Investing in Tesla (NASDAQ:TSLA) stock requires a significant leap of faith. While every investment carries some amount of risk, Tesla’s futuristic ambitions are certainly not for those with weak stomachs (or more short-term horizons).
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
That leap has been tested this year. The road hasn’t exactly been smooth for the Elon Musk-led company, as dwindling sales in Q1 and Q2 dragged TSLA’s share price 20% lower. Yet, despite these near-term struggles, many investors remain captivated by the company’s grand vision of a driverless future.
Indeed, visions of robotaxis ferrying vast swaths of the population are enticing, particularly when one considers Tesla’s technology could power much of this massive fleet. The big question, however, is whether this future is truly realistic, at least in terms of a timeframe that is relevant for most everyday investors.
Seeking answers, William Blair’s top analyst, Jed Dorsheimer, recently traveled to Austin to experience Tesla’s robotaxi service firsthand – and he came away highly impressed.
“Wow,” exclaimed the 5-star analyst, who ranks in the top 3% of Wall Street stock pros. “We experienced a glimpse of the future, and it is exciting.”
Dorsheimer praised the rides as “smooth,” “discerning,” “confident,” and “patient.” For him, the comparison was especially striking after test rides in Alphabet’s Waymo, which, in his view, “felt more … robotic.” The implication was clear – Tesla’s user experience could prove a key differentiator in this nascent market.
Beyond performance, Tesla appears intent on competing on service and cost, charging about half the price of Uber rides and leveraging technology that Dorsheimer believes will scale more cheaply than rivals. His projections suggest Tesla could command ~35% of a $1.4 trillion market by 2040.
Even so, Dorsheimer tempers his optimism with caution. Near-term pressures loom, including the elimination of the $7,500 EV consumer tax credit and the loss of CAFE fines – a mechanism that allowed Tesla to book $2.8 billion in regulatory credit revenue last year, about 16% of gross profit.
Valuation is another sticking point. With TSLA trading at nearly 100x his 2026 EBITDA estimates – versus 20x–25x for sector peers – Dorsheimer expects multiple contraction ahead.
“Despite our enthusiasm for robotaxi, we acknowledge there is a period of margin headwinds to endure from pending regulatory cuts as part of the OBBB,” the analyst summed up, assigning TSLA a Market Perform (i.e., Neutral) rating. (To watch Dorsheimer’s track record, click here)
Wall Street more broadly paints a similarly restrained picture. With 14 Buys, 15 Holds, and 8 Sells, Tesla carries a consensus Hold rating. Its 12-month average price target of $307.23 suggests shares have a 10% downside from current levels. (See TSLA stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.