Tesla’s (TSLA) hyped robotaxi debut this past weekend is shedding light on one of the biggest issues facing the stock’s bulls.
The stock’s valuation may already reflect thousands of driverless Teslas in the US collecting under $10 a trip.
“There’s a lot of jazz hands going on here [with Tesla’s robotaxi launch],” Washington Crossing Advisors senior portfolio manager Chad Morganlander said on Yahoo Finance’s Opening Bid (watch above). “This stock trades at ten times revenue. You have a [stock] multiple that’s insane.”
Washington Crossing Advisors is wholly owned by boutique investment bank Stifel (SF). It has about $2 billion in assets under management.
Morganlander said he personally owns tech giant Alphabet (GOOG, GOOGL), which operates the more established Waymo autonomous taxi service. Waymo first launched its driverless taxis in Phoenix in 2018.
“Waymo has been proven, and it’s working in many cities,” Morganlander explained. “And we believe that this whole robotaxi idea that you’re going to let your car go out in the middle of the night and pick up drunk people just to make money is perhaps a little bit foolhardy. We would pick Alphabet instead.”
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To Morganlander’s point, there remains a large disconnect between Tesla’s valuation and its fundamentals. It extends beyond the stock’s revenue multiple, including its lofty forward price to earnings multiple of 178 times. The S&P 500 (^GSPC) trades at roughly 21 times.
This comes as consensus earnings per share (EPS) estimates for 2025, 2026, and 2027 have plunged 77%, 70%, and 71% for Tesla since October 2022, according to new research from JPMorgan auto analyst Ryan Brinkman.
You can study Tesla’s falling EPS for yourself on the Yahoo Finance platform.
Meanwhile, the EV tax credits that have supported demand for Tesla vehicles are likely going away soon under the Trump administration.
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These tax credits have been a driver of Tesla’s sales and profits. Brinkman estimates EV subsidies represent about 52% of Tesla’s current profits, which could be wiped out by Trump’s “big, beautiful bill.”
And lastly, in April Tesla reported top and bottom line misses for the first quarter due to waning EV demand and controversy surrounding CEO Elon Musk’s political activities.
“You look at that multiple and it’s hard to imagine them growing into that in any short period of time,” Innovator ETFs chief investment strategist Tim Urbanowicz said on Opening Bid. “As with anything that we’ve seen from Tesla, it always takes longer than Elon Musk thinks and investors think. So we have to be really conscious of that.”
