Tesla (NASDAQ:TSLA) stock is down 36.8% year-to-date, and the Austin-based firm recently announced that deliveries had fallen sequentially and year-on-year in Q1. Then, co-founder and CEO Elon Musk tweeted in a characteristically vague manner that the company would be unveiling its Robotaxi on August 8. Given the concerns about the company’s valuation in light of its slowing growth, I can’t help but see Musk’s announcement as something of a distraction. Therefore, I’m bearish on TSLA stock.
Don't Miss Our Christmas Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Tesla’s Performance Issues
Tesla has been growing at an impressive rate in recent years, dominating the battery electric vehicle (BEV) market and becoming one of the world’s largest car manufacturers. However, Tesla’s Q1 data pointed to a concerning development: the company is no longer growing.
On April 2, 2024, Tesla announced that it had produced 433,371 vehicles and delivered 386,810 during the first quarter of the year. In the same period last year, Tesla reported 422,875 deliveries and production of 440,808 vehicles. That means production volume fell 1.6% year-on-year, and deliveries fell 8.5%.
This also marked a decline sequentially, as Tesla reported 484,507 deliveries and production of 494,989 vehicles in the fourth quarter of 2023. Analysts were expecting deliveries of around 457,000 for the three months ended March 31, according to an average of 11 estimates compiled by FactSet. As such, the 386,810 deliveries marked a huge underperformance.
It’s also worth highlighting that the gap between deliveries and production suggests that Tesla is now sitting on a substantial quantity of unsold stock. Perhaps more concerning is the discounts the firm was offering toward the end of Q1. Purely anecdotally, I was offered a Tesla Model Y for just £300 a month on a business lease in the UK. The offer, which has now lapsed, required deliveries before the end of March.
Providing a justification for the disappointing figures, Tesla pointed to facility updates at its Fremont factory, factory shutdowns resulting from attacks on vessels transiting the Red Sea, and an arson attack at Gigafactory Berlin.
Moving forward, Tesla has announced that it will be cutting a further 10% of its workforce. If this amounts to a company-wide initiative, as many as 14,000 people could lose their jobs. Analysts have suggested that the move comes as Tesla prepares for slower growth.
A Convenient Diversion
Tesla is now set to unveil its Robotaxi on August 8, but Musk’s vague tweet smacked of a distraction, in my humble opinion. Musk once claimed that there would be one million of his robotaxis on the road by 2020. It’s no secret that he occasionally over-promises and underdelivers. So, while we’ve been waiting for the Robotaxi for some time, the announcement was something of a surprise for various reasons.
First, according to NBC reports, none of the agencies that regulate autonomous taxis have been contacted by Tesla. California has been a ground zero for autonomous taxis, but neither regulatory agency — California Department of Motor Vehicles and the California Public Utilities Commission — have heard from Tesla.
Musk’s company currently has the lowest-level permit, which allows it to test autonomous vehicles with human drivers present. Two other states that regulate robotaxis, Arizona and Nevada, haven’t heard from the company either.
As such, I’m not entirely sure what we can expect from Tesla in August. Can it be anything more than a concept car? Moreover, experts suggest that fully-autonomous vehicles probably won’t be on our roads until the 2030s. While car manufacturers may claim that self-driving cars exist, it’s important to recognize that there are levels to vehicle automation. Driverless taxis would require the highest level of automation, and to date, no company comes close to that.
The Robotaxi announcement seems like something of a convenient announcement. With Tesla’s growth currently stagnating, it’s becoming very hard to justify the stock trading at 58.4x forward earnings. If Tesla were to become the dominant force in the Robotaxi sector, it could be a hugely valuable venture.
However, Musk may be overpromising for now. As such, we’re left with a company that just isn’t growing that fast and trades at excessive multiples. The stock’s price-to-earnings-to-growth (PEG) ratio of 4.2x further highlights this excessive valuation relative to medium-term growth projections.
Is Tesla Stock a Buy, According to Analysts?
Tesla stock is rated as a Hold, according to analysts, with nine Buys, 19 Holds, and seven Sells assigned in the past three months. The average TSLA stock price target is $196.72 with a high forecast of $320 and a low forecast of $23.53. The average price target represents a 25.2% change from its last price.
The Bottom Line on Tesla Stock
Driverless taxis represent a huge new market for Tesla and its peers, but I’d suggest that Musk is, once again, overpromising and may well underdeliver. Reports suggest that the Tesla Robotaxi has none of the required licences to operate anytime soon. In fact, it may be a decade before fully autonomous vehicles are seen on our roads. That’s what the experts say.
Resultantly, we’re left with a very expensive car manufacturer. Tesla’s valuation metrics are particularly unattractive, given medium-term growth expectations, and as much as I want to see Musk’s company succeed, I would find it very hard to put my hard-earned money behind the company. Moreover, investing in Tesla for its autonomous taxi prospects would be very risky.
