Tesla Stock Likely Heading Lower After RoboTaxi Flop

Key Points

• Tesla's highly anticipated robotaxi event was a flop, leaving analysts wanting more. 
• The best-case scenario is that Tesla advances its projects sometime in 2025.
• Increased competition and macroeconomic headwinds will impact revenue growth and earnings for the next 24 months.

Tesla NASDAQ: TSLA investors hoping for positive movement on the robotaxi opportunity, the low-price model, and FSD technology were disappointed by the We Robot event in early October. The event was more of a showcase of Tesla’s dream than its reality, leaving the market with more questions than at the start. Critical takeaways from the analysts' commentary are that no details on capability were announced, no new near-term opportunities were unveiled, the Optimus robot needed human help, and credibility was hurt. 

The analysts' response was tepid at best, with a half dozen revisions tracked by Marketbeat reiterated ratings and price targets offering little market support. The consensus remains a Hold, biased to the downside, with a price target of $210. However, the $210 price target doesn’t reflect the downward revision trend. The activity since summer includes numerous price target reductions to the low-end range, which suggests a 20% downside for this stock. 

The most optimistic of the lot is Wedbush’s Dan Ives, long a fan of Musk and Tesla. He chose to focus on the long-term and potential advancements expected to be revealed in 2025. His stock price target is $300, among the highest issued by a major firm. However, 2025 is still a long way off; Tesla’s stock price is under pressure now and heading for another 20% decline this year.

U.S. Automarket Comes Under Pressure, Bad News for Tesla

While sales of EVs are surging in China, Tesla is losing market share, and its core market, the U.S., is under pressure and expected to grow slowly. The latest forecast from S&P Global warns of limited growth and rising pressure for the OEMs, including Tesla. S&P Global warns that economic headwinds, including rising unemployment, will cap industry gains at 1% to 2% with little expectation for margin improvement as average selling prices fall. 

The average price for all vehicles is expected to fall 6% to 8%, driven partly by lower-cost EV models, and the forecast may be optimistic. Lower-cost EV models are in the works, but even Tesla’s model appears far off. The best estimates, generated by Elon Musk himself, are for early 2025, before mid-year, but the lack of verifiable evidence cast a shadow on it. 

Uber NYSE: UBER may be the big winner of the Tesla event. Analysts at Jefferies called Tesla’s We Robot event a best-case scenario for the ride-sharing company as it alleviates the overhang on Uber stock caused by Tesla’s foray into autonomous driving. Jefferies analysts also called out Tesla for its solo approach to robotaxi development, citing barriers to entry and scaling that will impact growth and scalability, including asset management, regulation, pricing, and fleet operations. In contrast, Uber is seen as uniquely positioned to capture the FSD/autonomous market because of its ability to support autonomous OEMs as they develop their technology. 

Forecasts for Tesla’s Q3, 2024, and 2025 Are Too Optimistic

Analysts have been trimming their estimates for Tesla’s Q3, Q4, and next year but remain overly optimistic given the macroeconomic headwinds and lack of progress on critical projects. Although the bar for Q3 had been lowered, the consensus continues to expect YOY growth to accelerate to 10% from the prior quarter and to accelerate again in 2025. The consensus for 2025 is for top-line growth to hit 16% on ramping products and deliveries, offset by reduced pricing. Investors should expect these forecasts to fall over the next few quarters. 

The price action in TSLA shares isn’t bullish. The stock fell 10% following the We Robot event and is testing support near the middle of its trading range. Support is present but not robust, suggesting that this market will move sideways from here if it doesn’t continue to fall. The critical support target is the 150-day EMA, which is near $215; if it is broken, this market could fall below $200 to the $180 region quickly.