Elon Musk has always been a big fan of self-driving cars, seeing them as crucial for Tesla (NASDAQ:TSLA) to revolutionize transportation. However, despite high hopes, Tesla cars have yet to achieve fully autonomous driving after years of development. That could soon change.
Scheduled for unveiling on August 8, Tesla’s highly anticipated new electric vehicle, referred to as the Tesla robotaxi, is poised to change that narrative. This self-driving vehicle will harness Tesla’s advanced Autopilot and Full Self-Driving software. Musk disclosed in 2022 that the robotaxi’s cabin will forego traditional controls like steering wheels and pedals. More recently, Musk hinted at naming the vehicle “Cybercab,” sparking speculation that its design could echo the angular aesthetic of the Cybertruck.
Cathie Wood, the widely known founder and CEO of ARK Invest, projects that the robotaxi business could drive 63% of Tesla’s revenue and 86% of its earnings (before interest, taxes, depreciation, and amortization (EBITDA)) by 2029. Wood predicts Tesla will launch a robotaxi network within five years, foreseeing a transformative shift in Tesla’s business model “from one-off vehicle sales to a recurring revenue base as every car becomes an AI-powered cash flow generation machine.”
This begs the question: should investors load up on Tesla before the big reveal this coming August 8?
Not so fast, says JR Research, a 5-star investor ranked in the top 2% of TipRanks’ stock experts.
“I urge investors to be cautious about buying into the hype that Musk and Ark are trying to drum up as we draw closer to Tesla’s Robotaxi Day,” JR Research warns.
The investor notes that achieving fully autonomous driving remains a complex, long-term challenge, citing the poor marks Tesla received for its Advanced Driver Assistance System from The Insurance Institute for Highway Safety in March.
Furthermore, TSLA trades at a forward adjusted PEG ratio of 6.6, well above its sector median of 1.51. “Therefore,” says JR Research “Tesla investors must be willing to bet on Elon Musk’s ability to realize its autonomous driving and Robotaxi ambitions.” The investor, obviously, is not among the believers.
Overall, JR Research isn’t optimistic about TSLA outperforming in the next 12 to 18 months, rating the stock as a Hold. (To watch JR Research’s track record, click here)
Wall Street is mostly in agreement here. With 10 Buy, 14 Hold, and 9 Sell ratings, TSLA receives a Hold (i.e. Neutral) consensus rating. Its average 12-month price target of $174.60 represents a downside of roughly 5% from current levels. (See TSLA 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.
