Tesla (NASDAQ:TSLA) has made big bets on far-reaching technologies and cutting-edge innovations, one of the central reasons the company has captured investors’ imaginations. Indeed, its lofty valuation multiples – far higher than those of traditional car manufacturers – hinge on these leaps of fancy.
CEO Elon Musk’s vision has guided TSLA throughout its journey. The world’s richest man, Trump’s BFF, and tech enthusiast has demonstrated remarkable skill in charting the EV manufacturer’s course, turning the company into one of the industry leaders.
However, not all of Musk’s choices have proven prescient. His political bet on Trump certainly paid off initially, though the political backlash has been swift and powerful – and is one reason the company share price is down some 40% year-to-date.
One investor, known by the pseudonym APAC Investment, believes that another one of Musk’s decisions – basing TSLA’s self-driving technology on camera-based sensors – will prove to be a true blind spot.
“Tesla’s reliance on camera-based sensors over LiDAR (“Light Detection and Ranging”) and radar raises concerns about its self-driving capabilities and future market position,” cautions the investor.
APAC highlights a troubling video in which a Tesla failed to distinguish a wall from an open road – an error that could’ve been avoided with LiDAR or radar as a backup.
“If Musk really wants to tap into the full potential, emphasizing redundancy and safety should be a priority. That makes embracing radar and LiDAR, in my opinion,” explains APAC.
And the stakes couldn’t be higher. Tesla currently trades at a price-to-earnings ratio that’s over 300% higher than the industry average. Without winning the self-driving race, maintaining that premium valuation could become an impossible task.
Additional headwinds of rising global trade barriers, deep-pocketed competitors, and the ever-present specter of Musk’s continued political activities are creating further potholes along the road to profits.
“With the market cap already so high and so many risks mounting, TSLA remains too expensive for my taste even after the recent declines,” concludes APAC, who rates TSLA shares a Sell. (To watch APAC Investment’s track record, click here)
Wall Street appears more divided on the EV giant. With 16 Buy, 11 Hold, and 12 Sell recommendations, TSLA holds a consensus Hold (i.e. Neutral) rating. Its 12-month average price target of $296.66 implies roughly 23% upside for the year to come. (See TSLA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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