Tesla Shares Plunge After Delaying Robotaxi Launch and UBS Downgrade

Tesla's (NASDAQ:TSLA) shares dropped over 8% on Thursday after Bloomberg reported a two-month delay in unveiling its Robotaxi. Originally set for August 8, the launch is now postponed to October to give development teams more time to finalize prototypes.

The decline continued in Friday's premarket, with shares falling an additional 2% following a downgrade from UBS, which moved Tesla from Neutral to Sell. UBS analysts noted that while Tesla is more than an auto company with positive developments supporting it, expectations for its core auto business are deteriorating.

UBS highlighted that Tesla's stock often carries a premium due to future growth initiatives, especially with current AI enthusiasm. They estimated that future growth accounts for over $500 billion of Tesla's current valuation, suggesting a future value of $1 trillion to justify current stock levels. To warrant a Buy rating, an even larger growth opportunity would be needed.

The analysts also pointed out that while Tesla's investment in AI is significant and progressing, it is costly, the improvement pace might slow, and the payoff is long-term. If market enthusiasm for AI wanes, Tesla's valuation could be affected.

Tesla's stock had rallied for 11 days following a stronger-than-expected second-quarter deliveries report, recovering its year-to-date losses. However, the recent decline has pushed the shares back into negative territory for 2024. The company has faced a challenging year with widespread layoffs and declining sales, attributed to an aging EV lineup and increased competition in China.