Tesla’s (TSLA) stock has declined over 8% in the last five days in the aftermath of the anticipated and hyped robotaxis event, where the company unveiled its Cybercab. We say that numbers don’t lie; sure enough, they tell a story in this case. The essence of the story is confusion, which is the feeling investors had coming out of the event.
They expressed their disappointment at how little information was handed to the public: no knowledge in regard to strategy, no time frame for the actual release of the Cybercab, and almost no technical information and data about the autonomous vehicle, which left guests and investors alike with more questions than answers.
In addition, at the event, in a further attempt to excite the public, Elon Musk and Tesla have decided to unveil the new development of Optimus, a humanoid AI robot designed to be the next generation of housekeepers and could even be trusted to babysit. The robots danced with the crowd, poured drinks, and engaged in small talk with the guests.
It must be said that Optimus was of secondary importance in an evening dedicated mostly to the much-anticipated Cybercabs. However, even the unveiling of Optimus created controversy after some guests claimed the robots were remote-controlled by Tesla employees. The presentation did not do well for the Tesla brand and Musk’s reputation, which is the main catalyst for Tesla’s high valuation.
If you wish to read more about Tesla’s robotaxis event, you can read what our writer at Tipranks, Marc Guberti wrote about the event right here.
Now, let’s examine three major challenges facing Tesla and Elon Musk:
- Tesla’s Competitors in the Autonomous Industry: While Tesla unveils its Cybercab and doesn’t report data on its progression, companies like Waymo, sponsored by Google (GOOGL), are already operational and completing an estimated 100,000 drives a week. The California DMV reveals that Waymo has accomplished more than 4.7 million miles in 2023. Also, companies like Cruise, Zoox, Nuro, and even Apple (AAPL) are all in the race for reliable autonomous vehicles. So, competition is fierce.
- Current Market Challenges: While Musk and Tesla are trying to ensure a profitable future, the present is filled with its own challenges. TSLA’s revenues from its current stack of cars have declined 7% year-over-year in this year’s second quarter. Since leading the way in the EV industry, other players and cheaper players have entered the industry and taken a bite of Tesla’s market share. EV Chinese manufacturers like BYD (BYD) and NIO (NIO), or even Ford (F) and General Motors (GM), all pose a genuine threat to Tesla’s market share. With this kind of competition, Musk, who has never failed to deliver, will need to deliver fast.
- High Valuation: Tesla’s valuation could become a problem. It trades at a multiple ratio of 61, even after disappointing second-quarter results and a 12% decline year-over-year. Of course, Musk’s reputation is the added ingredient that has put a premium on the stock, but now it seems unjustifiable, especially with net profit margins of 5.8% this year. Ford’s valuation, for example, is at a multiple of 11, with a net profit margin of 3.8%. Ferrari’s (RACE) valuation is 54x, but it has accumulated a net profit of over 16% year-over-year.
What Is TSLA’s Price Target?
On Wall Street, Tesla is a Hold, with 11 Buys, 16 Holds, and 8 Sell. The average price target for TSLA stock is $207.83, reflecting -6.10% downside.
Conclusion
Tesla has just revealed its new autonomous vehicle – the Cybercab – and has overwhelmed the people attending, not for the good. In the aftermath of this event, TSLA stock has declined by over 8%, leaving many questions surrounding the company’s strategic moves. The company’s challenges have become more evident, with rising competition in the near future autonomous industry and the current EV industry. Also, the company’s valuation seems to hinder the company’s bottom-line profits compared to other companies in the industry, which might cause investors to back away from the stock.
Tesla’s whole reputation relies on one man’s reputation, Elon Musk’s reputation, and now is the time for him to deliver on his promises.
