I can’t get enough of this Tesla (TSLA) fall from grace story!
So, I am back (see 6:00 a.m. post below) with a new piece of research that just came my way on Tesla from Deutsche Bank auto analyst Emmanuel Rosner. I loved this title on his Tesla section: “Clarity Needed on Future Direction of the Company.”
Perfectly said, and most others on the Street would agree.
Here’s what Rosner says, which goes a long way in explaining why Tesla’s stock has gotten run over:
“Perhaps most importantly, we view recent sequence of Tesla news as potentially thesis-changing for investors. With still many questions unanswered, it may be too early to tell if it is particularly bearish, or just neutral. As of now, it is unclear if a drivable version of Model 2 is still coming and if so when; how far along is robotaxi in its development and what a realistic timeline for deployment is in light of considerable technology and regulatory hurdles ahead. We expect Tesla to have to comment on these on its upcoming earnings call. Unfortunately, if Tesla were to confirm that its renewed robotaxi focus comes at the expense of Model 2, we believe this would introduce considerably higher risk profile for the stock, and remove a key reason many shareholders currently own the stock. More critically, this change in strategy would also make any upside from here tied to Tesla cracking the code on full driverless autonomy, which represents a significant technological and regulatory challenge.
All in, we await clarity from Tesla on any change in strategy. If Robotaxi is being accelerated with no focus or timeline change for Model 2, this may be perceived as a positive signal of Tesla’s confidence in its autonomous technology and could potentially be accretive to out year estimates. If, however, Model 2 is being pushed out or canceled, we would view it as completely thesis-changing, as we worry about Tesla’s new execution risk profile, see considerable downside risk to 2026+ earnings estimates, and believe the stock would need to undergo a potentially painful shift in ownership base, with investors focused on Tesla’s EV volume domination and cost advantage potentially throwing in the towel, and eventually replaced by AI/tech investors with considerably longer time horizons.