At Tesla’s (TSLA) investors day event on Monday, lots of news came out of the automaker, most notably Elon Musk’s announcement that the company will produce level 5, fully-autonomous vehicles ready for Q2 of next year. If the promise holds, Tesla will be the first to deliver on what nearly all auto analysts see as the future of transportation, putting the company in a position to dominate for years to come. But, of course, Tesla has made plenty of promises in the past, to no avail. Further, challenges still remain for the company — including if customers actually want to buy Tesla cars.
However, Needham analyst Rajvindra Gill is not convinced, reiterating an Underperform (i.e. Sell) rating for the stock. (To watch Gill’s track record, click here)
The race to full self-driving cars has essentially reached a boiling point, with the biggest names in auto and tech vying to be the first to launch mainstream. Already for some years, Tesla has been incorporating some autonomous tech, but so far has been unable to deliver a fully-autonomous, level 5 car. While Musk is saying 2020 will be the year Tesla’s will be fully self-driving, Gill doesn’t necessarily see it that way.
While the analyst says Tesla’s Full Self-Driving computer “technology is compelling, both from a chip perspective and neural network capability,” he thinks “it’s a mistake to believe the company has a sizable lead in ADAS/autonomy.” Tesla is definitely among the leaders in autonomous tech, but isn’t alone. Gill says competitors offerings similar capabilities to Tesla, including lane merge, highway exit and AutoPilot, will “will reach the mass-market” in 2020.
Besides the technology, a major roadblock to Tesla’s (and other companies’) self-driving success is regulation. Even if the technology is 100% there, if governments are still years behind, self-driving cars will be forced to stay in the garage. Gill believes “government regulation could curb the deployment of self-driving vehicles and limit it under certain conditions (like weather or geo-static environments).” And as if working with the government wasn’t difficult enough, self-driving regulation will not come through only the federal government, but individual state governments, too. So while one state may be progressive in their regulation, a state next door may not.
All in all, while Tesla’s Q1 earnings are set for release this week, the big news around the company is self-driving cars. Many investors are looking at Tesla with the future in mind — if the company can see success in autonomous vehicles, early bets could pay of significantly. But at the time, many analysts aren’t convinced. TipRanks analysis of 26 analyst ratings shows a consensus Hold rating, with nine analysts recommending Buy, six suggesting Hold and 11 preaching Sell. There average price target among these analysts stand at $292.68, representing an 11% upside. (See TSLA’s price targets and analyst ratings on TipRanks)