Tesla Stock Falls After Lackluster Robotaxi Event: Time to Buy the Dip?

Tesla (NASDAQ: TSLA) hosted an event called "We, Robot" last week to display its prototype-autonomous vehicles and humanoid robots. Investors were disappointed. Tesla shares are now down 10% in the last five trading days (as of this writing) as Wall Street gets increasingly skeptical on how material the "Cybercab" and Tesla Optimus Bots will be to the company's bottom line anytime soon.

As usual, this event came with a lot of fanfare, drama, and promises from Tesla CEO Elon Musk. Will the company make good on what he said? And should you buy the dip on the stock? Time to analyze the potential of these new products and whether they can add trillions of dollars to Tesla's market cap as Musk has prophesized.

More Musk promises

Tesla has been working on self-driving vehicle technology for more than a decade. Musk has promised numerous times that the company was on the verge of bringing full self-driving software to Tesla vehicles, usually within a few years. Most famously -- or perhaps infamously -- he said in 2019 that there would be 1 million "robotaxis" on the road by the end of 2020. This didn't happen.

Last week had a similar feel. Musk came to the event in what Tesla is calling a Cybercab, a futuristic-looking taxi with doors that open vertically. They also debuted a prototype for a self-driving van in the same style. According to the company, the Cybercab will go into production in 2026, but it gave no timeline for the van. Tesla wants to build these vehicles and the associated self-driving software to attack Uber's business, allowing owners and/or Tesla itself to use this fleet of vehicles to operate a ride-sharing network with zero human drivers. If successful, it has the potential to radically lower the cost of taxi rides.

On top of the robotic vehicles, Tesla made a big push to highlight its research into the Tesla Optimus Bot, which is a robot that looks like a human. Tesla claims the robot will be able to do any task you ask it to. In typical Musk fashion, he was optimistic about how much value it could bring to Tesla, projecting upwards of $25 trillion in value added to its market cap just from the Optimus product line. It is unclear what analysis led him to come to this conclusion.

Practicality remains to be seen

There are a lot of numbers thrown around by Tesla when it comes to robotics: Millions of robotaxis; trillions of dollars in market value. There is also a lot of bark coming from the company. However, there is not much bite in the form of real products getting sold to customers today.

If I was a Tesla investor, I would be worried that this is just another event with announcements for products that eventually get delayed. Tesla seems to be betting its future on artificial intelligence (AI), robotics, and autonomous vehicles. But so far it's only built prototypes. Its current full self-driving software is a bit of a misnomer in that it still needs humans operating the vehicle. Unlike Waymo, which has licenses to operate a fleet of actual robotaxis in cities across the United States, Tesla's self-driving network is nothing more than an idea right now.

There should also be concerns about the Optimus Bot prototype. It has come out in the days following the event that the bots were being remote-controlled by humans when interacting with guests. This is not exactly close to the autonomous robot that Musk has promised; it's also misleading investors and the company's biggest customers.

TSLA Operating Income (TTM) data by YCharts

Should you buy Tesla because of Robotaxis and humanoid bots?

Tesla stock has done phenomenal over the long term. It is also down 47% from all-time highs set in late 2021. Given all the hype around these AI and robotics products -- not to mention the huge electric vehicle (EV) and battery-storage divisions -- you might think it is smart to buy the dip on Tesla stock after its recent fall.

I think this is misguided thinking based on promises yet to be fulfilled. Given the information about the robotaxis and Optimus Bot at the event, it is highly likely that these products will not be meaningful to Tesla's business for at least the next five years, if ever. This leaves investors with the current EV and battery-storage business.

There shouldn't be much optimism around these segments, either. Due to huge supply increases for EVs and profit-margin compression, Tesla's operating income and free cash flow have plummeted in recent quarters. Over the last 12 months, it has generated just $1.7 billion in free cash flow. That is a measly figure compared to its market cap of $686 billion.

Tesla stock looked overvalued before this "We, Robot" event. With no new products coming until at least a few years and unproven technology, it is still overvalued after the event as well.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,121!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,917!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $370,844!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 14, 2024

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Uber Technologies. The Motley Fool has a disclosure policy.