Prickly billionaire Elon Musk is at a crossroads with Tesla (TSLA) — and investors are shouldering the outsized risk.
“I think we are in the transition phase, so it’s a very critical phase for Tesla at the moment,” Gradient Investments’ Lisa Schreiber said on Yahoo Finance’s Opening Bid (watch above).
On July 23, Tesla reported much weaker second quarter earnings compared to a year ago. During the earnings call, Musk cautioned about headwinds and shared that ride-hailing and autonomous features will be a key focus for the company going forward.
Shares fell directly after the earnings announcement and closed down 8.2% on Thursday.
Tesla remains an innovator, with robots and AI in its portfolio. Its EV business, however, is sharply declining as competition rises and backlash grows against Musk’s politics. The expiration of a $7,500 federal credit for EVs won’t help matters, either.
“When we look at valuation, investors do not know exactly how to value [Tesla]. Is it an EV maker? Is it more than that? The thing is, it’s not just an EV play anymore,” Schrieber said. “But it’s also not a robotaxi [and] robot company already. So we have struggles here.”
To Schrieber’s point, Tesla’s stock trades more like a hot tech player trying to take on juggernauts like Nvidia (NVDA). Shares trade at 161 times the estimated forward price to earnings. (Nvidia, with much stronger growth, trades around 55 times.) Ford (F), a pure-play automaker, trades at 9.6 times.
Meanwhile, some perceive Tesla as a company that isn’t sure what it wants to be when it grows up. The innovation around autonomous driving is noteworthy, but the waiting can make even the most patient investor antsy.
“Especially with Tesla, we have to be a little bit careful,” Schreiber said, noting that Musk has a history of huge promises but delayed launches.
The robotaxi, for instance, launched this past June in Austin, Texas. William Blair analysts Jed Dorsheimer and Mark Shooter, who rate Tesla’s stock at Market Perform, noted that rival company Google’s (GOOG) Waymo robotaxi “represents a six-year head start.”
“We think the training wheels will get taken off quickly and the pace at which robotaxi scales will surprise the upside,” the pair wrote. “Although maybe not to half of Americans by the end of the year.”
During Tesla’s earnings call, Musk also discussed humanoid robots, AI, and their integration into the vehicle fleet, calling the company’s cars “essentially a four-wheeled robot.”
