Tesla's Robotaxi Event: Expectations and Skepticism

Ahead of Tesla's (TSLA) highly anticipated robotaxi event on Thursday, October 10, Guggenheim Securities director of automotive equity research Ronald Jewsikow shares his insights and expectations as a Tesla bear. Jewsikow's analysis provides a thought-provoking perspective on the potential outcomes of the event and the challenges Tesla may face in its pursuit of autonomous driving technology.

Cautious Optimism: Tempering Expectations for Tesla's Robotaxi Showcase

Potential for a "Sell the News" Event

Jewsikow suggests that the robotaxi event may be more of a "sell the news" event, as investor expectations have been running high. He believes that the promises and products showcased at the event may not live up to the hype, and that a credible path to commercialization of robotaxis within the next 12 to 24 months is highly unlikely to emerge.

Jewsikow's skepticism stems from the significant technical and regulatory hurdles that Tesla must overcome to bring its autonomous driving technology to market. He argues that the company's current valuation, trading at around 100 times its next year's earnings and with little to no free cash flow, is difficult to justify without the successful deployment of a viable robotaxi service.

Concerns about Cannibalization of Existing Models

The Guggenheim analyst also raises concerns about Tesla's new models, such as the Cybertruck, potentially cannibalizing sales of its existing premium vehicles like the Model S and Model X. Jewsikow notes that the growth in Tesla's sales volumes for premium vehicles has been largely driven by this cannibalization, rather than capturing a larger share of the overall market.

This dynamic, he believes, makes it unlikely that Tesla will see a significant improvement in its gross margins in the next six to 12 months, as the company struggles to maintain profitability across its expanding product lineup.

Cautious Outlook on Tesla's Q3 Performance

Jewsikow's analysis also touches on Tesla's recent quarterly performance, noting that the company's US sales were down by around 5% in the third quarter compared to the second quarter. While the analyst acknowledges the strong growth in China during the same period, he remains cautious about the quality of this growth and its impact on Tesla's overall financial health.

The Guggenheim analyst suggests that investors should closely monitor Tesla's Q3 earnings report, particularly the gross margin line item, to gain a better understanding of the company's operational efficiency and the sustainability of its growth trajectory.

Fundamental Valuation Concerns

Ultimately, Jewsikow's view is that Tesla's stock is trading at a significant premium to its fundamental value, and that the company's success in the robotaxi market is crucial to justifying its current valuation. He believes that if the robotaxi event fails to deliver on the promised milestones, Tesla may be forced to refocus on its core business and its underlying financial performance, which could lead to a correction in the stock price.

The Guggenheim analyst's analysis provides a thought-provoking counterpoint to the widespread optimism surrounding Tesla's autonomous driving ambitions. As the company prepares to showcase its robotaxi technology, investors and industry observers will be closely watching to see if Tesla can overcome the skepticism and deliver on its ambitious promises.