Forget EVs. Tesla Stock Is All About This.

Forget EVs. Tesla Stock Is All About This.

Morgan Stanley analyst Adam Jonas pointed out in a recent report that artificial-intelligence computing can improve self-driving technology at an accelerating rate. He values Tesla’s software and robotaxi business at roughly $161 a share, more than the $67 a share he values the car business at. (Jonas also has a per-share value for Tesla’s stationary power and other businesses.)

Jonas is a Tesla bull with a Buy rating, and a $310 price target. Guggenheim analyst Ronald Jewsikow is a bear, rating Tesla stock at Sell with a $126 price target.

Yet he agrees with Jonas that Tesla stock is changing into a bet on self-driving cars.

“Tesla is increasingly an investment underpinned by autonomy,” wrote Jewsikow in a Tuesday report. That’s “a challenging balancing act requiring investors to buy into a vision of the future with limited supporting evidence, while simultaneously ignoring the current light-vehicle business deterioration.”

His “deterioration” refers to falling sales. Tesla delivered about 387,000 vehicles in the first quarter, down almost 9% year over year. He expects Tesla to deliver 409,000 vehicles in the second quarter, down from 466,000 delivered in the second quarter of 2023. The consensus call for second-quarter deliveries is closer to 450,000 cars.

Amid falling sales, the prospects for self-driving cars loom larger. “Expectations will be high” for the Tesla robotaxi event, wrote Jewsikow. “We don’t have a lot of confidence in steady-state market structure or timing for robotaxis.” Tesla could be five years away, or even 10 years. But a five-year delay could cut today’s value of a robotaxi business in half, he adds.

Investors don’t know when self-driving cars will arrive or how they will be used. For now, bulls and bears are debating the issue.

Telsa investors are no strangers to debate and controversy. About 21% of analysts covering Tesla stock have Sell ratings, according to FactSet. The average Sell-rating ratio for stocks in the S&P 500 is about 7%. About 42% of analysts covering Tesla stock have Buy ratings. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The above-average Sell-rating ratio and below-average Buy-rating ratio are one illustration that Tesla is a controversial stock on the Street.

The average analyst price targe t for Tesla stock is about $183. The top target price is $310 while the bottom is $85; the $225 spread is almost 130% of the recent stock price. That’s a wide spread compared with Microsoft  stock, which stands at about 40% of the recent stock price.

Tesla stock was down 0.2% in midday trading Tuesday at $175.89, while the S&P 500 and Nasdaq Composite  were down 0.1%, and the Dow Jones Industrial Average  gained 0.1%.

Tesla shares have been stuck in a range since late April, when the shares had jumped after the company reported better-than-feared first-quarter earnings. The stock is now above its 10-week moving average, wrote Piper Sandler technical analyst Craig Johnson in a Tuesday report. That’s a good sign, he said, adding he could see shares trending toward $190 while investors wait for the June 13 annual meeting—where investors will vote on Elon Musk’s 2018 pay package.

The 2018 pay package, worth some $56 billion at the time of the award, was voided by a Delaware judge in January.

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