Key Morningstar Metrics for Tesla
- : $450
- : ★★★
-
Morningstar Economic Moat Rating
: Narrow
-
Morningstar Uncertainty Rating
: Very High
Tesla TSLA held its Cybercab launch event in Austin, Texas.
Why it matters: The event was largely limited to a small number of Tesla employees and social media influencers. There was a short presentation from Tesla management, but CEO Elon Musk did not speak.
- We think the market is reacting to the event not featuring management guidance, such as the timeline for Cybercab production or target costs to produce the vehicle. As Tesla shares were up 5% on Sept. 3 heading into the evening event, some of the selloff may be due to profit taking.
- In our view, the Cybercab launch was meant to be the official addition of the fully autonomous vehicle to Tesla’s ride-hailing fleet. The vehicle has two seats but no steering wheel or pedals, with only a button to allow a passenger to stop the vehicle.
The bottom line: We maintain our $450 per share fair value estimate for narrow-moat Tesla. At current prices, we view Tesla shares as slightly undervalued, with the stock trading nearly 20% below our fair value estimate but in 3-star territory.
- Tesla management said the Cybercab will allow Tesla to offer ride-hailing customers a lower price versus current ride-hailing providers. This is in line with our view that Tesla’s robotaxi service will ultimately be about 25% cheaper than human-driven ride-hailing services.
- Following the event, Tesla’s website featured a page that allows a fleet operator to sign up to purchase a fleet of Cybercabs in the future. This signals Tesla’s long-term strategy to pivot to an asset-light model where it sells then operates the vehicles. This should maximize free cash flow.
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The author or authors do not own shares in any securities mentioned in this article.
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