Tesla Stock Falls After Lackluster Robotaxi Event: Time to Buy the Drop?

Tesla (TSLA -0.09%) hosted an event called “We, Robot” last week to introduce its prototype autonomous vehicles and humanoid robots. Investors were disappointed. Tesla shares have fallen 10% in the last five trading days (as of this writing) as Wall Street becomes increasingly skeptical about how important the Cybercab and Tesla Optimus bots will be to the company’s bottom line in the foreseeable future.

As usual, this event came with a lot of fanfare, drama and promises from Tesla CEO Elon Musk. Will the company make good on its statement? And should you buy if the stock drops? It’s time to analyze the potential of these new products and see if they can add trillions of dollars to Tesla’s market cap, as Musk predicted.

More promises from Musk

Tesla has been working on self-driving vehicle technology for more than a decade. Musk has repeatedly promised that the company is close to integrating fully autonomous driving software into Tesla vehicles, usually within a few years. Most famous – or perhaps infamous – was his statement in 2019 that there would be a million “robotaxis” on the road by the end of 2020. However, that didn’t happen.

Last week I had a similar feeling. Musk arrived at the event in what Tesla called a Cybercab, a futuristic-looking taxi with doors that open vertically. They also presented a prototype for a self-driving transporter in the same style. According to the company, the Cybercab is expected to enter production in 2026, but no timeline was given for the van. Tesla wants to attack these vehicles and the associated self-driving software AboveTesla’s business allows owners and/or Tesla itself to use this fleet of vehicles to operate a ride-sharing network without human drivers. If successful, there is the potential to radically reduce the cost of taxi rides.

In addition to robotic vehicles, Tesla has gone to great lengths to highlight its research on the Tesla Optimus Bot, a robot that looks like a human. Tesla claims that the robot can complete any task you ask of it. In typical Musk fashion, he was optimistic about how much value the company could bring to Tesla, predicting that the Optimus product line alone would add more than $25 trillion to its market cap. It is unclear what analysis led him to this conclusion.

The practicality remains to be seen

When it comes to robotics, Tesla throws around a lot of numbers: millions of robotaxis; Trillions of dollars in market value. A lot of bark also comes from the company. However, these days there isn’t much bite in the form of real products sold to customers.

If I were a Tesla investor, I would be worried that this is just another event with product announcements being delayed at some point. Tesla appears to be betting its future on artificial intelligence (AI), robotics and autonomous vehicles. However, only prototypes have been built so far. Current fully self-driving software is somewhat misleading in that it still relies on humans operating the vehicle. Unlike Waymo, which has licenses to operate a fleet of real robotaxis in cities across the United States, Tesla’s self-driving network is currently nothing more than an idea.

There are also likely to be concerns about the Optimus bot prototype. In the days following the incident, it emerged that the bots were being remotely controlled by humans when interacting with guests. This isn’t quite close to the autonomous robot Musk promised; It also misleads investors and the company’s largest customers.

TSLA Operating Income (TTM) data from YCharts

Should you buy Tesla for robotaxis and humanoid bots?

Tesla shares have performed phenomenally over the long term. It’s also 47% below the all-time high set at the end of 2021. Given all the hype surrounding these AI and robotics products – not to mention the huge electric vehicle (EV) and battery storage sectors – you might think that it would be wise to watch the decline Tesla stock to buy after its recent decline.

I think this is a misguided way of thinking based on promises that have yet to be fulfilled. Given the information about the Robotaxis and the Optimus Bot at the event, it is very likely that these products will not be significant to Tesla’s business for at least the next five years, if at all. This leaves investors with the current business with electric vehicles and battery storage.

There is probably not much optimism in these segments either. Due to the huge increase in electric vehicle supply and shrinking profit margins, Tesla’s operating profit and free cash flow have declined sharply in recent quarters. Over the last 12 months, the company generated just $1.7 billion in free cash flow. That’s a paltry number compared to its market cap of $686 billion.

Tesla stock appeared to be overvalued before this “Us, Robots” event. Since new products will only be available in a few years and the technology is not yet proven, it is still overvalued even after this event.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Uber Technologies. The Motley Fool has a disclosure policy.