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Tesla (TSLA) shareholders have had a roller-coaster ride in 2024. After a slow start to the year, shares of this electric vehicle (EV) maker soared more than 58% from their April year-to-date lows, showcasing strong investor confidence.
However, that optimism took a hit after Tesla’s much-anticipated “We, Robot” event last Thursday night, which failed to live up to expectations. As a result, Tesla stock dropped 8.8% on October 11.
With the stock's recovery momentum now halted, it’s worth asking: Is now the time to exit TSLA? Let’s dive deeper to understand what the future might hold for Tesla stock and whether it’s the right time to exit.
The Robotaxi Reveal: A Letdown?
At the highly anticipated event, Tesla introduced the Cybercab and Robovan as part of its Robotaxi program. The Cybercab is a two-seater vehicle with no steering wheel or pedal. Meanwhile, the Robovan, designed to carry up to 20 passengers or transport goods, highlighted Tesla’s vision for autonomous public transport. While these reveals were impressive in concept, investors were left wanting more.
Tesla gave little detail on the timeline for Full Self-Driving (FSD) Robotaxi deployment, which is expected to begin in Texas and California next year. Cybercab production isn’t anticipated until 2026 or later, and Tesla admitted that its timeline estimates could be optimistic. While CEO Elon Musk said that the cost of the vehicle would be below $30,000, critical information on fleet ownership or the scope of initial deployments was missing.
This lack of clarity and no updates on a more affordable consumer vehicle disappointed investors, leading to a sharp stock decline. Although the Optimus humanoid robot showed progress and could play a significant role in Tesla’s future, the technology is still in its early stages, making it difficult to predict its impact on Tesla’s profitability.
Tesla’s Profitability Puzzle
Tesla’s Robotaxi plan reflects its long-term vision, but turning that vision into profitability will take time. The costs of developing and deploying an autonomous fleet are substantial, and it could be years before Tesla sees meaningful returns from this venture. Compounding the challenge, Tesla is facing growing competition in the EV market, while its margins are consistently declining.
For investors, the event underscored the uncertainty surrounding Tesla’s future earnings potential. The stock’s underperformance after the event shows that the market participants are questioning whether Tesla can deliver on its ambitious goals.
What’s Next for Tesla Stock?
Tesla's upcoming third-quarter (Q3) earnings report, set to be released on Oct. 23, could be a pivotal moment for the company’s stock. Investors will be keenly watching the company’s fundamentals, particularly in terms of demand trends, profit margins, and progress on key initiatives. A solid earnings report could help in restoring confidence among shareholders.
However, Tesla's reliance on discounting to drive unit sales growth may continue to pressure profit margins. This could limit the recovery and hurt its earnings. Analysts expect Tesla to report earnings of $0.46 per share in Q3, a notable decline from the $0.53 reported in the same quarter last year.
Despite these challenges, Tesla’s energy storage division remains a bright spot. The company’s second-quarter 2024 results showed this segment’s potential. The company achieved record energy storage deployments, which translated into solid revenues and gross profits.
Looking forward, Tesla is well-positioned to scale up its energy storage business. Further, a robust backlog of orders suggests continued revenue growth in this segment over the coming quarters.
In addition, Tesla is also taking steps to reduce costs across its operations. By lowering the cost of goods sold per vehicle, Tesla aims to cushion its profit margins, even in a competitive environment. The company is also accelerating its development of artificial intelligence (AI)-enabled products and services, which are expected to enhance operational efficiency and support long-term growth.
Should You Sell Tesla Stock?
Tesla’s advancements in FSD technology and its upcoming Robotaxi service hold promise for the future, but these developments will take time to materially impact the company’s financials. As a result, Tesla stock remains risky for short-term investors, without clear near-term catalysts.
The company’s long-term potential is still promising, especially if it successfully delivers on its goals around autonomous driving, AI, and robotics.
However, the major concern for investors is Tesla's current valuation. The stock trades at a lofty 85 times its estimated 2025 earnings of $2.55 - which is high, given the pressure on margins, challenges in the EV market, and uncertainties surrounding the Robotaxi timeline.
Wall Street analysts currently rate Tesla a "Hold," and have an average price target of $203.57. This price target suggests further downside potential from its current levels.
