(Reuters) – Tesla stocks have fallen almost half in three months. Still, investors are still debating whether Elon Musk’s electric vehicle maker will remain at high prices.
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The company’s market capitalization fell 45% since it hit a record high of $1.5 trillion on December 17, erasing most of its stocks after CEO Musk helped fund US President Donald Trump’s election victory.
Still, Tesla continues to get ratings that far surpass those of the world’s largest automotive and technology companies, judging from standard financial indicators. It’s because most investors and analysts have bought the mask pitch, so the world’s most valuable automakers are not actually car companies, but rather the pioneer of artificial intelligence that unleashes the revolution of Robotaxis and humanoid robots.
Tesla’s electric vehicle business accounts for almost all of its revenues, but accounts for less than a quarter of the stock market’s value, according to a Reuters review of more than 12 analyses by banks and investment companies. Much of its value is based on desires for self-driving cars that Tesla has yet to offer, despite the annual promise of masks since 2016, that Driver Resteslus will arrive more than the following year.
The decline in stocks since December has been attributed to lower vehicle sales and profits. Protests against mask political activities. This includes massive shootings by US government workers as senior Trump advisers. And investors are worried that politics will distract you from caring for the world’s wealthiest man to his cash cow. Still, Tesla’s market capitalization has increased by around $65 billion since the election. This is more than the overall value of General Motors (GM).
File Photo: 2024 Paris Auto Show
Tesla’s total $845 billion remains at the top of the next nine most valuable major automakers, which sold around 44 million cars last year, compared to Tesla’s 1.8 million units.
Investors have long been betting on Musk’s Tesla’s vision of tomorrow, not on today’s profits. However, when the gap between real-world performance and analysts’ estimation of fetal revenue, some warn of irrational vitality.
“How long can a stock remain divorced from fundamentals?” JP Morgan analyst Ryan Brinkman wrote in January after Tesla reported low revenues and its first-ever decline in vehicle sales.
Tesla and Musk did not respond to requests for comment. In July, Musk said investors who don’t think Tesla will “settle vehicle autonomy” should “sell Tesla stocks.”
Tesla’s previous peaks were more than $1.2 trillion in 2021, in response to specific results. The groundbreaking surge in sales of the Model 3 and Model Y proved that EVs could sell in large quantities and profitably. Musk has vowed that Tesla will produce even cheaper EVs by 2030 and sell 20 million vehicles a year.
But Musk shifted from a massive goal last year. In April, Reuters reported that Tesla had killed the much-anticipated $25,000 “Model 2” that investors had hoped to drive growth. Since then, Musk has pitched investors to Tesla’s Robotaxi Focus.
The pivot was persuasive. Tesla’s stock rose 71% from its low price in April last year to the November election, even if EV sales stagnate and profits fell.
The stock price has since nearly doubled in the weeks since Trump’s election. Musk spent more than $250 million in support of Trump and is now his top advisor to cut government staff and regulations.
Musk’s political influence convinced bullish analysts that Trump will clear regulatory obstacles and deploy Tesla Robotaxis’ vast fleet. But Tesla already faces little surveillance from many US states that control most autonomous vehicle regulations. Texas, which has promised that Musks will collect fares by June, has banned cities from regulating them.
“There’s absolutely nothing to stop him from releasing this autonomous driving technology right now,” said Gordon Johnson, chief executive of GLJ Research, an investment advisory company that recommends shortening Tesla’s shares. Johnson argues that the technology is not ready along the road. These things will be destroyed all over America. ”
Tesla is facing lawsuits and federal investigations into accidents that include deaths, including autopilots and driver assistance systems sold as fully autonomous driving. The company warns consumers that the system will not make the car autonomous and require drivers to pay close attention. Masks have long said that Tesla technology is safer than human drivers.
Automakers’ core EV business is struggling. The 2020 Model Y is a CyberTruck, so this is the only vehicle that Tesla has released. The triangle pickup was 38,965 units sold last year, and Cox Automotive estimates are well below the 250,000 that Musk originally predicted Tesla would produce by 2025. Tesla has reduced the price of the now aging Model 3 and Y.
New data also shows a sharp decline in Tesla sales this year in the European market after Musk embraced the far-right political movement there.
Tesla is currently facing headwinds from President Musk. A frequent EV critic, Trump is calling for the scrapping of EV subsidies and policies that add billions of dollars to Tesla’s revenues. Musk dismissed the impact on Tesla of losing the subsidy, saying its rivals would suffer more.
When Tesla reported a 20% decline in annual operating profit in January, revenue call analysts did not question Tesla’s financial or EV sales decline. Instead, it focused on the “autonomous driving” promise in Austin, Texas by June and the launch of a wider range of driverless vehicles by the end of the year. Tesla shares rose 3% the following day.
Tesla is still trading at a massive premium, as measured by forward prices and rate of return. This measure is used by investors to determine whether the stock is being valued significantly. A high ratio suggests that the stocks may be too high.
Tesla’s forward PE ratio is more than nine times the average for the next 25 most valuable automakers. That’s four times that of BYD (BYDDY, BYDDF), a Chinese automaker that passed Tesla last year as the world’s top EV seller.
Unlike Tesla, BYD is also booming in gas-electric hybrids, driving a total of 2024 sales to around 4.2 million units, with more than double the Tesla delivery. However, BYD’s market capitalization is less than a sixth of Tesla’s.
Tesla’s forward PE ratio is more than twice or three times that of tech giants Nvidia, Apple, Meta Platforms, Alphabet, Amazon.com and Microsoft.
The Bulls discount standard financial metrics to determine Tesla’s potential, claiming Musk can lead the transportation revolution. He says that Robotaxis and Robots will make Tesla “the most valuable company in the world.”
Brian Mulberry, client portfolio manager at Tesla Investor Zacks Investment Management, said Musk “always keeps technology apart” despite long-standing concerns about the “characteristics of Mad scientists.”
Most analyst models reviewed by Reuters remain bullish.
Such models typically justify Tesla’s market value by dividing it into several categories. Automotive business includes services such as EV charging (90% of current revenue). Its energy generation and storage business (10% of revenue); and three embryo businesses: Robotaxis; license or subscription to autonomous driving technology. and Optimus Humanoid Robots. Three such models in January rated EV sales as a relatively minor factor in Tesla’s expected growth.
Truist Securities attributed only 9% of Tesla’s value to car sales, 21% to driverless technology services, 17% to Robotaxis, and 34% to robots.
The Bank of America model comes from Robotaxis, which accounts for about half of Tesla’s value and 28% from autonomous driving software subscriptions.
Morgan Stanley belongs to Robotaxis, 21% belongs to subscriptions to autonomous technology and other services.
The Tesla Investor Ark Investment Management project has stakes reaching $2,600 by 2029, with Robotaxis accounting for 88% of the company’s value. ARK could potentially generate millions of robotaxi by then, generating approximately $760 billion in annual revenue. It will be more than Walmart, the world’s largest company, by revenue.
Tasha Keeney, director of investment analysis and institutional strategy at Ark, said he believes Tesla will achieve such growth by reducing ride costs and making human drivers obsolete.
“It’s cheaper than driving a personal car,” she said. “Maybe people will even stop driving.”
With the federal government regulating vehicle design safety, Trump could potentially clear the roads of driverless vehicles without steering wheels or pedals. Last October, Musk unveiled a concept car with a two-door cybercab, which is configured like this, and said it will be produced in 2026.
However, individual states manage autonomous vehicle travel on public roads and limit the impact of Trump. Some states, including Texas, have few rules. California, Tesla’s largest US market, requires extensive driverless testing under state surveillance before granting a Robotaxi permit.
Trump’s move to loosen restrictions on Robotaki could benefit not only Tesla but all his competitors. For now, the small US lobotaki industry is dominated by Alphabet’s Waymo, which operates hundreds of unmanned taxis in cities such as Los Angeles and Phoenix.
Waymo and most other autonomous technology developers are trying to ensure safety with many overlapping technologies, such as artificial intelligence, radar, and Lidar. Tesla aims to develop much cheaper Robotaxis by relying solely on cameras and AI.
Some investors suspect that Tesla has found a unique path to a reduced Robotaxis. Mark Spiegel, investment manager at Stanphyl Capital Partners, keeps Tesla stock short. This is an investment you pay if your stock decreases.
Tesla’s approach to Robotaxis “does not work safely and never work without radar and rider,” says Spiegel.
And last month, China’s BYD said it would offer driver assistance technology, similar to the fully automated driving system that Tesla sells for over $8,000 in China, for free as standard features.
“BYD says autonomous driving is worthless,” said Johnson, a research analyst at GLJ. “In fact, it’s very worthless, so we’ll pass it on.”
(Reporting by Chris Kirkham; Additional reporting by AbhirupRoy, Noel Randewich, and Geert de Clercq; Editing by BrianThevenot and Michael Williams.)
