Tesla Stock Slides as Its Robotaxi Event Disappoints. Time to Buy or Bail?
Tesla's (NASDAQ: TSLA) highly publicized robotaxi event failed to impress investors, who sent its shares tumbling following the presentation. The stock had rallied over the past quarter in anticipation of the event, despite the electric vehicle (EV) market continuing to see decelerating sales.
Investors must decide whether this is a buying opportunity or a time to sell Tesla stock.
Autonomous vehicles and robots
After earlier pushing back its robotaxi event, which was originally scheduled for August, Tesla gave spectators the first look at its new cybercab design: a sleek, two-seat vehicle with no steering wheel or pedals. Of course, the design immediately begs the question of why only two seats, eliminating any families or group of friends using a single vehicle for a trip. However, Tesla also introduced a 20-passenger robovan, which it said could transport sports teams.
The company said consumers would be able to buy a cybercab for under $30,000. However, the two-seat vehicle market is pretty small and generally reserved to sports cars, where owners typically like the feel and drive of the car.
Tesla will look to start producing the vehicles before 2027, although CEO Elon Musk acknowledged he tends to be optimistic. Meanwhile, the company gave no specs with regards to safety features, driving range, or the technology being used.
Musk said he anticipates the company having unsupervised full self-driving (FSD) testing in California and Texas next year. However, no details were provided on any technology changes the company has made to make the leap to full FSD. Tesla's supervised self-driving technology has had many documented challenges and has been associated with hundreds of crashes.
Image source: Getty Images.
Meanwhile, before the event, Reuters published an article saying that Tesla's robotaxi hinged on a "black box AI gamble." Citing industry executives, autonomous vehicle experts, and a Tesla engineer, the news outlet said without Tesla using things such as radar and lidar, its technology struggles with less-common driving events. It also noted that with a black box end-to-end AI system, it can't identify what goes wrong when accidents occur in order to safeguard against future occurrences. Tesla's technology is cheaper, but a lot of questions remain about its safety.
TechCrunch highlighted Tesla's history of overpromising and underdelivering when it comes to autonomous driving. It noted that Musk told Fortune in 2015 that Tesla was two years away from full autonomous driving, while in 2019, he said the company would have a million robotaxis on the road by 2020.
In addition to revealing its new cybercab, Musk once again hyped Tesla's Optimus robot, which he has called the company's biggest opportunity. The robots are expected to cost between $20,000 to $30,000. At the event's afterparty, several robots served drinks and danced, which were apparently controlled by Tesla employees via remote control.
Is it time to buy or bail on Tesla stock?
Tesla's cybercab presentation was lax on details and given the company's past history, there is no guarantee its robotaxis will be on the road in 2027 as planned. Meanwhile, even if the company does get its approvals and is up and running, it will still be a few years behind Alphabet's Waymo, which is already offering paid rides in San Francisco, Los Angeles, and Phoenix, with plans to soon begin service in Austin.
At the same time, Tesla's core EV business has been slumping. Overall EV industry sales growth is slowing, but Tesla has been seeing sales declines. Last quarter, it saw its deliveries fall 5%, while auto revenue dropped 7%. Meanwhile, the company's Q3 deliveries of 462,890 units came up short of the 469,828 that analysts had been expecting.
Trading at a forward price-to-earnings (P/E) ratio of 68 times based on next year's estimates, viewed as a traditional automobile company, Tesla would be considered very overvalued given that traditional automakers are trading under 6 times.
TSLA PE Ratio (Forward 1y) data by YCharts
As such, much of the bullish case for Tesla relies on its robotaxi and robot ambitions. However, its robotaxi and robot event gave no clear answer that the company is closing in on its goals.
Given its valuation, the struggles of its core business, and the questions surrounding its FSD technology, I'd bail on Tesla stock at current levels.
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