Tesla Analysts Are Skeptical of Bold Autonomy Plans Ahead of Results

(Bloomberg) -- Tesla Inc. and its Chief Executive Elon Musk made some bold claims at the company’s investor day on Monday, but Wall Street analysts are far from convinced.

Musk said Tesla is now making the best self-driving chip in the world, speaking during a discussion that largely focused on the electric vehicle maker’s plan for autonomous vehicle technology. He noted the company would have self-driving cars on the road next year -- without any humans inside -- operating in a so-called robo-taxi fleet. The CEO also asserted Tesla will be producing 10,000 Model S, X and 3s per week by the end of the year.

Some aren’t convinced.

“We see a significant amount of technology and execution risk in the shift in strategy from competing in just electrification, to Tesla also beating Nvidia in hardware, Google in software, and building a better ride-hailing service than current ride hailing leaders,” Cowen analyst Jeffrey Osborne wrote in a note to clients. The test drive offered by Tesla after the event was “much less impressive than rides we experienced at Consumer Electronics Show over the past two years,” the analyst added.

The company’s decision to host the event right before its first-quarter earnings report on Wednesday also led some to view it as an effort to hide weak results and outlook, and instead direct investors focus to Tesla’s strategic value.

“We believe the autonomous day was meant to help the stock market focus on the multiple rather than the earnings,” Morgan Stanley analyst Adam Jonas wrote in a note, adding that the “tone of the event seemed as much geared to a venture capital audience as it was to a public market equity audience.”

“With now two attempts at investor redirection in front of first-quarter earnings (first was Model Y), we expect a weak second-quarter unit guide,” Roth Capital analyst Craig Irwin said.

This has been a lackluster year for Tesla shares, which have dropped 21 percent, while the broader S&P 500 Index has risen 16 percent. The reasons were many -- underwhelming delivery numbers, multiple job cuts, lowered price for the vehicles, the phase out of a federal tax incentive and the expansion into China and Europe -- but the biggest concern weighing on Tesla’s valuation was about demand. Tesla shares pared a drop of as much as 2.7 percent on Tuesday in New York.

To contact the reporter on this story: Esha Dey in New York at edey@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Steven Fromm, Felice Maranz

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