What?
Tesla may face more challenges following its highly anticipated "We, Robot" event. Instead of providing key business updates, the event showcased flashy prototypes like the Cybercab and Optimus robots. However, investors were disappointed by the lack of details on how Tesla plans to commercialize these autonomous vehicles. Critical information about the low-cost compact electric vehicle (often referred to as Model 2) was also missing. Furthermore, questions have arisen about Cybercab’s design flaws—such as its two-door layout, insufficient cargo space, and the absence of manual override controls, which may pose regulatory challenges.
These gaps in Tesla's strategic plans have left investors unsure about the company’s future growth and its ability to capitalize on these innovations. Following this, Tesla stock dropped over 8% on Friday, Oct 11, breaking through key technical levels, suggesting more trouble ahead as Tesla approaches its October earnings report
So What?
The implications of this disappointing event are considerable. Tesla's stock now faces a potential technical price floor around $180 to $200 as concerns about the company's future earnings and growth persist (see the 6-month chart below).
Investors were not convinced by Tesla’s new robotic ventures, especially since ride-sharing competitors like Uber and Lyft saw gains in stock value on the same day. Without concrete timelines or updates on lower-cost models, Tesla’s stock could face continued volatility
Investors were not convinced by Tesla’s cybercab ventures, particularly because companies like Uber are already partnering with autonomous vehicle leaders like Waymo and Cruise, which have more advanced technologies. While Tesla showcased its autonomous vehicle efforts, it is far behind in building a comprehensive ride-hailing marketplace akin to Uber’s. This explains why Uber’s stock surged, benefiting from its partnerships, while Tesla dropped 8% on Oct 11 (see the chart below). The market clearly sees Uber's partnership with Waymo and Cruise as a better play in the ride-sharing business with autonomous vehicles.
Now What?
For long-term investors, the upcoming earnings call on October 23 will be a critical moment. Tesla must provide detailed production plans for its budget vehicles to regain confidence. If these details are not forthcoming, expect a further drop in stock price. However, for patient investors, this could be an opportunity to buy Tesla at a lower valuation, assuming future technological developments align with revenue growth. Expect increased volatility in the short term, so it’s wise to stay cautious.
Conclusion
Tesla remains a highly innovative company, but it is increasingly dependent on delivering on its promises. The stock’s current struggles highlight the importance of substance over spectacle. Investors should closely monitor the company’s upcoming earnings report to determine whether Tesla can deliver the necessary growth drivers to justify its lofty valuation.
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