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It’ll be a huge day for Tesla (NASDAQ: TSLA) stock investors on 10 October. I’m getting a sense of déjà vu as I write, but this is the moment when Elon Musk will finally unveil the company’s long-awaited robotaxi.
In anticipation of this delayed event, Tesla stock has rocketed 25% in just two months. Should I invest now in case it surges even higher? Here are my thoughts.
The glitz and the glamour
Tesla isn’t holding back on the Hollywood-style event it’s calling “We, Robot“. It’ll be held at the Warner Bros Discovery Inc‘s movie studio and could showcase new innovations in wireless charging technology (beneficial I suppose given that driverless cars can’t plug themselves in!).
Investors will want to get a feel for how well the company’s massive investments in artificial intelligence (AI) are progressing. Unlike robotaxi rival Waymo, which relies on LiDAR and detailed mapping, Tesla uses computer vision for its driverless technology. Its AI learns from vast amounts of driving data, allowing it to make real-world decisions and continuously improve through machine learning.
Tesla’s approach could potentially be more adaptable and scalable, as it doesn’t rely on costly mapping efforts. As well as purpose-built robotaxis, Musk envisions Tesla owners making money by sending their cars out into a ride-hailing network, which he says will be a “combination of Airbnb and Uber“.
Currently behind Waymo
However, the company’s approach presents regulatory challenges in terms of ensuring the safety and reliability of its AI technology. Therefore, we don’t know when these vehicles will be deployed at scale. Remember, Musk originally promised a huge fleet of robotaxis by 2020!
Meanwhile, Alphabet‘s Waymo already has hundreds on the road and will soon roll out more in other US cities. These will be available through the Uber app.
Tesla still needs to get state regulatory approvals to operate a fleet of robotaxis. That could take years. So it’ll need to get its skates on or risk falling much further behind.
Valued as more than a carmarker
These risks are heightened because Tesla is currently valued as a high-growth AI robotics company. The stock’s price-to-sales (P/S) ratio is 8.8, while the forward price-to-earnings (P/E) multiple is a hefty 79.
According to Nasdaq, the forecast 12-month price-to-earnings growth (PEG) ratio is 6.5. Generally, a PEG below one is considered attractive.
Therefore, if we value Tesla purely as an electric vehicle (EV) business, its $754bn market cap makes no sense. It’s facing slower sales, lower margins, and rising competition.
Will I invest?
At the event, Tesla will need to impress with its robotaxi as well as provide a realistic mass-production timeline. If not, I fear the stock will sell off very sharply.
Even the most optimistic timeline suggests the vehicles (and Optimus humanoid robots) won’t have a material impact on revenue for a few more years. So the current valuation appears detached from reality.
Tesla is undoubtedly one of the world’s most innovative firms and I wouldn’t bet against Musk one day fulfilling his autonomous ambitions. I’ll certainly be getting the popcorn out to watch the livestream of the robotaxi event.
I’ve owned the stock in the past and would consider doing so again. For now though, I think there are better growth shares for my portfolio.
