Tesla’s stock price isn’t just about selling electric vehicles.
Much of its value today is tied to the idea that Tesla one day will dominate the autonomous-taxi market, according to Brad Ginesin, founder of the hedge fund Polar Capital.
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“Reasonably, 40% to 50% of TSLA can be attributed to the potential of robotaxis — currently, over $300 billion in market cap is already baked in,” Ginesin wrote on TheStreet Pro.
According to Wedbush analyst Dan Ives, robotaxis could be a $1 trillion opportunity. He sees Tesla as the future leader in autonomous driving, and he has a price target of $550 and an outperform rating for the EV stock.
But the robotaxi dream may be much harder to achieve than investors think.
Tesla is facing sharp declines in EV sales worldwide.
Tesla EV sales declining
Tesla stock (TSLA) recently got a boost. On March 24 Tesla said via its Weibo account that it planned to roll out its Full-Self-Driving software in China, pending regulatory approval.
Tesla stock rallied almost 12% on March 24 following the news.
In the U.S., Elon Musk said earlier this year that unsupervised FSD would launch in Austin by June 2025, with more cities to follow.
Related: Surprising China news sends Tesla stock soaring
Right now, Tesla is facing sharp declines in EV sales worldwide.
In China, Tesla sold 30,688 new energy vehicles in February — the lowest monthly total in over two years. That’s less than one-tenth of what Chinese EV rival BYD sold in the same period.
In Europe, Tesla sold just under 27,000 vehicles in January and February, down 42.6% from more than 46,000 in the year-earlier period.
In the U.S., Tesla sales slipped 1% in 2024, the company’s first annual sales drop in over a decade.
Fourth-quarter earnings and revenue, reported in late January, both missed analysts’ estimates. Tesla’s automotive revenue fell 8% to $19.8 billion year over year, while operating income declined 23% to $1.6 billion.
Tesla’s Q1 delivery numbers are expected on April 2.
Robotaxi plans might be too rosy: Ginesin
Ginesin worries that Tesla’s robotaxi plans may be overly optimistic.
“Considering the recent brand erosion, investors and analysts may be buying into a mirage of a business — a robotaxi operation that may never materialize on a broad scale,” Ginesin wrote.
A case in point is Cruise, a robotaxi startup owned by General Motors (GM) , which faced a major backlash in San Francisco after its vehicles got stuck in traffic and disrupted emergency services. After a number of safety incidents, GM closed Cruise.
Related: Tesla stock extends rally with Q1 delivery data, earnings on deck
Tesla could face similar resistance.
“One of the lessons from Cruise’s failed robotaxi business is the need for broad public support,” Ginesin said. “It’s not far-fetched to believe Tesla may have difficulty gaining the necessary widespread support, especially with a viable competitor” in Alphabet’s (GOOGL) Waymo.
Ginesin added that Waymo’s valuation of the robotaxi service is pegged between $50 billion to $60 billion. Last October, Waymo raises $5.6 billion in capital at a valuation of $45 billion.
“At Tesla’s current valuation, the shares arguably bake in a robotaxi value 7 times to 10 times Waymo’s recent funding round,” he said.
“At a minimum, investors may want to see the service operating before they get carried away trying to value all the robotaxi potential.”
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Meanwhile, growing concern about CEO Elon Musk’s political activities and personal behavior could hurt adoption of robotaxis.
Tesla stock is down nearly 30% year-to-date.
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