Tesla robotaxis: Wall Street weighs in on Elon Musk’s latest claim

 

Tesla (TSLA) stock closed up nearly 5% on Monday as investors bought into CEO Elon Musk’s latest proclamation that Tesla would debut its long-awaited robotaxi on Aug. 8.

Musk’s announcement of Tesla’s Robotaxi after the bell on Friday followed a Reuters report that Tesla had canceled plans to build a long-awaited sub-$30,000 EV, which some have called the Model 2. Reuters said that Tesla would instead focus on a self-driving robotaxi, with Musk responding on X that Reuters was “lying (again),” before returning to the platform later to announce the unveiling of the robotaxi, generally understood to have no steering wheel or pedals. It’s still an open question whether Tesla will eventually unveil a low-cost EV.

Despite Monday’s pop in shares, Wall Street analysts are mixed on the announcement.

Deutsche Bank’s Emmanuel Rosner said the robotaxi news was “thesis-changing” on Tesla.

“If the shift away from Model 2 is once again confirmed, the Tesla bull case would then presumably be that in light of solid improvement in its autonomous tech, Tesla has decided to press its unique AI and software advantage through a focus on robotaxi, which few OEMs [original equipment makers] could imitate and that would command more favorable economics,” Rosner said on the bull side of the thesis.

The bear side, however, is that Tesla has given up a “key reason” why many own the stock: the Model 2 as a volume play that would “reaccelerate volume, margins, and FCF [free cash flow],” Rosner said. It would also mean the bull thesis is based on Tesla cracking the code on self-driving, which will require navigating a number of regulatory hurdles and acquiring enough data to train the software.

Rosner has a Buy rating on the stock and a $189 price target.

On the flip side, noted Tesla bull Tasha Keeney at ARK Invest believes the long-term potential of Tesla is largely tied up with self-driving and autonomy.

“They have an unparalleled data advantage compared to every other company that’s solving for full autonomy,” Keeney said in an interview with Yahoo Finance Live. As with AI, Keeney said data is the key to training models and getting to a working model of self-driving. She said Tesla’s full-self driving (FSD) beta is nearly there, noting that Tesla is accumulating 2.5 million miles of self-driving data from customers every day. Competitors like Waymo have only logged a little over 10 million miles since the beginning of the project, Keeney said.

“We think this is going to drive the future value of Tesla. When we look out five years, we think it’ll be two-thirds of the enterprise value in five years. So we’re super excited about it,” Keeney said.

ARK Invest founder Cathie Wood recently reiterated the firm’s $2,000 price target on Tesla, forecasting $10 trillion in revenue from robotaxi efforts.

On the other side of the spectrum is Craig Irwin at Roth Capital, who is much more skeptical on the robotaxi. He believes today’s move in the stock is technical in nature and not rooted in fundamentals. Irwin has a Neutral rating on the stock and an $85 price target.

“Professional investors follow momentum. They measure retail momentum very carefully, and the size of the uplift on this announcement will be measured by all my clients across Wall Street,” Irwin said. After the initial digestion of the news, Irwin believes Tesla’s autonomous play is still far off.

“[Autonomous driving] will consume as much electricity as the drivetrain [in current EVs]. Technically it’s conceivable, it’s feasible, but not on the [Tesla] vehicles that have been sold, and not in the format that anyone’s close to today,” Irwin said.

Irwin suspects Tesla’s vehicles will need more enhanced sensors, cameras, and other equipment to truly achieve full autonomy, and the fascination of the “Cyber Taxi,” as Irwin called it, is masking the bigger fundamental problems at the company, such as lack of demand and strong competition.

“I think the stock can get cut in half; I think there’s more price cuts to come. I think that there’s more margin compression, and this is a diversion away from the fact that the company is now shrinking,” Irwin concluded.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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