MW Tesla's 'Robotaxi Day' will show that Elon Musk has the EV maker in the fast lane
By Cody Willard
Tesla also will soon report quarterly earnings - another big catalyst for the stock
Tesla bulls and bears are anticipating its "We, Robot" event on Thursday - better known as "Robotaxi Day."
Robotaxi Day - the expected introduction of Tesla's Cybercab - was postponed a few months ago, which sent Tesla shares $(TSLA)$ into a freefall at the time. In the past few weeks, the stock has found its mojo again and raced back toward its 2024 highs - which are still 40% lower than the stock's all-time high about three years ago.
The stock's recent rally is probably more attributable to Tesla being just about the only car company that is growing, while Stellantis $(STLA)$ (Jeep, Dodge, Ram, etc.), GM $(GM)$, Ford Motor $(F)$, Volkswagen (XE:VOW) and most other carmakers are seeing sales decline.
But Tesla's valuation is not really about the car business. If Tesla were simply a car company, the stock would likely trade at less than half its current market valuation of $769 billion. But the market and Tesla bulls both recognize there are potential trillion-dollar kickers in coming years for Tesla that no other car company has. Most of those opportunities are based on AI-related revenues, including the Cybercab (I'll refer to the robotaxi using this Tesla-branded name).
Tesla will be reporting quarterly earnings next week too, and that will also be a big catalyst for the stock. So here's what I expect we'll see from Tesla and CEO Elon Musk, and how I expect the stock to trade as a result.
Tesla will likely outline plans to allow individual Tesla owners to let their cars join the Cybercab system.
It's likely that Tesla will announce that people in at least one U.S. city (Austin, Texas, probably, or maybe Phoenix and one other city) will be able to start using the Tesla app to summon a driverless Tesla Cybercab any time.
Initially, those riders will be summoning their rides from a fleet of Tesla-owned Model 3's and Model Y's and Tesla will keep 100% of the revenue. Within a year, or maybe six months, Tesla will outline plans to allow individual Tesla owners to let their cars join the Cybercab system. In that case, Tesla will keep 30% of the revenue and give 70% of the revenue to the car owner. Tesla will likely demo a fleet of Cybercabs giving people rides around the 110-acre Warner Bros. studio, or even around the whole neighborhood, showing how consumers can use the app to request a ride like they would with an Uber $(UBER)$.
I expect that Tesla will raise the price of its Full Self-Driving feature from $8,000 back to $15,000, and that the monthly subscription will go from $99 a month to $199 a month.
Robots, AI and expectations
Musk might also reveal the third version of Tesla's Optimus humanoid robot and have an Optimus robot with him. Videos will be shown of the Optimus robot doing manual labor in Tesla's factories and Musk will give a more detailed timeline for when Tesla will have hundreds of these robots working in its factories (say, by the middle of 2025). We'll also find out when Tesla will start selling Optimus robots to other enterprises (late 2025 or early 2026) and when consumers will be able to buy an Optimus robot for their house (late 2026).
And I expect that Musk will announce that companies and individual consumers can pre-order their own Optimus robots for a fully refundable $100 (or maybe $500) charge. I'd imagine that Tesla will get millions of pre-orders and that could end up putting billions of dollars of cash in Tesla's checking account to help fund the ramp-up to full production of the Optimus robot.
If Musk announces even half of these developments on Robotaxi Day, the stock could gain 10%-15% over the next week heading into the earnings report. But if the event is a disaster, and Musk and Tesla just talk about how great self-driving cars will eventually be and how they plan to start trying to get permission from individual cities to start letting them trial the Cybercabs next year, then the stock will likely trade down 10%-15% over the next week.
Unlike a lot of analysts, I do not expect Tesla to reveal a smaller, cheaper car or a van or a new roadster. The gathering on Oct. 10 is going to be all about FSD and (maybe) Optimus robots.
As for earnings, if the company can show stabilized gross margins and a meaningful uptick in signups for the FSD software, then the stock could pop 5% or so after the earnings report, regardless of whether it is up or down after the "We, Robot" event.
Much of Tesla's future is riding on the Cybercab. In 10 years, Cybercabs could be worth trillions of dollars for the company, and in 15 years, Optimus robots could be worth tens of trillions of dollars. Tesla has been the biggest position in my hedge for the last five and a half years, and while the position has been hedged a bit going into this earnings call, it's still an outsized bet.
Cody Willard is chief investment officer at 10,000 Days Capital Management and the publisher of TradingWithCody.com, a subscription trading newsletter offering real-time trade alerts. Willard and/or 10,000 Days Fund LP were net-long TSLA at the time of publication. Positions can change at any time and without notice.
More: Tesla's deliveries didn't live up to the hype. What investors should watch next.
Plus: GM met with investors. The car business is better than many fear.
-Cody Willard
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October 09, 2024 07:16 ET (11:16 GMT)
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