Tesla, Inc. (NASDAQ:TSLA) possesses an X-factor with the unrelenting ambition and drive of CEO Elon Musk. Any investor in Tesla understands that they are wagering on the futuristic visions of the company head, and perhaps more importantly his ability to turn them into reality.
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Many have elected to take this bet throughout the years, which explains why TSLA’s share price trades at multiples far-and-above those of a standard car company. A central pillar in the current investment thesis is the trillion-dollar robotaxi opportunity and Tesla’s attempts to serve as a central cog in a driverless future.
After years of promises by Musk, the company launched limited commercial service in Austin, Texas earlier this summer. While currently a safety driver is present in the vehicles, Musk announced yesterday that these would be removed by the end of the year.
The technological wherewithal to make self-driving cars is no small feat of engineering, and Tesla had built a supercomputer called Dojo to train its models and improve its Full Self-Driving technology. However, last month, the news broke that the company was terminating the computer, with Musk acknowledging that it had reached “an evolutionary dead end.”
The investor known by the pseudonym Simple Investment Ideas wasn’t thrilled by this development.
“The recent shuttering of Dojo represents the most concrete sign that the company’s robotaxi vision is faltering,” asserts the 5-star investor.
Simple Investment reminds investors that Tesla had previously defined Dojo as a “necessary ingredient” for autonomous driving, as it was geared to process enormous amounts of data at scale. The move now forces Tesla to use third parties for these services, making it no different than other companies in their reliance on Nvidia and AMD.
But beyond the operational and technical setback, the investor also believes that development further chips away at Tesla’s credibility.
“Without Robotaxis, Tesla is just a carmaker with an aging lineup, deteriorating margins, growing competition, and an increasingly erratic CEO,” adds Simple Investment Ideas.
Needless to say, that would have plenty of deleterious effects on Tesla’s valuation. That’s led the investor to decide that the time is right to head out the door.
“Without a mass market robotaxi service, Tesla looks like what bears have long argued it to be: a capital-intensive carmaker masquerading as a software giant,” concludes Simple Investment Ideas, who rates TSLA a Sell. (To watch Simple Investment Ideas’ track record, click here)
Wall Street presents a mixed picture, with analysts split between 14 Buys, 14 Holds, and 8 Sells – making TSLA a consensus Hold (i.e. Neutral) rating. Its 12-month average price target of $309.00 has a downside in the high single-digits. (See TSLA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.