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Analyzing Tesla’s Current Market Valuation

Tesla (TSLA) is making waves in the stock market, reminiscent of a cutting-edge AI powerhouse, primarily due to recent triumphs in the robotaxi sector. Despite this seeming success, a comprehensive evaluation reveals that Tesla’s fundamental business of manufacturing and selling electric vehicles (EVs) may only account for a small fraction of its soaring market capitalization.

Shifting Perspectives on Tesla’s Business

Jed Dorsheimer, the Group Head of Energy Research at William Blair, recently shared insights with Yahoo Finance’s "Opening Bid," emphasizing that Tesla is increasingly being perceived through the lenses of autonomy and energy, rather than just its automotive developments. This pivot in focus points toward a startling disconnect in the company’s valuation. Dorsheimer indicated that the automotive segment, as analyzed in various reports, contributes approximately $30 to $40 per share to Tesla’s overall worth, a stark contrast to the broader market perception that elevates the stock price.

Recent Stock Performance

Tesla’s shares have experienced a remarkable surge—over a 7% increase in just the last five trading days—reaching unprecedented high levels. In contrast, traditional market indices like the Dow (^DJI) and the S&P 500 (^GSPC) have shown a downward trend as investors digest labor statistics revealing a slight uptick in unemployment to 4.6%, marking the highest level since 2021.

Driverless Robotaxi Tests Fueling Optimism

The remarkable rally in Tesla’s stock has largely been fueled by reports of driverless robotaxi testing unfolding in Austin, Texas. There is a growing sentiment that Tesla is successfully transitioning from a struggling EV manufacturer to a prominent player in autonomous driving technology. According to Dorsheimer, the current stock price reflects almost solely a bet on innovations that are yet to materialize fully. He argues that the "transition" from traditional auto company metrics to evaluations based on robotics and artificial intelligence is already underway.

The Value of Autonomy

Dorsheimer’s analysis further reveals that autonomy now comprises more than 70% of Tesla’s overall value. This includes not only the much-anticipated Robotaxi platform but also the company’s humanoid robot project, Optimus, which has garnered both intrigue and skepticism due to its "spooky" attributes.

Rethinking Business Segments

Dorsheimer added that the energy segment is rapidly gaining parity or possibly surpassing the automotive business in terms of valuation. The "sum-of-the-parts" approach to valuation indicates that if one were to strip away the promising potential of self-driving software and the energy storage division, the remaining automotive business would be evaluated at an incredibly discounted rate compared to its current trading level.

Addressing Execution Concerns

However, skepticism continues to loom over Tesla’s future prospects, largely centered on execution risks. Although the stock price anticipates future gains, the company’s current revenue and profitability still heavily rely on the global EV market, which is currently facing growing competition and regulatory pressures.

Regulatory Challenges

This week, for instance, California regulators raised alarms regarding Tesla’s "autopilot" marketing claims, issuing a 90-day notice to clarify or eliminate potentially misleading language. This serves as a stark reminder that the road toward full autonomy is fraught with both legal and technical hurdles. For investors considering entry at nearly $480 per share, the margin for error is dangerously narrow. Should the rollout timeline for the robotaxi slip—something that has occurred multiple times before—the market may be prompted to reevaluate the foundational $30 per share automotive segment with significant scrutiny.

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