Tesla Stock: Hold or Fold? Unpacking the Robotaxi Roadmap and EV Outlook.

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Tesla (NASDAQ:TSLA) has an upside of 3.33% YoY. Tesla stock faces long-term challenges despite potential growth opportunities.

The company’s catalysts include Robotaxi, Model Y finance plan, and supercharging network expansion. These innovations may take years or decades to be adopted. I believe Tesla stock warrants a hold, with a possible upside of 5.5%. 

Catalyst 

Tesla’s CEO, Elon Musk, recently posted on X about the company’s introduction of self-driving vehicles called Robotaxi on Aug. 8.

This product is an autonomous electric taxi that customers can request through a smartphone app, like Uber and Lyft. Robotaxi is designed to be a self-driving vehicle that uses Telsa’s full self-driving technology.

This product will operate as a fully autonomous electric taxi where customers can request a ride through a smartphone app similar to other competitors, such as Uber and Lyft. Robotaxi’s use of electric power and autonomous drivers will lower operation costs compared to other ride services. 

The plan has been announced by 2019, and Tesla expects to have one million taxis on the road by 2020. This delay presents the complexity of integrating Robotaxi into everyday life.

Tesla competes fiercely with other established players in ride-sharing. Tesla must improve technology and safety to compete in this landscape. The vision for Robotaxi is clear, but implementation faces obstacles. 

Tesla also notified its limited-time finance plan for U.S. Model Y orders, offering the buyers a 0.99% APR interest rate.

As the EV sales have been slower down the past year, I believe that this surprisingly lower interest rate could increase Tesla’s sales revenues for its Model Y.

Aside from that, Elon Musk recently posted on X to reveal that Tesla will spend $500 million to expand the supercharger network, creating thousands of new charger stations this year.

These moves could boost EV FY2024 sales revenue and should affect Tesla stock.

Tesla Stock Valuation 

Tesla stock’s financial health has been robust over the years. The company’s slowing demand growth for EVs has caused a decrease in revenue growth rate for FY2022 and FY2023.

The promotional finance plan for Model Y could improve the company’s sales for this year. I estimated the revenue growth to be 19.5% for this year. The historical operating income margin is relatively low, with an average of 10%, but it constantly grows. I forecast the margins for operating income for FY2024 to be 11%.

Moreover, as the company announced its plan to expand supercharger stations, I believe this could increase its capital expenditures for this year. 

The company’s terminal growth rate of 4% hovers ominously close to the economy’s average growth, casting a shadow of uncertainty over its future. Equity cost is 12.74% with a beta of 1.8 and a risk-free rate of 4.51%. WACC is 12.7%.

Risk 

One risk that Tesla stock needs to face is the intense competition within the electric vehicles industry. Several emerging Chinese EV brands like Nio and BYD have gained international attention, causing challenges for Tesla in maintaining its dominant position.

In Q1 2024, Tesla reported a decrease of 8.5% in its vehicles delivered QoQ, worsening many analysts’ expectations. 

Moreover, Tesla’s fully autonomous driving technology has imposed many safety concerns. Recently, the company was investigated by the Justice Department for whether it committed wire fraud by misleading customers and investors about its full self-driving technology. The outcome of these legal issues could decelerate the company’s prospective growth. 

Conclusion

In conclusion, Tesla stock slightly increased by 3.33% YoY. The company also introduces some plans for its growth, including Robotaxi, a new finance plan for Model Y, and an expanding supercharger network.

However, the time needed to implement its vision into real life could take longer. Additionally, there are potential risks, such as losing its market position in the competition of the EV industry and facing legal challenges.

I believe Tesla stock should be on hold for now, with a potential upside of 5.5%.

On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

Michael Que is a financial writer with extensive experience in the technology industry, with his work featured on Seeking Alpha, Benzinga and MSN Money. He is the owner of Que Capital, a research firm that combines fundamental analysis with ESG factors to pick the best sustainable long-term investments.

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