The Tesla "Robotaxi Checklist"
What to watch for Thursday ...
In the Oscar-nominated 2003 drama Seabiscuit, there’s a scene where trainer Tom Smith (actor Chris Cooper) tells owner Charles Howard (actor Jeff Bridges) that the racehorse was so beat up that it would take work to get back to its thoroughbred roots.
“Hell, he's so beat up it's hard to tell what [we have here],” the Chris Cooper/Tom Smith character told the horse’s owner. “I just can't help feeling they got him so screwed up running in circles he's forgotten what he was born to do. He just needs to learn how to be a horse again.”
I could make the same statement about Tesla Inc. TSLA 0.00%↑. Like Seabiscuit, Tesla has thoroughbred potential. Like Seabiscuit, Tesla is beat up. Like Seabiscuit, it’s hard to tell exactly what we have in Tesla right now.
And with its big “robotaxi” event slated for Thursday, now’s as good a time as any to ask: “Just what do we have in Tesla?”
I mean … think about it. You’re talking about a company with such contradictory storylines as:
It’s an electric vehicle leader — but EV sales are slowing, and questions about the costs, benefits and environmental impact are climbing.
It’s focusing on autonomous driving (“full self-driving,” or FSD, in company parlance) — though public acceptance and regulatory red tape remain big obstacles.
The company’s vaunted Cybertruck (which I personally think is super cool and has value as a “halo” to its product line — and even said so in a letter I sent to founder Elon Musk when the truck was unveiled), has polarizing styling, but has seen its initially disappointing sales gain traction.
Is helmed by an exec who is just as polarizing: Some see him as a brilliant innovator and a colorful generational thinker; but critics say he’s erratic, hyper-political and downright mercurial.
Not fully appreciated – if not downright misunderstood: Tesla isn’t just an EV company; it’s an energy company (thanks to its charging networks and battery factories); and it’s a data-analytics company, thanks to its investments in artificial intelligence (AI) and Dojo quantum-computing business.
I’ve super-simplified that, I know: In fact, there’s one more bit of context that’s actually a bit more complex than each of these, so we’ll come back to that in a moment.
But you get the general picture. And that lack of a cohesive view of Tesla … that lack of a “generally accepted view” among the big institutions – is “why Tesla’s Wall Street valuations are all over the place,” Barron’s Associate Editor Al Root wrote this week.
“Taking the low and high estimates together, Wall Street’s range for Tesla stock is somewhere between $140 billion and $1.5 trillion — or between roughly $45 and $470 a share,” Root said. “That range, frankly, isn’t helpful. But good to know what analysts are using in their Tesla models. Investors will have to decide what to pay on their own.”
Elegantly said, Al.
And timely …
THE ROBOTAXI CHECKLIST
At Monday’s close, Tesla was trading at $240 a share – more toward the top than the bottom of its 52-week range ($138.80 to $271). That’s pretty close to the midpoint (about $258) of that analyst “chasm” of $45 to $470.
Then there’s the robotaxi event – whose postponement back in July was seen as a blow to Musk’s “autonomy drive.”
So the stakes, here, will be high. And investors will want Tesla to deliver several key things, Barron’s Root says.
Let’s call it “The Robotaxi Launch Checklist.” And it contains five “must-do’s” for Tesla.
Keep it Real: The old jingle says that “Coke’s the real thing.” But at the Tesla event, folks will want to see the real thing … as in a physical robotaxi. The delay in July was attributed by some experts as “buying time” to develop physical prototypes. Well, seeing is believing. And investors will want to see it here.
“B” is for Business: Tesla will need to present, at the very least, a high-level overview of its “business model” – outlining the projected fleet size, its ramp-up schedule and its fee structure. Folks will want that specificity to counter the very real risk here. Said Root in an interview with Yahoo! Finance: “We’ve got millions of cars giving us data. We have billions of miles driven with full self-drive on. Yet [Tesla] has never done a single official autonomous cab ride. [Rival] Waymo has.”
What Time Do We Leave: As a follow-on to that, investors will want to know when the business launches.
Two Points for (a) Safety: While a “safety” is two points in the NFL, Tesla will score even more for delivering reams of data that make a strong “safety case” for the robotaxi — easing the minds of institutions, shareholders and potential customers.
And the “Upside Surprise:” Folks have heard me use this term in relation to a company’s earnings report that eclipses forecasts. Here I’m using the term as an “unexpected announcement” at the robotaxi event. Root says Tesla might dish on a low-cost EV called the “Model 2.” Or maybe update us on its $10,000 humanoid robot called “Optimus.”
Here’s where it gets interesting …
BREAKING IT DOWN
Once we have a better picture of the robotaxi event, we’ll be able to put some numbers on that venture — as well as the rest of Tesla.
One of the challenges is that – in addition to the competing bullish/bearish views on Tesla, its macro story and its leadership — analysts and other institutional players are struggling to get a real handle on the company’s individual ventures (and opportunities).
EVs aside, there are some pretty cool, futuristic wealth windows here.
The obvious ones … like self-driving cars.
Or “spinoffs” — like the electric Tesla Semi.
Then there are the less “obvious” opportunities — like AI and humanoid robots.
But handicapping those opportunities — and creating financial “models” that detail them — is a challenge.
When I’ve analyzed complex companies in the past, I’ve used such methods as the “breakup value” or the “sum-of-the-parts” (SOTP) method. But those were usually “going businesses.” Here you’re crystal-ball gazing — attempting to predict the future.
Investors are giving it a shot.
According to Yahoo’s interview with Barron’s Root, several other reports and some of our own research, here’s a rundown on some of of the Tesla units — starting with EVs.
EV Value: Here the estimates run from $40 billion to $660 billion — less than Ford Motor Co. F 0.00%↑ ($42 billion) at the bottom and more than Toyota Motor Co. TM 0.00%↑ ($235 billion) at the top.
Energy Storage: Yahoo said Tesla deployed 6.9 gigawatt-hours of battery storage in the third quarter — a year-over-year jump of 73% and enough to heat and light 700 U.S. homes for a year. Analysts are valuing that business from $50 billion to $150 billion, below GE Vernova GEV 0.00%↑ at the bottom and more than Southern Co. SO 0.00%↑ at the top.
Robotaxis: RBC Analyst Tom Narayan said that unit will generate $110 billion in sales by 2040 – giving it a value of $414 billion. ARK Invest, operated by Cathie Wood, says Tesla will reap $240 billion in robotaxi EBITDA by 2029 — giving the business a value of $4 trillion.
AI, Robotics and More: Deutsche Bank analyst Edison Yu assigned a $150 billion valuation on the AI businesses. That, and the other innovations, are tough to model since they’ll be weaving their way through all Tesla’s operations.
That’s what the so-called “smart money” is thinking.
Now it’s time to talk about what I think.
HOW TO WIN WITH TSLA SHARES
I said there was one more “bit of context.” And it’s time to circle back to that.
Musk has X/Twitter, SpaceX, Tesla, Tesla Energy, The Boring Co., xAI, Neuralink and probably a few more ventures in there. And they all work together – in the short-term and the long term in a way some experts refer to as sort of a Unified Field Theory.
Having spent time in Japan during my reporting years, I’d use a Japanese analogy – and refer to it as Elon Musk’s keiretsu. In Japan, a “keiretsu” is an interconnected family of companies, that operate for the good of themselves, the good of each other and the good of the group.
That’s essentially Musk’s management philosophy. And in the era of data creation, automation, AI and quantum computing, the digital “scale” his group of companies can achieve is a massive long-term competitive advantage.
And that’s the stumbling block that’s keeping analysts from really modeling Tesla.
I think you need to step back, essentially look Tesla in the eye, and see its potential.
It reminds me of another scene from that Seabiscuit flick when the narrator talked about Tom Smith’s first view of the great horse-to-be:
“The first time he saw Seabiscuit, the colt was walking through the fog at five in the morning. Smith would say later that the horse looked right through him. As if to say: ‘What the hell are you looking at? Who do you think you are?’ He was a small horse, barely 15 hands. He was hurting, too. There was a limp in his walk, a wheezing when he breathed. Smith didn't pay attention to that. He was looking the horse in the eye.”
Smith saw Seabiscuit’s potential.
And we see Tesla’s — in the long run.
But there’s lots of uncertainty – in the short run. Starting with the robotaxi event – which we’ll be watching.
Here’s how to play this if you’re comfortable with investing in Tesla.
Embrace the “Accumulate” strategy.
If you already own Tesla’s shares — keep that stake. If you don’t, start a small “foundational” position.
In both cases, look to keep building your stake over time — as you get more cash, or whenever the stock pulls back.
We’ll keep following this.
And I’ll see you next time.
