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How much of the Tesla (NASDAQ: TSLA) stock value is based on robotaxi potential? RBC Capital Markets analyst Tom Narayan puts it at 60%.
With Tesla stock up 8.2% on Monday (23 June), he could be right. That’s the day after the long-awaited robotaxi rollout finally happened in Austin, Texas. It was a low-key thing, but was largely hailed a success.
A selected group of investors and influencers took rides around town and streamed their adventures. Nobody was hurt, and it seems everyone got where they wanted to go.
The valuation
Many see the Tesla valuation, with a trailing price-to-earnings (P/E) ratio up at a lofty 198, as way too high for a motor manufacturer. There’s no disagreement from me. But seeing Tesla as just a carmaker would surely be a mistake.
If Mr Narayan is right, the non-robotaxi part of Tesla would effectively have a P/E of 79. That still seems very high, based on making cars. But it surely also has to include the intellectual property value behind Tesla’s pioneering electric vehicle technology. And presumably its promise in robotics and artificial intelligence too.
How much overlap there actually is between this and anything attributed to robotaxis is far from clear. But it leads me to conclude that trying to put a conventional valuation on the company right now is fraught. A P/E based on recent results, or on short-term forecasts, looks like a very poor measure.
Wall Street outlook
Trying to get a feel from analyst forecasts doesn’t bring much clarity. The high end of the price target range suggests $500 per share. And that would mean a 40% gain from the price at the time of writing.
But the average price target stands at only around $307, for a loss of about 14%. There’s even an analyst out there predicting a crash as low as $115.
On that basis, we might expect a majority Sell or Hold consensus, right? Well, no. Close to twice as many analysts have Tesla down as a Buy rather than a Sell. Do those two things — the average price target and the Buy/Sell balance — make sense together? Not to me they don’t.
Most bullish bull
And then we have Cathie Wood’s Ark Invest, which is extremely bullish on Tesla with a price prediction on the stock for 2029 of… wait for it… $2,600. They base it on some complicated computer simulations that rely on all kinds of variables that we can really only guess at very vaguely. To me, it’s worthless.
It reinforces a conviction I have about investing professionals and their takes on a Tesla valuation. Most of them simply haven’t the faintest clue.
So what can humble private investors like us do? For me it’s an easy decision. My inability to work out any kind of valuation means I’ll keep away.
But in the medium term, I can see Tesla stock being pushed up by any non-financial good news that comes along. The robotaxi success, modest though it was, could be the latest. Anyone who thinks the same might do well to consider buying.
