After an extensive rally that has seen Tesla (NASDAQ: TSLA) stock erase all the year-to-date losses and finally trade in the green in 2024, the unexpected and sudden hiccup in the Robotaxi unveiling event caused an 8.44% drop in a single trading session, with losses of 1.55% extending in the pre-market on July 12.
This meant that its competitors’ shares, such as Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT), have surged in response to the news, gaining 6.15% and 4.64%, respectively.
Now, the issue of rescheduling could erase the gains that TSLA stock achieved in the previous month, which amounted to 40% before losses, and could put the EV maker back to square zero.
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What happened with Tesla’s Robotaxi?
The concept of an autonomous taxi service has been a long-standing goal for Tesla, originating as far back as CEO Elon Musk’s second “master plan” in 2016. Recently, Musk has prioritized this project over developing a cheaper electric vehicle than Tesla’s most affordable car, the Model 3 sedan.
Now, Tesla is delaying the unveiling of its planned Robotaxi from August 8 to October to give its teams more time to develop additional prototypes, according to a Bloomberg report on July 11.
The sources, who requested anonymity because the information has not been publicly announced, said the approximately two-month delay was communicated internally. The design team was informed of the delay this week.
Wall Street was quick to react to the news
The news of the delay coincided with a report from the UBS analysts, who believed that the growth and value outlook warranted a downgrade from “neutral” to “sell” rating, with a price target of $197.
“Tesla is more than just an auto company, and recent positive developments provide additional support,” UBS analysts noted in a recent report. “This support is increasingly important as expectations for the core auto business decline.”
“Tesla has always had a premium for its future growth initiatives. Properly valuing that potential is challenging. Recently, this premium has increased due to enthusiasm for AI,” they added.
After evaluating Tesla’s various ventures, analysts estimate that future growth is valued at over $500 billion. Even with a five-year outlook, this suggests a future value of $1 trillion, justifying current stock prices. To warrant a Buy rating, “one would need to see an even larger opportunity,” UBS noted.
“While Tesla is heavily investing in AI and making progress, the investment is costly, the pace of improvement may slow, and the payoff is long-term. If market enthusiasm for AI wanes, this could impact Tesla’s valuation,” the analysts added.
Additional setbacks could further harm Tesla’s stock rating, which currently stands at “hold,” while its price target is set at $194.17, implying a 19.44% downside.
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