took a, oops, that's on my spreadsheet. Let me get my spreadsheet here because I want you to see the rates of change. So I have a Tesla delivery consensus, a spreadsheet release that came out from Tesla. And then what I did
[17:45] is I put percentage growth targets on here. So you can kind of see what the Tesla consensus is. You'll find that in 27, the consensus is that Model 3 and Y deliveries are only going to grow 8%,
[17:59] they're only going to grow 7% in 2028, 10% in 2029, 8% in 2030. This is way lower than that historical 50% growth rate that we had for vehicles. So it's pretty bad on the Model 3 and Y side.
[18:16] However, look at this, all other models, we can potentially see this growth rate of 63 to 95 to 45 to 39% to get us all the way up to 362,000 cars by the end of the decade, which would be about 15%
[18:33] of all the cars that Tesla makes. Now, what is going to drive that bump? Well, over here in 2028, you have this big boost of cars. That's where you almost double the all other models. That's where I'm guessing most analysts are starting to actually write in some kind of CyberCab release. Again, obviously,
[18:49] you've got the semi-truck that could be in there as well. We know the CyberTruck doesn't do so well, but semi and Cyber is probably over here. You could price in Optimus as well. Of course, energy is doing well, but energy is also not growing at least per estimates at that 50% growth rate
[19:04] either anymore. It used to be that when Tesla lost its 50% growth rate on cars, they're like, well, at least we have a 50% growth rate on energy. Not anymore per consensus sitting at about 34% expected between now and next year, 31 thereafter, 26 thereafter, and 20 thereafter. So not fantastic.
[19:23] But hey, there's a lot of optimism also that Elon is kind of expecting to buy Tesla with SpaceX shares if Tesla stock ends up falling enough in SpaceX rallies. And so that kind of creates a
[19:41] floor for Tesla's price. Now, if I go in and I put, let's see what the estimates are right now. If I go to Wall Street's estimates and we'll be able to value this ourselves,
[19:53] let's go price in a larger growth rate. Let's go with a 2.67 peg. Let's take an EPS of the end of 27. Okay, we're going to do the end of 2027. Let's go a little more bullish here. And then let's do a
[20:09] growth rate of 37 and 56, 51 divided by 3, a growth rate of 48%. Okay. If we take these numbers
[20:21] right here, we'll be able to justify a much larger valuation for Tesla. All right. There we go. 312 bucks would be a reasonable higher margin service based price target for Tesla assuming 48% growth.
[20:37] That would be an end of 2027 price target. Now, if I drop this to just a manufacturer of about 1.67, obviously, we're going to see that go down under $200 closer to what we saw there as that
[20:50] bearish estimate, probably because this growth is closer to about 42% somewhere around there. So you really need that growth to stay up. You also need them to be a higher margin producer,
[21:04] which, you know, they're not right now. Now their pricing power has increased a little bit, but only because margins are somewhat improving. And that was in part because of
[21:16] terrif relief along with some extra FSD accounting. So it's unclear that margin relief is going to remain. We'll say they're also constrained on battery packs right now, something else to be aware of.
[21:31] And then, of course, you want to see a broader rollout of FSD internationally. I mean, once China going to approve FSD, right? So there, there's still like growth opportunities throughout the rest of the world. Again, I'm a bull on FSD. I'm not excited personally about the Tesla valuation or
[21:48] the space acceleration, but let me get me along premium, you know? So you kind of just have to know that going into it. Anyway, that's my take. Thanks so much for watching. If you want my daily takes on short-term, medium-term, and long-term price targets, make sure to go on over to meatkeven.com,
[22:03] use that coupon code Pope before it expires on June 30th. And we'll see you there. Goodbye and good luck. Why not advertise these things that you told us here? I feel like nobody else knows about this. We'll try a little advertising and see how it goes. Congratulations, man. You have done so much.
[22:17] People love you. People look up to you. Kevin Pafra there, financial analyst, and you too, but meatkeven, always great to get your take.