Tesla is looking for its next big win. And the company is eyeing self-driving taxis as Tesla stock's next growth driver.
Tesla CEO Elon Musk is expected to reveal the highly anticipated robotaxi prototype this fall. Along with a potential model and app, analysts expect to hear more details about the company's timeline to deploy full-self driving, or FSD, technology.
But questions remain on FSD's capabilities and that's been a major hurdle for the EV maker.
Delay Rattles Tesla Stock
In fact, Tesla stock sold off after the EV giant pushed its robotaxi reveal from Aug. 8 to sometime in October. The delay will give Tesla more time to build vehicle prototypes, Bloomberg reported, citing unnamed sources.
Tesla stock tumbled 8.4% on July 11, to 241.03. That snapped an 11-day advance streak for the EV maker. TSLA stock surged 44% during that win streak. That's the longest run since a string of 13-consecutive gains in June 2023.
Tesla skyrocketed 27.1% to 251.52 for the week ending July 5. That move put shares above their 200-day moving average as Q2 deliveries fell vs. a year earlier but beat lowered expectations.
Shares are now extended from a 191.08 handle buy point, according to MarketSurge. That buy range extended to 200.63.
UBS analyst Joseph Spak downgraded Tesla stock from a neutral to a sell rating on July 12. Spak noted that the stock's valuation premium has recently widened thanks to artificial intelligence enthusiasm in the market. But the company's automotive growth opportunities are limited, he said.
Tesla Bulls Vs. Bears
Tesla aims to produce cheaper vehicles with more robust profit margins. But it's doubtful the company will see substantial financial gain from robotaxis anytime soon.
"Robotaxis are likely years away from mass-market adoption," RBC Capital analyst Tom Narayan told The Wall Street Journal. In a June 11 note to investors, JPMorgan analyst Ryan Brinkman said: "We do not expect material revenue generation likely for years to come."
Still, Tesla bulls like Wedbush analyst Dan Ives say the event will be the key to Tesla stock reaching a trillion dollar valuation.
While the delay has rattled some investors, Ives remains optimistic. "We believe the timing of robotaxis, partnerships, and the ultimate autonomous and AI driven technology does not change at all for our bullish Tesla thesis," he said in a July 11 note.
Elon's Broken FSD Promises
Musk has consistently predicted that fully autonomous vehicles were just around the corner. But the deployment of FSD has taken longer than expected. Musk's broken promises, along with Tesla's recent struggles in the EV market, have left investors questioning if they should take the CEO's words at face value.
Musk has talked about Tesla's FSD capabilities multiple times over the last decade. At Tesla's 2019 Autonomy Day, Musk said there would be a million Tesla robotaxis on the road by 2020.
He continued to tease the release of FSD technology during the company's Q1 earnings call in April 2023. "The trend is very clearly towards full self-driving," Musk told investors. "And I hesitate to say this, but I think we'll do it this year."
Musk isn't the only business leader who sees a future for robotaxis. Uber and Lyft had self-driving initiatives as early as 2016. In 2017 General Motors said mass production of fully autonomous vehicles would be a reality by 2019.
But autonomous driving technology has been challenging. Some companies have opted to build their platforms using light detection and ranging, or LIDAR technology. LIDAR is more accurate — but also more expensive. Tesla took a different route. The EV maker relies on camera-based vision for their FSD platform.
Camera Vision: Tesla's Self-Driving Advantage?
Choosing to work with camera sensors has advantages. They can be more cost effective and have better visual recognition of objects closer to the car.
Other self-driving competitors like Google's Waymo use LIDAR, which employs lasers to create three dimensional shapes. Google is owned by parent-company Alphabet. Amazon's Zoox autonomous delivery vehicle uses a combination of the two in its self-driving vehicles.
Waymo is currently the dominant robotaxi service in the U.S. with about 700 vehicles in its autonomous fleet. While Waymo has an early lead in the market, Ark Invest analyst Tasha Keeney cites Tesla's advantage over the Google subsidiary: data.
"Tesla is vertically integrated and should be able to leverage the data that its ~6 million vehicles have been generating on the road," Keeney wrote in a July 1 newsletter.
She noted that Tesla was already generating 66x the driving data of Waymo and its other competitors. That data not only helps train and improve the EV maker's self-driving platform, but could also generate significant revenue when Tesla decides to license its full self-driving software.
Robotaxis & Tesla Stock
Why does Musk continue to lean into the autonomy story for Tesla despite the challenges and unkept promises on FSD technology? Some analysts believe it might be the key to Tesla stock's high market valuation.
"This will unleash the beginning of the AI story at Tesla which we value at $1 trillion alone over the next few years," Ives wrote in a July 24 note.
Tesla must grapple with technological road bumps, and navigate changing regulations that govern self-driving cars. The company is moving closer to launching its full self-driving technology in China after striking a deal with Beijing-based Baidu to use their mapping software in its vehicles.
But Tesla faces stiffer scrutiny in the U.S. Federal regulators, including the Department of Justice, are looking into the company's self-driving claims following a series of crashes using the Tesla Autopilot system.
For Tesla, getting FSD technology right is more important than being first to market.
"Tesla is a robotics and AI play," Ives continued. "The next phase of the Tesla growth story is around autonomous, robotaxis, and AI playing out for Musk & Co."
Please follow Alexis Garcia on X @IBD_Alexis for more coverage.
YOU MAY ALSO LIKE:
Is Tesla Stock A Buy Or A Sell?
Get Full Access To IBD Stock Lists And Ratings
If Tesla Is The Most Valuable Car Company, Why Are Hybrids Outselling EVs?
Is Rivian A Buy Right Now After It Launched Its New Product Line?
