Tesla's Hidden Gems: Why Its Undervalued Tech and Energy Play Make It a Buy Now

Tesla (TSLA) has long been a polarizing stock, with skeptics dismissing its valuation as overhyped and overly reliant on its electric vehicles (EVs). But beneath the noise, Tesla's Full Self-Driving (FSD) software, energy division, and emerging software monetization strategies are being grossly undervalued by the market. Combined with shifting regulatory dynamics and temporary headwinds tied to fraud allegations, Tesla presents a rare buying opportunity. Here's why investors should look past the noise and position themselves for a rebound.

The Misunderstood Value of FSD Beta v12

Tesla's FSD Beta v12 represents a leap forward in autonomous driving, transitioning from Level 2 (driver-assisted) to Level 3 (conditional automation). The system's end-to-end neural network processes raw camera data in real time, eliminating reliance on lidar and radar—a cost-saving design that Waymo and others have yet to replicate. While Waymo's multi-sensor approach currently offers superior safety metrics (e.g., 83% fewer crashes in tested cities), Tesla's software is improving rapidly.

Tesla's valuation lags behind Alphabet, whose Waymo unit is a clear leader in autonomous tech today. Yet Tesla's camera-only architecture could prove its greatest advantage: it's cheaper to deploy ($400/vehicle vs. Waymo's $12,700 per vehicle) and scalable across its massive existing fleet. By 2025, Tesla's FSD system has already achieved a 100x reduction in disengagement rates (instances requiring human intervention), with further gains expected as its fleet learns from 50 billion miles of annual "shadow mode" data.

The key question is whether Tesla can achieve "human+ safety" with vision alone. If it does, its software could command a $10,000–$20,000 premium on future EVs, creating a recurring revenue stream akin to Apple's ecosystem. Even if it falls short, Tesla's software-first approach positions it to dominate the $214B autonomous vehicle market by 2030, where Waymo's slower, capital-intensive model may struggle to compete at scale.

Energy Division: The Untold Profit Machine

Tesla's energy storage business is another overlooked gem. In Q2 2025, the company deployed a record 9.6 GWh of energy storage (up 52% year-over-year), driven by utility-scale Megapacks and residential Powerwalls. The division's gross profit hit $2.6B in 2024, now accounting for 26% of Tesla's total gross profit—up from 19% in 2023.

With two Megapack factories (Lathrop, CA and Shanghai) hitting 60 GWh of annual capacity by 2025, Tesla is well-positioned to capture a growing energy storage market. Its AAA bankability rating (a measure of financial reliability) ensures utilities and governments trust its systems, even as competitors like Fluence and Enphase lag. By 2028, energy revenue could hit $30B annually—25% of Tesla's total earnings—making it a cornerstone of long-term profitability.

Regulatory Shifts and Fraud Allegations: Temporary Headwinds

Tesla's stock faces two near-term risks: NHTSA's ongoing investigations into FSD's safety (e.g., the 2023 fatal collision) and U.S. regulatory debates over autonomous vehicle standards. Critics argue Tesla's camera-only system is unsafe in low-visibility conditions, while Waymo's multi-sensor approach is seen as more reliable.

However, these challenges are transient. Tesla's software updates (e.g., highway neural net unification in Q4 2024) and partnerships (e.g., Cybertruck Autopark) suggest steady progress. Meanwhile, Waymo's reliance on costly geofencing and sensor suites may limit its global expansion. As for regulations, Tesla's lobbying efforts and early mover advantage in markets like Japan (virtual power plants) could help it navigate compliance hurdles.

The Investment Thesis: Buy on Dips, Target $350+ by 2026

Tesla's stock trades at just 23x 2025 consensus earnings, far below Waymo's parent Alphabet (27x) and the broader tech sector. This discounts the potential of its software and energy divisions. Here's why to act now:

1. FSD Monetization: A $10B+ annual software revenue stream by 2026 (via FSD upgrades and autonomous fleet services).
2. Energy Dominance: 30%+ annual growth in energy storage, supported by grid-scale projects like its Shanghai megaproject.
3. Undervalued Tech Assets: Waymo's $30B+ valuation (per Alphabet's disclosures) suggests Tesla's autonomous tech alone could add $50–$100 to its per-share value.

Risk Factors: NHTSA penalties, supply chain bottlenecks, and Waymo's safety edge.

Buy Signal: Accumulate shares below $200 (current price ~$185) as skepticism over FSD's reliability fades. A $350+ target by 2026 assumes 30% earnings growth from software and energy, with FSD's valuation aligning closer to Waymo's.

Conclusion: A Multibillion-Dollar Opportunity in Disguise

Tesla's stock is a classic case of the market underestimating disruptive innovation. While Waymo and others focus on incremental safety gains, Tesla is building a software-driven mobility ecosystem that combines autonomous driving, energy storage, and EVs. The fraud allegations and regulatory scrutiny are speed bumps, not roadblocks. For investors with a 3–5-year horizon, Tesla offers a rare chance to buy a $1T+ company at a fraction of its potential value. The question isn't whether Tesla's tech will win—it's already ahead of the pack. The question is: how long will the market take to realize it?

Action: Buy Tesla shares on dips below $200. Hold for 3+ years.