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After last week's Robotaxi event, Tesla's stock price fell nearly 9% last Friday. Some analysts commented that this is exactly the lesson that Tesla investors should learn: hype is more important than fundamentals. The latest event has exposed the disconnect between the high valuation of the company's stock and reality.
Garrett Nelson, an analyst at research firm CFRA, commented on this incident as follows: "It's like watching a movie with intricate plot and numerous special effects, and in the end, you'll leave without a clear idea
In last Friday's sell-off, Tesla's valuation evaporated by over $60 billion, which is vastly different from the recent upward trend of the stock. Since Musk started promoting artificial intelligence in April this year, Tesla's stock price has surged by over 70%. Before announcing the launch of autonomous taxis, Tesla's market value had exceeded $760 billion, more than 14 times that of General Motors and nearly 18 times that of Ford.
Now, the biggest issue for investors may be reassessing Tesla's stock price. Nelson, who has long been bullish on Tesla, warns that last Friday's decline "may" be just the beginning of Wall Street's reassessment.
The high valuation of Tesla stock is becoming increasingly disconnected from the reality that Tesla's profit growth has hit a wall, "he added. He also pointed out that the medium-term growth drivers are "still unclear".
Bernstein analyst Toni Sacconaghi reiterated his view in a report to clients that Tesla's valuation is disconnected from fundamentals, writing that the autonomous taxi incident "lacks immediate delivery results or incremental revenue drivers.
Sacconaghi estimates that Tesla's automotive business is worth approximately $200 billion, indicating that the company's valuation of nearly $600 billion depends on its unverified businesses, including fully autonomous driving (FSD), robot taxis, and humanoid robots.
As my colleague Akiko Fujita has written, robot taxis are a costly adventure that may take several years to achieve profitability, "he added.
The lack of short-term catalysts comes at a time when Tesla is facing challenges. In recent quarters, sluggish demand and intensified competition for electric vehicles from companies such as General Motors have put pressure on sales and profit margins. Experts warn that this trend is unlikely to change soon: the company's operating profit margin for the second quarter was 6.3%, compared to 14.6% two years ago.
Ron Jewsikow, an analyst at Guggenheim Partnership, a well-known asset management company in the United States, believes that the company's fair value is approximately $153 per share. After the robot taxi incident, investors will 'refocus on the company's fundamentals', which they believe are' quite poor '.
It's really difficult to recommend a company with a P/E ratio of 100 times next year's profit and almost no free cash flow, "he added.
It can be said that Tesla still has a lot to prove in terms of fundamentals. Its next major test will be the third quarter performance report scheduled to be released after market hours on October 23rd.