Companies

Tesla posted a surprising profit margin in the September quarter while guiding the December quarter and 2025 deliveries well ahead of expectations. Additionally, I believe Cybercab will be a measurable boost to deliveries, accounting for about 15% of deliveries by 2032. Putting these together, we're seeing signs that EV growth is returning, the most critical piece to the 3-year Tesla investment case.

On the surface, the waiting game will continue for TSLA investors as the Cybercab and Optimus are still years away. Beneath the surface, the "We, Robot" event posed a challenge for traditional automakers as Tesla showcased an innovation edge that puts an end to the "Is Tesla a tech or car company?" debate.

I’ve had a week to process the “We, Robot” event, including conversations with several industry players and am left with 4 takeaways. 1) The world needs autonomy. 2) It’s going to take longer than I thought to get there. 3) Once the Robotaxi fleet is nationwide, it could add +20% to Tesla’s operating income. 4) Tesla's biggest opportunity lies in unsupervised FSD driving more consumer sales.

Tesla's "We, Robot" event is Thursday, October 10 at 10p ET. The two key topics orbiting the event include the number of vehicles they'll announce and timing of production. I'm looking for 3 vehicles (most are expecting two) and I believe we'll only hear production timing on the Model 2, which I expect to begin late in 2025. This timing is a few months later than what Elon's comments suggested on the June earnings call. The one wild card could be the more affordable Model 2 is actually a stripped down Model 3, which would be viewed as a negative by investors.

The fact that TSLA initially dropped 6% on the September deliveries, which were essentially in line with the Street, suggests there was something more concerning in the report, possibly related to inventories. I have a different view and see the results as a win for the company given they mark a return to growth for the first time in nine months, despite multiple headwinds. As for next year's deliveries, the timing of a new model will have a measurable impact. Beyond 2025, growth should ramp to above 20%.

I believe iPhone revenue will grow at 15% in FY25, compared to the Street's estimate of 7%. For FY26, I expect 17% growth versus the Street’s 8%. The most significant factor in my estimate is my belief that 8% of the iPhone installed base will upgrade early in FY25, and 14% in FY26. However, the dark side to the supercycle is I estimate iPhone revenue will be down 5% year-over-year in both FY27 and FY28.

This note provides Deepwater’s updated timeline of EV adoption in the United States. Previously, we had estimated that by 2030 50% of new car sales in the US would be fully electric. We now believe by 2030 only 25% of new car sales will be EVs. We expect the industry to cross the 50% threshold between 2035 and 2036. As for Tesla, we're expecting total 2030 deliveries of 4.5m, compared to the Street at 3.6m (FactSet).

Meta and Google are shifting their development focus away from Virtual Reality (VR) and Mixed Reality (MR) to ambient computing in the form of smart glasses given the potential that artificial intelligence adds to the form factor. I believe the annual market for smart glasses will reach hundreds of millions of units over the next decade, leading Apple to refocus its Spatial Computing initiatives to be more in line with Meta and Google wearables.

Apple reported another solid quarter, with sales growing by 5% year-over-year, marking an improvement from the 4% decline in March 2024. The September guidance suggests that growth will remain steady, which is a positive surprise given the potential impact of the Osborne Effect. More importantly, I continue to believe that the company will experience its strongest product cycle ever over the next two years, driven by Apple Intelligence that will lead upside to earnings.

Meta reported a slightly better than expected June quarter and raised September's y/y revenue growth target to 20%, up from the Street's previous expectation of 15%. Most importantly, Zuckerberg presented the company’s most compelling vision of how and when AI will transform the business. The bottom line is Meta remains one of the best positioned companies to benefit from AI over the next 3-5 years.

Tesla’s stock declined 12% on June earnings as profitability dipped and the timing of Robotaxi got pushed out by 6-12 months. Musk said it best when he boiled down the TSLA investment case to a simple question; Do you believe the company will deliver on the promise of autonomy? Our view is that potential is within reach, and by late 2027 we should start to see FSD adoption, and the fleet business begin to build. Beyond FSD, the company looks to add licensing of FSD to other car makers and scale Optimus, both of which will take 5-10 years to add to the bottom line.

We asked Gemini, ChatGPT, Claude, and Grok 15 questions about upcoming events to determine which models are most effective at looking into the future. This note is centered on “predictions” in the balance of 2024, which we’ll cover as they…