Key Morningstar Metrics for Tesla
- Fair Value Estimate: $250
- Morningstar Rating: ★★
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: Very High
Tesla Stock Update
Tesla TSLA received approval to begin testing its robotaxi, an autonomous driving ride-hailing service, in the US state of Nevada. Following the news, Tesla shares closed more than 7% higher in US trading on Friday.
Why it matters: Nevada is the third state where Tesla will be testing its robotaxi service, following current testing in Texas and California. The expansion to a new market signals that the current testing is progressing.
- Tesla’s rapid testing expansion would allow the company to quickly offer robotaxis in multiple cities when the software develops to the point where Tesla can move from testing to a full product.
- A market entrance in multiple cities supports our view that robotaxis will quickly expand and gain market share. We think Tesla will eventually capture 30% of the US and Canada ride-hailing market by 2035.
The bottom line: For now, we maintain our $250 fair value estimate for narrow-moat Tesla. We view Tesla shares as significantly overvalued, with the stock trading nearly 60% above our fair value estimate and in 2-star territory. In our view, Tesla’s robotaxi business is nearly priced for perfection.
- We continue to forecast Tesla’s full robotaxi service to launch in 2028, two years behind management’s guidance for a 2026 launch. We define a full launch as a robotaxi with no Tesla employees on board and no geofencing. Currently, robotaxis in testing have both.
Coming up: Early next month, Tesla will report third-quarter deliveries. We think that deliveries will be down from the third quarter of 2024, by a low-to mid-single-digit percentage, better than the 13% decline in the first half of the year.
- In the third quarter, Tesla should benefit from the US electric vehicle tax credit, which expires at the end of the quarter. This should pull forward some demand from consumers who are considering buying an EV and want to take advantage of the tax credit.
