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Tesla (TSLA) stock jumped again on Wednesday, leading the market upwards following some positive inflation data. However, this only served to make the electric vehicle (EV) maker more expensive, with the stock now trading at 160x forward earnings. Despite being broadly supportive of Elon Musk’s business endeavors, I’m bearish on Tesla simply because the valuation is incredibly hard to justify and Musk’s plans hard to quantify.
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Tesla’s Plans Remain Ambitious
I’m bearish on Tesla, but not because it lacks ambition. Instead, I’d contend that Tesla’s objectives, which extend far beyond electric vehicles with autonomous driving and robotics at the forefront, are very ambitious.
To start with, the company’s progress in these areas has been slower than initially promised. While Tesla continues to tout its Full Self-Driving (FSD) capabilities, it remains at Level 2 autonomy, lagging behind competitors like Waymo and Cruise in achieving true autonomous driving.
Meanwhile, the company’s plans for Optimus robots and Tesla trucks on Mars seem even more far-fetched to some onlookers, bordering on science fiction rather than near-term reality. Some analysts have also suggested that the disconnect between Elon Musk’s bold promises and actual delivery timelines has become a recurring theme, potentially eroding confidence in the company’s ability to achieve its very ambitious goals. Moreover, Tesla’s near-term plans face increasing competition and regulatory scrutiny.
Autonomous Driving Technology Has Faced Criticism
The company’s autonomous driving technology has also faced criticism for its safety record and misleading marketing, while its robotics division remains largely conceptual despite a promise of rollout in 2025. And a traditional automakers and tech giants pour resources into electric vehicles and self-driving technology, Tesla’s first-mover advantage may be eroding.
With this in mind, the company’s ability to maintain its technological edge — especially the strength of its compute power — while scaling production and entering new markets is particularly important in determining whether it can live up to its ambitious plans and justify its lofty valuation.
Quantifying Tesla’s Goals Is Impossible
Secondly, my bearishness is further reinforced by the difficulty of trying to quantify Tesla’s objectives, which may be an exercise in futility, given the company’s penchant for pivoting into uncharted territories. ARK Invest’s ambitious $2,600 share price target for 2029 exemplifies the wide range of forecasts, with projections varying wildly among analysts.