Tesla stock plunges after Elon Musk's robotaxi event disappoints

Instead of adding momentum to the stock's recent rise, the robotaxi unveiling proved to be the “sell the news” event that some analysts had predicted as shares plunged over 7% on Friday morning. The stock is now down about 11% this year, while the S&P 500 has gained more than 22%. Tesla has already been pushed out of the so-called “Magnificent Seven” – America's seven largest technology companies by market capitalization – by emerging semiconductor and software giant Broadcom.

Even famous Tesla bulls like Dan Ives of Wedbush Securities said Musk and Tesla didn't provide enough details about how the company would implement its autonomous vision.

“This will of course be a knee-jerk reaction to stocks this morning,” he and his colleagues wrote in a note. “However, we strongly disagree with the idea that last night was a disappointment, as we would argue the opposite if we saw Cybercab with our own eyes and the massive improvements in Optimus that we interacted with throughout the evening. “

Musk hasn't shied away from the idea that he has staked the company's future on the successful deployment of autonomous vehicles. He and Tesla bulls agree that robotaxis could bring the company to a valuation of $5 trillion, compared to around $700 billion currently.

“Tesla believes it can overtake companies like Alphabet-owned Waymo, which is already on the road, because it has the vision to deliver a vehicle at a much cheaper price that is not limited to a geofenced area.” says Morningstar's Seth Goldstein, equity strategist at Morningstar and chairman of the company's electric vehicle committee, recently said: Assets.

Musk unveiled 20 vehicles on Thursday and said Tesla's “Cybercab” would be available for less than $30,000, compared with about $250,000 for a single Waymo vehicle. In addition to saying the Cybercab would be ready in 2027 – and admitting he was “somewhat optimistic” about timelines so far – Musk also didn't say where the vehicle would be manufactured.

The company surprised attendees by also unveiling a “robovan” that can carry up to 20 people, but no production date or price was given for the product.

“The Cybercab demos were conducted on a film set in a well-controlled environment.
and were very similar to a slow and short ride through an amusement park,” Wells Fargo analysts who attended the event wrote in a note Friday morning. “Waymo now hosts 100,000 rides per week in major cities, so we expected more from the TSLA demo.”

Tesla's autonomous vehicle strategy is based on the further development of its “Full Self-Driving Software” (FSD), which still requires human oversight.

Musk said some of Tesla's electric vehicles should have “unsupervised FSD” in Texas and California next year. However, many analysts emphasized that there were no short-term updates on the software's progress or data to demonstrate improvements.

Wells Fargo acknowledged that the biggest draw was the Optimus robots that walked around the event and served drinks, but added that the economics of that product remain unclear.

Any momentum Tesla stock had leading up to the event has now evaporated, and Tesla bears will likely continue to feel vindicated ahead of the company's earnings release on October 23rd. The stock plunged after the July earnings release, during which Musk largely neglected to address questions about deteriorating profitability and instead pondered the company's future.

This is a given for Tesla management, Goldstein explained.

“They tend to have a long-term view,” he said, “so if they have a few bad quarters, they don't care if the stock sells out.”

Musk's charisma and demeanor, as well as glamorous product presentations like Thursday's event, have helped Tesla build a loyal fan base of shareholders. At least in the short term, their loyalty will continue to be tested.