Is Tesla Stock a Buy or Sell on Robotaxi Delay?

Valued at $805 billion by market cap, electric vehicle (EV) giant Tesla (TSLA) has taken investors on a roller-coaster ride since touching all-time highs in November 2021. Today, Tesla stock trades 39% below record highs – and is up 43% in the past month. 

Despite the volatility associated with the EV stock in the last three years, TSLA has returned close to 16,000% to shareholders since its IPO (initial public offering) in 2010. 

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In recent months, investors have been pricing in their excitement about the Tesla Robotaxi, which might rake in billions of dollars at scale, unlocking a massive revenue stream for the company. However, while Tesla initially scheduled its much-awaited robotaxi event for August 8, the much-anticipated reveal has now been delayed by a couple of months. 

Let’s see if Tesla stock remains a good stock to buy right now. 

UBS Downgrades Tesla

Last week, investment bank UBS downgraded Tesla stock from “neutral” to “sell,” while increasing the target price from $147 to $197. UBS analyst Joseph Spak downgraded TSLA on concerns about its expensive artificial intelligence (AI) investments. Moreover, the firm believes the slow pace of improvements in the AI segment could drag Tesla’s valuations lower, especially if market enthusiasm is diminished. 

“We believe TSLA stock price has gotten caught up in the AI trade/phenomenon. While we don’t doubt Tesla is making very good progress on such initiatives, aside from FSD (we were impressed by recent improvement), the other initiatives are purely R&D,” warned Spak.

Is Tesla Stock Overvalued?

Separately, according to a research report from Data Trek, the percentage of stock price based on the current value of Tesla is just 9%, compared to 45% for the S&P 500 Index ($SPX). That suggests about 91% of Tesla’s valuation is based on future earnings, making the EV maker a “faith-based stock,” in Data Trek’s view.

Priced at more than 90x forward earnings, Tesla stock is quite expensive, given its falling sales and narrowing margins. A high valuation indicates investors expect Tesla to dominate the electric vehicle market despite rising competition from new and legacy players. 

A major catalyst for Tesla is full self-driving cars and its robot service, which will be in direct competition with ride-hailing players such as Uber (UBER) and Lyft (LYFT). Even Tesla CEO Elon Musk expects the company’s valuation to account for potential growth in verticals such as AI and robotics, though it currently generates a majority of its revenue from auto sales. 

Tesla Delays Robotaxi Event

According to a Bloomberg report, and seemingly confirmed by Musk on Monday, Tesla’s much-anticipated Aug. 8 robotaxi event is now delayed until October, as the design team is reworking certain elements of the vehicle. 

If Tesla unveils an autonomous vehicle at the event and provides a timeframe for large-scale rollouts, investors can expect the stock to surge at an accelerated pace. Alternatively, Wall Street will be ready for a pullback if the details provided are hazy. 

A Trump Win Might Benefit Tesla

Tesla is positioned to benefit if Donald Trump wins the U.S. presidential race, according to analysts. Economists expect the Trump administration to raise tariffs on China-based EVs that are fast gaining traction in global markets, and potentially end EV tax credits that could be damaging for automakers that aren’t yet manufacturing EVs profitably. 

Further, Musk’s relationship with Trump could help Tesla capitalize on trade policies that favor domestic production and a political landscape that may prove challenging to its competitors. 

Out of the 33 analysts covering Tesla stock, nine recommend “strong buy,” two recommend “moderate buy,” 14 recommend “hold,” and eight recommend “strong sell.” The “hold” consensus is unchanged over the last several months of stock volatility. 

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The average 12-month target price for TSLA stock is $188.47, about 25% lower than the stock’s Monday closing price.

On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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