Tesla shares have seen a significant surge in anticipation of the launch of its robotaxi. However, Wall Street analysts are not entirely convinced that this event will have an immediate impact on the company's revenue.
In September, Tesla shares have risen by nearly 22%. This increase is related to the “We, Robot” event to be held on October 10 in Los Angeles, as well as the third quarter delivery report expected soon. The robotaxi will be an autonomous vehicle that could operate on a transportation network similar to Uber, where owners will allow their cars to be part of this service.
The impact of the “We, Robot” event
To meet expectations, Tesla will have to present a prototype of the robotaxi called Cybercab. In addition, investors are expecting news about driver assistance systems such as Autopilot and Full Self-Driving (FSD), as well as advances in artificial intelligence. Analysts are also keeping an eye on regulatory approvals of its technology in Europe, China and other markets.
Does the event justify the rise in shares?
Some experts, such as Garrett Nelson of CFRA, believe that this event is being handled more as a media spectacle than as a key milestone for the company. According to Nelson, although he has been optimistic about Tesla in the past, he is now more skeptical. The analyst says that expectations are very high and that it will be difficult for Tesla to exceed them.
Nelson says: “Revenue and earnings growth has stalled. We don’t see significant improvement in the next 2-3 years.”
Risks and rewards: opinions divided
Analysts surveyed by LSEG estimate that Tesla shares could fall by 19%, with a target price of $210.71. Firms such as Bernstein, UBS and Guggenheim are especially pessimistic, as they find it difficult to justify Tesla’s current valuation. They believe that a robotaxi service is unlikely to be available on a large scale anytime soon.
Elon Musk has been known for making ambitious promises. In 2015, he claimed that Tesla cars would achieve full autonomy within 3 years. In 2019, he promised that there would be 1 million robotaxi vehicles by 2020. None of these promises have been fulfilled.
Can Tesla lead in autonomy?
Bernstein rates Tesla stock “underperform” with a price target of $120, which would imply a 54% drop. While they believe full autonomy will eventually be achieved, they doubt Tesla can outperform its competitors, who are already moving forward with Level 4 autonomy technologies.
Today, Tesla’s Autopilot and FSD systems are Level 2, meaning they require driver supervision. A Level 5 vehicle, by contrast, would be fully autonomous. Level 4 allows for highly automated driving, but with the possibility of human intervention if necessary.
Analysts’ expectations and projections
Joseph Spak, an analyst at UBS, rates Tesla stock “sell,” with a price target of $197, which would imply a 24% drop. Spak notes that mass deployment of robotaxis is unlikely in the coming years, though he acknowledges that Tesla continues to make progress in the technology.
Goldman Sachs' Mark Delaney, meanwhile, notes that Tesla has a cost advantage because of its cheaper hardware. However, he suggests that the company may need radar technology to make robotaxis work properly in adverse weather conditions. Delaney has a price target of $230, suggesting a possible 11% drop.
Morgan Stanley's Adam Jonas is more optimistic, with a price target of $310, which would imply a 19% increase. However, even he has doubts about whether the "We, Robot" event will meet investors' high expectations.
Tesla's future: beyond cars?
Although Tesla remains the leader in electric vehicle sales in the United States, its automotive segment has shown signs of slowing. In the second quarter, automotive revenue was $19.9 billion, a 7% drop from the previous year. In addition, competition in the electric vehicle market is increasing.
Nelson doesn’t think Tesla’s next launch will be the change many are expecting. “Investors need to take a wait-and-see approach. Expectations are very high,” he said. He also noted that Tesla’s medium-term growth is not entirely clear.
Lastly, Morgan Stanley is watching the relationship between Tesla and Elon Musk’s new artificial intelligence startup, xAI. Tesla plans to build a supercomputer called Dojo to improve its autonomous driving systems. According to Jonas, “Tesla’s success will depend on its ability to develop and commercialize autonomous technologies.”
Will Tesla meet expectations?
With the “We, Robot” event just around the corner, Tesla is in the spotlight. While expectations are high, Wall Street pundits remain divided on whether Tesla will be able to deliver on the promise of an autonomous future. The company has shown it can innovate, but it has also generated skepticism for its unfulfilled promises. Time will tell whether Tesla’s robotaxi will be a success or whether it will face more challenges.
