Electric vehicle maker Tesla’s (TSLA) stock is stuck in neutral, down 7% on the year and trading sideways since July. Retail investors continue to have high hopes for the company’s self-driving vehicles and robots, and many have the upcoming Robotaxi unveiling on October 10 circled on their calendars. While I’m personally skeptical of Tesla, I recognize the stock as one of the biggest speculative trades of all time. As such, I’m neutral on the company and its shares.
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Delivery Downgrades
One of the biggest reasons TSLA stock has been treading water lately, and why I am personally neutral on the security, is that analysts continue to ratchet down their outlook on the company’s electric vehicle deliveries. Recently, analysts at Canaccord lowered their forecast for Tesla’s third-quarter deliveries to 469,200 vehicles, down from 480,000 previously. Likewise, Guggenheim dropped its Q3 forecast to 456,000 vehicle deliveries. The consensus estimate is for Tesla to deliver 459,000 vehicles in the current quarter.
Equally bad, Tesla’s automotive gross margins have been on a downward trend over the past 12 quarters due to increased competition, price discounts, higher spending on artificial intelligence (AI) and other technologies, and sluggish consumer demand. In Q2 2024, Tesla’s gross margin fell to 14.6%, its lowest level in five years. These issues have led to 15 earnings downgrades in the past 90 days. The consensus earnings per share (EPS) estimate for Q3 is $0.62. Tesla has missed its EPS forecast in each of its last four quarters.
Tesla’s Robotaxi
Another reason I retain a neutral view of Tesla is that many analysts and investors are unsure about the company’s Robotaxi, or self-driving taxi cab. Details about the long-gestating Robotaxi are so scant that many analysts don’t appear to be making forecasts based on its future potential. Some analysts seem to be discounting the Robotaxi altogether. Ark Invest (ARKK) is an exception and has been bullish on Tesla’s potential in this area. In June 2024, Ark released an ambitious forecast suggesting that Tesla’s stock could reach $2,600 per share by 2029, driven by the success of the Robotaxi business.
Ark predicts that Robotaxis could represent 90% of Tesla’s enterprise value by the end of the decade. It’s a crazy idea and would be very hard to achieve. Tesla might lack the capital and capacity to bring millions of Robotaxis to market by 2029. Ark Invest’s projection also discounts any regulatory challenges Tesla may face in the future. All eyes will be on Tesla’s October 10 Robotaxi event, and an underwhelming unveiling could hurt the stock and the company’s shareholders.
Tesla’s New Ventures
I am also neutral on Tesla because of the risks associated with its stock. Some analysts are urging investors to buy TSLA shares before the Robotaxi launch event, betting that the stock will bounce higher after the October 10 reveal. But this might be a dangerous move. Tesla CEO Elon Musk first announced the Robotaxi concept in 2019, but the program has experienced repeated delays. It’s not clear how robust the Robotaxi concept will be when it is shown to the world in a few weeks.
That said, Tesla’s plans for a Robotaxi network could potentially revolutionize transportation and create new revenue streams for the company. In the last few years, Tesla has steadily improved its full self-driving technology, with the latest beta version marking a significant step forward towards fully autonomous vehicles. The company is also making strides with its AI and robotics projects as it evolves beyond its electric vehicle business and diversifies into new areas.
Is Tesla Stock a Buy or Sell?
TSLA stock currently has a consensus Hold rating among 36 Wall Street analysts. There have been 12 Buy, 16 Hold, and eight Sell ratings assigned by analysts in the last three months. The average Tesla stock price target is $208.98, implying 9.20% downside from current levels.
Read more analyst ratings on TSLA stock
The Bottom Line on TSLA Stock
Tesla stock is a risky bet, especially as analysts continue to downgrade their expectations for the company and its business. While the Robotaxi has the potential to revolutionize transportation and create a huge new revenue stream for Tesla, it remains a big unknown. Despite those concerns, Tesla continues to be a highly innovative business and I appreciate the potential of the company’s AI and robotics technologies. For these reasons, I am neutral on TSLA stock.
