Tesla (NASDAQ:TSLA) generates so much noise that often the most basic questions needed to be asked about its endeavors are ignored.
For instance, while there’s been plenty of excitement around the robotaxi, Bernstein analyst Toni Sacconaghi says the obvious question that needs to be asked is: why is Tesla focusing on a dedicated Cybercab, rather than prioritizing building more general-purpose personal vehicles with self-driving capabilities?
The answer, according to the analyst, is that this is a “’bet the farm’ decision” and that, he believes, “sacrifices a great deal of optionality.”
For a dedicated Cybercab to make sense, a few things must happen; Tesla’s self-driving tech must function effectively and gain widespread regulatory approval, while the company must convince users to replace their own vehicles with robotaxi services. In contrast, a general-purpose vehicle can still tap into these opportunities – selling cars and FSD (full self-driving) – if successful, while offering greater flexibility if any of these conditions aren’t met.
So, the next question to ask is, “what rationale could justify such a strategic decision?” Maybe it’s a simple case of Musk thinking a dedicated robotaxi is essential for achieving the scale needed for a successful network, with the idea that the “economics will be compelling.” Sacconaghi believes a robotaxi network could optimistically be valued at around $200 billion (for comparison, Uber’s market cap is roughly $150 billion, and Waymo is valued at $45 billion). Additionally, Tesla could generate profits from selling Cybercabs, which would inherently include FSD and potentially deliver $10,000 in profit per vehicle.
Tesla’s focus on the robotaxi could also be down to several other factors. It might represent Musk’s latest ambitious challenge for his team or might be a new “shiny toy.” The Cybercab could also act as an intermediate solution if Tesla cannot achieve full Level 5 autonomy immediately. Another possibility is that Tesla sees a $25,000 vehicle as essential, and a two-seater Cybercab could be the quickest path to that goal.
As for the question investors care about most — is now the time to buy Tesla stock? — Sacconaghi offers a cautiously skeptical perspective.
“We acknowledge [that] if Tesla is able to launch an L5 product, people will get incrementally excited and bid up the stock. However, we note that there are a lot of intermediate data points between now and then, both regulatory and technology, and we’re just not seeing sufficient progress to declare victory. We are still unable to justify Tesla’s valuation, and while we lack a high-conviction short catalyst, we see risk/reward as negative,” Sacconaghi explained.
Bottom line, Sacconaghi rates Tesla shares as Underperform (i.e., Sell), while his $120 price target suggests the stock is in for a big 70% correction over the coming months. (To watch Sacconaghi’s track record, click here)
The Street’s average target is a less harsh $260.55, although that figure still implies shares are overvalued by 35%. On the rating front, based on 13 Holds, 12 Buys and 9 Sells, the analyst consensus rates the stock a Hold (i.e. Neutral). (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.