Tesla CEO Elon Musk believes self-driving technology will change the world of personal transportation -- and the fortunes of his electric-vehicle firm -- forever.
Now he just has to get the cars to actually do the driving.
"I think [achieving fully autonomous driving] might be the biggest asset value appreciation in history," Musk said on Tesla's first-quarter-earnings conference call. Self-driving cars can be used more often, instead of parked in a commuter lot, earning money for owners or ride-hailing fleet operators.
Musk has been all-in on self-driving cars f or years. His confidence that Tesla will achieve truly autonomous driving appears to be growing. Tesla is hosting a robotaxi event on Aug. 8 to showcase its technology. Musk also recently traveled to China, winning the right to sell Tesla's highest-level driver-assistance features to Chinese customers.
Morgan Stanley analyst Adam Jonas pointed out in a recent report that artificial-intelligence computing can improve self-driving technology at an accelerating rate. He values Tesla's software and robotaxi business at roughly $161 a share, more than the $67 a share he values the car business at. (Jonas also has a per-share value for Tesla's stationary power and other businesses.)
Jonas is a Tesla bull with a Buy rating, and a $310 price target. Guggenheim analyst Ronald Jewsikow is a bear, rating Tesla stock at Sell with a $126 price target.
Yet he agrees with Jonas that Tesla stock is changing into a bet on self-driving cars.
"Tesla is increasingly an investment underpinned by autonomy," wrote Jewiskow in a Tuesday report. That's "a challenging balancing act requiring investors to buy into a vision of the future with limited supporting evidence, while simultaneously ignoring the current light-vehicle business deterioration."
His "deterioration" refers to falling sales. Tesla delivered about 387,000 vehicles in the first quarter, down almost 9% year over year. He expects Tesla to deliver 409,000 vehicles in the second quarter, down from 466,000 delivered in the second quarter of 2023. The consensus call for second-quarter deliveries is closer to 450,000 cars.
Amid falling sales, the prospects for self-driving cars loom larger. "Expectations will be high" for the Tesla robotaxi event, wrote Jewiskow. "We don't have a lot of confidence in steady-state market structure or timing for robotaxis." Tesla could be five years away, or even 10 years. But a five-year delay could cut today's value of a robotaxi business in half, he adds.
Investors don't know when self-driving cars will arrive or how they will be used. For now, bulls and bears are debating the issue.
Telsa investors are no strangers to debate and controversy. About 21% of analysts covering Tesla stock have Sell ratings, according to FactSet. The average Sell-rating ratio for stocks in the S&P 500 is about 7%. About 42% of analysts covering Tesla stock have Buy ratings. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The above-average Sell-rating ratio and below-average Buy-rating ratio are one illustration that Tesla is a controversial stock on the Street.
The average analyst price target for Tesla stock is about $183. The top target price is $310 while the bottom is $85; the $225 spread is almost 130% of the recent stock price. That's a wide spread compared with Microsoft stock, which stands at about 40% of the recent stock price.
Tesla stock was up 0.3% in premarket trading at $$176.81, while S&P 500 and Nasdaq Composite futures were both down about 0.3%.
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