The bull and bear cases for Tesla's position in the Magnificent 7

You've always come as the sobering voice on this dog. You're laughing already. Yeah. What do you make of this recent rally we've seen in Tesla? We're going to get into whether or not belongs to the Mag 7 or not, but what do you make on this recent rally, especially with the thought that we're going to test that might likely miss those delivery numbers. Yeah. I mean, I I don't think I miss this going to be taken as a surprise. You know, the stocks actually been been moving higher on optimism around the China deliveries, right. The fact that you, as you mentioned, you know, several of the key players in China have beaten, people are hoping that the fact that we don't have arson issues in Germany and and supply chain issues this quarter will allow them to maybe be a little bit stronger. But I look at used used car pricing, it's down 30% year over year. That's roughly double the the price cuts in North America for Tesla. But you know, you're getting the fundamentals on, you know, about the stock right now. But the recent rally, I mean, it sounds like you're thinking that's just a rational exuberance. I mean, is there, is there some reason that you can attribute even is the bear in this conversation for the stock to rally so much about double digits over the last month? You know, it's, it's optimism in China. I mean, people trade this thing on data points. It's a high velocity name. It's a retail darling. So when the headline news is coming through, positive stocks going up. When the headline news is coming through negative stops going down. All right, Steven, I'm going to come over to you. You're the bull in this situation right now. Even you believe you said the whisper number for Tesla delivery is actually is going to fall forward of fall short of what the estimates are expecting. What do you make of this recent rally? What are you possibly, but at least investors are seeing in this stock over the last month or so. Yeah, I think there's a few things. I think first of all, if you look at Tesla and you just look at it as an automotive company, you're not going to buy the stock, right? You're you're you're you're buying into a technology business. And I think Craig's right to an extent on, on what people are looking at with the short term numbers. But I also think people are thinking about Tesla at, at a larger scale and what they're doing on both the full full self driving side and how the the AI business is really is really fueling the company both on FSD full self driving and on ultimately longer term, the robotaxi side. All right. So a lot of people been pointing to that robotaxi event coming up in August. By the way, I want to get to your price target. You're at 265 on the stock. Ahead of that, as we look at Tesla, just the fundamentals of the company, delivery numbers and everything else, we Craig was mentioning some of of the pricing issues that the company's having as well. Does Tesla belong in the Magnificent 7? When you look at the stock, I know you're bullish on it, but do you still believe it belongs in the Mag Seven? Yeah. And and again, I go back to the the fact that this this truly is a technology business. They are set up for significant long term growth. A part of that is clearly the, the, the pace and the timing of EV adoption and how that impacts the core business. But but a larger part of that long term is, is how we think about the application of AI technology and, and, and also the ability to just fuel the, the full self driving piece of the company. I think what's important to note is when we look at our target price, we think the stocks worth, you know, 190 to 195 bucks on the core operations and the upside to our price target from there really comes from the other initiatives. And quite honestly, I think we're being conservative on the long term adoption rates on those initiatives. All right, Craig, I'm going to come over to you. I'm not going to be surprised by your answer, I don't think. But do you think that Tesla needs to be kicked out of the Max 7? And if so, why? What are the factors that lead you to that conclusion? Tesla is a retail darling, right? And why is the big question. It's because they've changed the world, right? They've brought EVs to the mass market and forced all the rest of the automotive industry to follow them, so they deserve special treatment. Does that mean they belong in the mag 7 or not? I don't think so. I see it as egregiously overvalued the the stocks trading on expectations for things like sentient humanoid robots. By the end of 25 that ain't going to happen. Mike's. You know Elon Musk is is is, you know, prone to hyperbole, right? You know, the FSD full self driving. No, no, no, no, no. I mean, they don't know if the technology that the actual energy tax on the drivetrain is more than more than it is for actually driving A to B. So Craig, you're hitting on some of the things that we're in a Wells Fargo's note yesterday, a lot of people were following Tesla's valuation of Corona system 74 times forward earnings. The rest of the Max 7 peers at 35 times. But Steven, I want to come back over to you. Another point in this note is that the outlook for three-year EPS growth for Tesla, it's about 12%. The rest of the Max Sevens at 26%. How can you be in one of these high in this high flying group if you have such a lower growth rate and and is Tesla in your mind still a growth stock? Yeah. Well, hey, I think yes, it is a growth stock. I think, I think when you, when you think about the, the pace of growth that we're seeing in the near term, we wrote this, we initiate covered in the stock only about 10 days ago. You know, in the very short term there are clearly EV adoption headwinds which are impacting the earnings profile, right. I don't think that's a shock to anybody. I think when we look at the roll out of, of incremental vehicles, the, the, the quote UN quote Model 2, which, which should start to be produced over the next 12 to 18 months, you know, that should be another high volume vehicle for the company. And, and then you, you layer in the long term. And again, when we think about the growth story for Tesla, we're talking about 27 to 35 where you start to get significant adoption rates of things like FSD and robotaxis. And I, I do agree with Craig in the short term, I do think there are headwinds that we've, that's pretty well documented in our reports. But I think you have to have a vision of Tesla maybe for long term to buy the stock. If you're buying this thing for a month or two months, you know clearly it's going to be choppy and it's going to trade on on data points as Craig indicated.