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Tesla (TSLA) Falls 8% on Robotaxi Event Delay: Buy the Dip?
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Tesla's (TSLA - Free Report) visionary CEO, Elon Musk, is celebrated as one of the most influential entrepreneurs. Under his leadership, the electric vehicle (EV) company has grown from its 2010 IPO valuation of $1.7 billion to a staggering market capitalization of roughly $800 billion today. However, Musk's grand vision is often accompanied by delayed timelines and unfulfilled promises.
The recent postponement of Tesla’s highly anticipated robotaxi event, initially slated for Aug 8 but now pushed to October, exemplifies this trend. On the first-quarter 2024 earnings call, Musk confirmed showcasing the company’s purpose-built robotaxi or Cybercab in August. Investors had set high hopes for it. So, this delay has seemingly not gone down too well with investors. The stock plummeted 8% yesterday, snapping an 11-day rally that erased its losses for the year. Tesla shares have now returned to negative territory for 2024, down 3% year to date.
So, is this a buying opportunity or should investors brace for more correction? Before that, let's examine Tesla's history of unmet promises regarding robotaxis and self-driving technology and understand why autonomous vehicle (AV) developments are so critical for the company's future.
Tesla's Unfulfilled AV Promises
Musk has repeatedly heralded the dawn of fully autonomous vehicles, promising groundbreaking advancements that have yet to materialize. In 2015, he projected that Tesla cars would achieve full autonomy within three years. The following year, he claimed that a Tesla car would complete a cross-country journey without human intervention by 2017. In 2019, Musk ambitiously forecasted one million robotaxi-ready vehicles by 2020. To date, Tesla has not delivered a single robotaxi or autonomous vehicle that meets these lofty expectations.
Tesla’s Autopilot and Full Self-Driving (FSD) systems, while impressive, still require driver supervision and accountability. This reality is in contrast to Musk’s bold claims, with Tesla currently embroiled in several wrongful death lawsuits linked to its driver-assist technologies. Meanwhile, competitors like Alphabet’s (GOOGL - Free Report) Waymo and General Motors’ (GM - Free Report) Cruise have made more substantial strides in the AV arena.
TSLA’s AV Strategic Imperative
Tesla’s AV efforts are not just any project but a very critical component of Musk’s vision for the company’s future. On the first-quarter earnings call in April, Musk emphasized the importance of autonomy for Tesla, framing it as the next significant growth driver amid waning demand for EVs and rising competition. He urged investors to either believe in Tesla’s autonomy strategy or reconsider their positions. Quoting him, “If somebody doesn't believe Tesla is going to solve autonomy, I think they should not be an investor in the company.”
Tesla’s planned robotaxi event was anticipated to showcase the company’s advancements and set the stage for its next growth phase. Analysts like Dan Ives of Wedbush have touted Tesla as the most undervalued AI player in the market, with the potential to revolutionize the autonomous transportation sector. The delay of the robotaxi event has undoubtedly dampened investor enthusiasm, raising concerns about Tesla’s ability to meet its ambitious goals and timelines.
This comes at a time when the company is grappling with declining sales and shrinking margins of EVs due to aggressive price cuts and increased competition, particularly in China.
Tesla’s focus on autonomous driving and artificial intelligence (AI) is expected to be a game changer. However, industry experts anticipate that developing self-driving systems and robotaxis will be challenging and time-consuming due to significant engineering and regulatory obstacles.
Some analysts and investors still remain optimistic. They view the delay as a sign that Tesla is refining its prototypes to ensure a more impactful unveiling. Jamie Meyers, a senior analyst at Laffer Tengler Investments, echoes this sentiment, suggesting that the two-month delay is a minor hiccup in the grand scheme of Tesla’s long-term strategy.
Should You Buy TSLA Stock at Current Levels?
Tesla commands a premium valuation due to its innovation and growth prospects, but even then, its valuation is a bit too stretched, given current challenges. The company's ability to deliver on promises like a lower-priced model and advancements in self-driving technology will be critical. Currently, TSLA shares trade at 7.25 times forward earnings, significantly higher than the industry average of 1.52 as well as its 5-year median of 6.95. It carries a Value Score of C.
The Zacks Consensus Estimate for TSLA’s 2024 EPS has gone down by a cent in the past seven days to $2.47, implying a year-over-year decline of 20.8%.
Additionally, the Zacks average price target of $181/share suggests a nearly 30.7% downside for the stock from the current levels. More correction could be on the horizon.
For now, it might be prudent for investors to wait for more clarity and stability before taking any position in the stock. While potential investors should wait for a better entry point, existing shareholders should hold the stock for a long-term horizon.
On the one hand, Tesla’s focus on AI and autonomous driving holds transformative potential, making it a smart bet for those with a high-risk tolerance and long-term perspective. On the other hand, the company’s history of missed deadlines and the substantial engineering and regulatory challenges associated with AV development warrant caution.
Investors should closely monitor Tesla’s upcoming earnings report on Jul 23, where further details about the robotaxi project are likely to emerge. It remains to be seen if the company can meet the latest target for unveiling the robotaxi in October. Also, any updates on AI investment costs will provide valuable insights into the stock’s near-term trajectory.
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Tesla (TSLA) Falls 8% on Robotaxi Event Delay: Buy the Dip?
Tesla's (TSLA - Free Report) visionary CEO, Elon Musk, is celebrated as one of the most influential entrepreneurs. Under his leadership, the electric vehicle (EV) company has grown from its 2010 IPO valuation of $1.7 billion to a staggering market capitalization of roughly $800 billion today. However, Musk's grand vision is often accompanied by delayed timelines and unfulfilled promises.
The recent postponement of Tesla’s highly anticipated robotaxi event, initially slated for Aug 8 but now pushed to October, exemplifies this trend. On the first-quarter 2024 earnings call, Musk confirmed showcasing the company’s purpose-built robotaxi or Cybercab in August. Investors had set high hopes for it. So, this delay has seemingly not gone down too well with investors. The stock plummeted 8% yesterday, snapping an 11-day rally that erased its losses for the year. Tesla shares have now returned to negative territory for 2024, down 3% year to date.
So, is this a buying opportunity or should investors brace for more correction? Before that, let's examine Tesla's history of unmet promises regarding robotaxis and self-driving technology and understand why autonomous vehicle (AV) developments are so critical for the company's future.
Tesla's Unfulfilled AV Promises
Musk has repeatedly heralded the dawn of fully autonomous vehicles, promising groundbreaking advancements that have yet to materialize. In 2015, he projected that Tesla cars would achieve full autonomy within three years. The following year, he claimed that a Tesla car would complete a cross-country journey without human intervention by 2017. In 2019, Musk ambitiously forecasted one million robotaxi-ready vehicles by 2020. To date, Tesla has not delivered a single robotaxi or autonomous vehicle that meets these lofty expectations.
Tesla’s Autopilot and Full Self-Driving (FSD) systems, while impressive, still require driver supervision and accountability. This reality is in contrast to Musk’s bold claims, with Tesla currently embroiled in several wrongful death lawsuits linked to its driver-assist technologies. Meanwhile, competitors like Alphabet’s (GOOGL - Free Report) Waymo and General Motors’ (GM - Free Report) Cruise have made more substantial strides in the AV arena.
TSLA’s AV Strategic Imperative
Tesla’s AV efforts are not just any project but a very critical component of Musk’s vision for the company’s future. On the first-quarter earnings call in April, Musk emphasized the importance of autonomy for Tesla, framing it as the next significant growth driver amid waning demand for EVs and rising competition. He urged investors to either believe in Tesla’s autonomy strategy or reconsider their positions. Quoting him, “If somebody doesn't believe Tesla is going to solve autonomy, I think they should not be an investor in the company.”
Tesla’s planned robotaxi event was anticipated to showcase the company’s advancements and set the stage for its next growth phase. Analysts like Dan Ives of Wedbush have touted Tesla as the most undervalued AI player in the market, with the potential to revolutionize the autonomous transportation sector. The delay of the robotaxi event has undoubtedly dampened investor enthusiasm, raising concerns about Tesla’s ability to meet its ambitious goals and timelines.
This comes at a time when the company is grappling with declining sales and shrinking margins of EVs due to aggressive price cuts and increased competition, particularly in China.
Tesla’s focus on autonomous driving and artificial intelligence (AI) is expected to be a game changer. However, industry experts anticipate that developing self-driving systems and robotaxis will be challenging and time-consuming due to significant engineering and regulatory obstacles.
Some analysts and investors still remain optimistic. They view the delay as a sign that Tesla is refining its prototypes to ensure a more impactful unveiling. Jamie Meyers, a senior analyst at Laffer Tengler Investments, echoes this sentiment, suggesting that the two-month delay is a minor hiccup in the grand scheme of Tesla’s long-term strategy.
Should You Buy TSLA Stock at Current Levels?
Tesla commands a premium valuation due to its innovation and growth prospects, but even then, its valuation is a bit too stretched, given current challenges. The company's ability to deliver on promises like a lower-priced model and advancements in self-driving technology will be critical. Currently, TSLA shares trade at 7.25 times forward earnings, significantly higher than the industry average of 1.52 as well as its 5-year median of 6.95. It carries a Value Score of C.
The Zacks Consensus Estimate for TSLA’s 2024 EPS has gone down by a cent in the past seven days to $2.47, implying a year-over-year decline of 20.8%.
Additionally, the Zacks average price target of $181/share suggests a nearly 30.7% downside for the stock from the current levels. More correction could be on the horizon.
For now, it might be prudent for investors to wait for more clarity and stability before taking any position in the stock. While potential investors should wait for a better entry point, existing shareholders should hold the stock for a long-term horizon.
Tesla carries a Zacks Rank #3 (Hold) now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Final Thoughts
On the one hand, Tesla’s focus on AI and autonomous driving holds transformative potential, making it a smart bet for those with a high-risk tolerance and long-term perspective. On the other hand, the company’s history of missed deadlines and the substantial engineering and regulatory challenges associated with AV development warrant caution.
Investors should closely monitor Tesla’s upcoming earnings report on Jul 23, where further details about the robotaxi project are likely to emerge. It remains to be seen if the company can meet the latest target for unveiling the robotaxi in October. Also, any updates on AI investment costs will provide valuable insights into the stock’s near-term trajectory.