Elon Musk's "Robotaxi Pie" market is not buying it, Tesla's high valuation is on the verge of collapse

According to the Zhitong Finance APP, Tesla (TSLA.US), the global leader in electric vehicles, disappointed investors in the financial market last week with the launch of its unmanned autonomous driving Robotaxi. Elon Musk, who is known for boosting Tesla's valuation by painting rosy pictures for investors, surprisingly failed this time. The "Robotaxi pie" he painted did not receive full recognition from Wall Street and Tesla stock believers, leading some Wall Street investment institutions to question whether the stock's significant premium valuation can be sustained.

Looking at Tesla's recent stock price trend, Musk's long-standing promotion of Robotaxi failed to attract global capital favor, causing Tesla's stock price to continue to decline after the Robotaxi launch event. Since the introduction of this unmanned autonomous driving taxi, Tesla's stock price has dropped by 7.5% last week. Bernstein, a Wall Street investment institution, stated that Robotaxi leans towards a grand narrative, but seems to have no practical significance for Tesla's weak performance at the moment and its expensive valuation support.

The so-called Robotaxi seems more like a "dazzling promise," but this promise, or "long-term plan," is crucial for the continued rise of Tesla's stock price and maintaining its high valuation. Robotaxi is also an important part of Musk's vision for Tesla's future development, which is fully driven by artificial intelligence and humanoid robots. Musk has even shouted out seemingly crazy market value expectations at Tesla's shareholder meeting, predicting that with the combined power of fully autonomous driving technology and Optimus Prime humanoid robots, Tesla's market value will exceed $30 trillion.

Ark Investment Management, led by "Cathie Wood," recently updated its target price for Tesla. Ark predicts that Tesla's stock price could reach $2600 by 2029. The main logic behind Ark's strong bullish view on Tesla's stock price is that by 2029, nearly 90% of Tesla's market value and profits will be attributed to the Robotaxi unmanned taxi network built on an incredibly powerful AI supercomputing system.

However, the actual situation presented at the Robotaxi launch event seems unrealistic compared to Ark's aggressive expectations. Due to many questions from investors about the specific technical details of Robotaxi unmanned autonomous driving vehicles and the rough timeline of the "Robotaxi blueprint," such as the advantages of the updated FSD compared to autonomous driving competitors, FSD regulatory progress, and when Robotaxi will actually be launched, many market focus points remain unanswered.

Therefore, Tesla's expected P/E ratio of up to 75x seems too expensive for Wall Street traders, and compared to the overall high valuations of American tech giants, it also appears very expensive.

"This is still a carrot on a stick," said Steve Sosnick, Chief Strategist at Interactive Brokers. "When Tesla's core automotive business inevitably slows down, and the company does not show how it will achieve faster growth in the future, how many new investors will be willing to buy such an expensive stock?"

Outrageous Phenomenon: Tesla's Valuation Far Exceeds the Nasdaq 100 Index, Yet Significantly Underperforms the Index

Indeed, Tesla investors generally have high hopes for the success of its autonomous driving business and Robotaxi vehicles. Analyst Toni Sacconaghi from Bernstein estimates that Tesla's core electric vehicle business may be worth less than $200 billion, indicating that its current market value reflects a total value of around $600 billion for all other businesses (including Robotaxi and Optimus humanoid robots), which is evidently very high. More importantly, this part of the business exists more in the realm of virtual imagination rather than concrete operational results.

Since the notable Robotaxi event on October 10th, Tesla's stock price has dropped by 7.5%, but this has hardly weakened its excessively inflated valuation. Tesla remains the most expensive stock in the "Magnificent 7" of US tech giants, and despite its stock price underperforming almost all tech giants this year, its valuation has remained higher than theirs in the long term. Tesla's valuation is even higher than that of AI chip giant NVIDIA, whose market value has surpassed $3 trillion, far exceeding the modest valuations of traditional automotive manufacturing giants like General Motors and Ford.

Furthermore, Tesla's valuation is much higher than the Nasdaq 100 Index's 26x forward price-to-earnings ratio. What's even more outrageous is that Tesla's stock price has dropped by over 10% this year, while the Nasdaq 100 Index, which includes tech giants like NVIDIA, Apple, and Tesla, has surged by over 20%.

"When it comes to Tesla's valuation, my biggest concern is how strong Tesla's performance needs to be to justify this high P/E ratio of 75x," said Sosnick from Interactive Brokers. "The only feasible way is if you have a technology that fundamentally changes the world, like Tesla has done in the past, but the current valuation requires a much larger-scale technological leap."

Undoubtedly, last week's grand event failed to instill confidence in global investors about this significant leap forward. Meanwhile, the slowing global demand for electric vehicles and intensifying competition with numerous Chinese competitors are continuously affecting Tesla's sales and profits.

"The planning showcased in Tesla's Robotaxi event is indeed forward-looking, but lacks specific delivery expectations or new revenue-driving factors," wrote Sacconaghi from Bernstein in a report.

In the Robotaxi event, the company showcased a two-door unmanned self-driving taxi called Cybercab, a concept car, and an upgraded prototype of the Optimus humanoid robot, but lacked many key details that investors hoped to see. These include how Tesla will transition from selling advanced driver-assist features to fully autonomous driving vehicles, the regulatory pathways and processes for approval, timelines, and core evidence proving that its Robotaxi is far ahead of competitors like Alphabet Inc.'s Waymo There are other more serious issues. For example, Robotaxi self-driving taxis "may" not be put into production until 2026. Earlier this week, the media reported that some employees may have remotely controlled certain functions of Tesla's humanoid robot at an event.

Saknagi from Bernstein pointed out that Tesla is still far behind its competitors in terms of regulatory approval for autonomous driving technology. He expressed concerns that even though it may be the first electric vehicle company to achieve fully autonomous driving that frees human hands, competitors may quickly catch up with Tesla.

He wrote, "We believe that the Robotaxi event did not provide enough details to alleviate our concerns, and we believe that many investors may have the same concerns."

Bullish View: As long as Musk is alive, there is no reason to be bearish on Tesla

It is certain that there are still some Tesla bulls or Musk fans willing to give Tesla another chance, and this view is mainly based on their long-standing trust in Musk himself.

"First of all, Tesla is a tech company managed by Musk," said Nicholas Colas, co-founder of DataTrek Research. "As long as Musk is alive and continues to generate novel ideas and succeed in other innovative businesses, people will say, if this person can make rockets return precisely, of course he can solve all the problems related to autonomous driving."

Nevertheless, despite Tesla's stock price surging by 70% before the Robotaxi self-driving taxi event, Tesla's stock price still appears to face significant challenges.

The next key catalyst to watch is the third-quarter earnings to be announced next week, with Wall Street analysts generally expecting a 10% year-on-year decline in the company's profits, mainly due to soft demand for electric vehicles under long-term high interest rates by the Federal Reserve and intensified market competition in the electric vehicle industry.

"In the short term, what concerns us is any substantial soft data related to electric vehicle sales, which is still Tesla's 'bread and butter,'" said Brian Moynihan, portfolio manager at Zacks Investment Management