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Happy Sunday everyone

Going over two trade ideas I like and reasoning why I like it. This would usually be for premium subscribers but we have a sponsor today.

This is part 2 - if you like this weekend trade thoughts thing I did this weekend let me know with an email back. Im always open to going over charts you all seem interested in as well!

lets dig in…..

First up is Tesla

This one is not for the conservative investor. Tesla is volatile and it’s chart reflects that. I think it’s seen a long enough consolidation with decent fundamentals to have a rip soon. Another company I’m looking at with a 1-3 year portfolio play.

I’m liking this any where around $200 with the big consolidation of volume shelf supporting it below in the $180s

Tesla (TSLA) Bullish Thesis

1. Energy Business Expansion:

   • Q2 2024 saw energy generation and storage revenue surge 100% YoY to over $3.0B

   • Storage deployments reached 9.4GWh, up 158% YoY

   • Energy segment shows strong pricing power and a robust deal pipeline

2. Automotive Segment Resilience:

   • Despite near-term challenges, Tesla maintains ~20% global EV market share

   • ASP increases on Model Y suggest pricing power is returning

   • Production efficiencies: 4680 battery cell production up 50%+ QoQ

3. Margin Improvement Potential:

   • Q2 2024 Operating Margin improved 80bps QoQ to 6.3% (8.7% excluding one-time charges)

   • Energy and Services segments have higher margins, potentially offsetting automotive margin pressure

4. Strong Financial Position:

   • $30.7B cash and short-term investments

   • Positive Free Cash Flow of $1.3B in Q2 2024

   • Low long-term debt of $7.4B compared to legacy automakers

5. Future Product Pipeline:

   • Cybertruck production ramping up, expected to be profitable by end of 2024

   • Model 2 (sub-$30k vehicle) planned for 2025, potentially opening new mass-market segment

   • Robotaxi unveiling scheduled for October 2024, with production planned at Giga Texas

6. FSD and Autonomy Progress:

   • Cumulative FSD miles increasing exponentially

   • Potential for high-margin robotaxi business, with Elon Musk projecting a fleet of 7-10 million vehicles

7. Valuation Upside:

   • Current forward P/E of ~61.7x based on near-term headwinds

   • Long-term projections suggest substantial growth: estimated 2030 EPS of $30 with potential P/E of 45x implies a stock price of $1,620

8. Analyst Sentiment Disparity:

   • Only 17 of 48 analysts have Buy ratings, suggesting potential for positive surprises

   • Consensus estimates project 17% revenue growth for next two years, not factoring potential robotaxi impact

9. Vertical Integration and Innovation:

   • In-house supercomputer (Dojo) development for AI training

   • Planned $5B investment in xAI startup to accelerate AI capabilities

10. Global Expansion and Capacity:

    • Building towards 3 million vehicle production capacity by 2025

    • Shanghai Megafactory for energy products starting production in Q1 2025

Next up is AMD

The quick run down is I think AMD is a sleeping giant in the AI space. Once we see it’s manufacturing scale and compete with NVDA on chip output, I think we will se explosive growth. This isnt AI hype either, this is a legitimate valuable sector that we will see grow over the next 10-20 years in tech. Their is a reason NVDA is up 2,748.93% past 5 years, AMD could be up next.

AMD (Advanced Micro Devices) Bullish Thesis

1. Data Center Growth:

   • Q2 2024 saw data center revenue increase 115% year-over-year to a record $2.8 billion

   • Driven by steep ramp of Instinct MI300 GPU shipments and strong double-digit percentage increase in EPYC CPU sales

   • Management increased 2024 revenue estimate for Data Center GPU from $4 billion to $4.5 billion (11% increase)

2. AI Chip Market Positioning:

   • AMD is well-positioned as the second-best option in AI chips

   • Potential to gain market share as new iterations bridge the gap with market leader Nvidia

   • Recent acquisitions (Silo AI, ZT Systems) strengthen AMD's full-stack data center design capabilities

3. Product Pipeline and Innovation:

   • MI325 GPU expected to begin ramping in 1H25, followed by MI350 later in 2025

   • MI350 projected to improve performance by 35x on CDNA 4 architecture compared to CDNA 3

   • MI400 set to launch in 2026 with CDNA Next architecture

4. Diversified Growth Across Segments:

   • Client compute segment showing signs of recovery with 49% year-over-year growth

   • Launch of Zen 5 products for notebooks and desktops, positioning AMD in the AI PC space

   • Potential turnaround in Gaming segment with anticipated new console releases

5. Acquisitions and Strategic Positioning:

   • Silo AI acquisition ($665 million) bolsters software capabilities and embedded segment potential

   • ZT Systems acquisition ($4.9 billion) enhances infrastructure architecture capabilities

   • Positions AMD as a one-stop-shop for AI data centers

6. Financial Performance and Outlook:

   • Q2 2024 showed 9% top-line growth with 22% adjusted operating margin

   • Forecasted Q3 2024 revenue of $6.75 billion and adjusted EPS of $0.93

   • FY2024 forecast increased to $25.9 billion in revenue and $3.49/share in adjusted EPS

7. Valuation Upside:

   • Trading at 10.90x trailing price/sales, compared to Nvidia's 40x

   • Potential for multiple expansion as production ramps up for Instinct GPUs

   • Price target of $225/share at 11x estimated FY2025 price/sales ratio

8. Market Positioning vs. Competitors:

   • Second-best option in AI chips with potential to gain market share

   • Competitive advantage in CPU market, continuing to gain share from Intel

   • Well-positioned to capitalize on both GPU and CPU demand in the AI era

P.S. Any “clicks” to our sponsor allows me to drink good coffee in the morning. Please consider clicking through even if you don’t think you want to buy from them :-)

- JB

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