Tesla (NASDAQ: TSLA) is expected to unveil its highly anticipated Cybercab robotaxi at an event on Oct. 10. It’s a big deal for investors, especially given the stock’s weak performance since peaking in 2021. They are eager to hear what’s next from Tesla’s visionary leader Elon Musk.
The specific plans regarding the new line of vehicles are still a mystery, but it’s clear that it will take a while before Tesla generates significant revenue from a robotaxi service, especially when you factor in the regulatory hurdles it has yet to overcome. Uncertainties like this can create some well-justified hesitation.
But there are at least three reasons I would buy Tesla stock before the announcement.
1. Tesla investors are likely to be impressed with what is announced
The stock market has a history of rewarding companies with exciting growth opportunities. Apple‘s unveiling of Apple Intelligence in June is a good example. Despite reports of apparent weak recent iPhone demand, the company’s share price is up 18% since that announcement.
Tesla stock is likely to experience a similar boost after Oct. 10, especially given its weak performance over the last two years.
Investors will need to walk away from the event impressed. Given Musk‘s history of expressing great optimism when talking about Tesla’s future, they probably won’t be disappointed. He suggested in a recent post on X that the robotaxi event will be the company’s most significant moment since the unveiling of the Model 3.
What happened after the Model 3? Tesla’s revenue and share price soared over the following six years. It was a game changer for its auto business, and a robotaxi service presents another step change in the company’s growth trajectory.
2. Tesla will be a major player in robotaxis
Tesla will be going after a big market. Uber Technologies alone generates $40 billion in annual revenue primarily from fees paid by drivers and merchants who use the service. Tesla will leverage its growing fleet of vehicles to set up a similar business model.
Cathie Wood’s ARK Invest expects that nearly all of Tesla’s profits will eventually come from a robotaxi service. Unlike human-operated ride services, Musk said on the second-quarter earnings call, the robotaxi service will operate 24/7. “You just literally open the Tesla app and summon a car,” he said. It sounds ambitious, but that is why investors could come away from the event impressed.
The obstacle for Tesla will be gaining regulatory approval, which will hinge on the safety of its autonomous driving capabilities. On that note, Tesla has gotten mostly favorable reviews for version 12.5 of its full self-driving (FSD) system. While it’s not perfect, videos on X show Tesla vehicles navigating traffic with humanlike ease.
Tesla says it has accumulated over 300 billion miles with its FSD system. The company is making great progress on its self-driving capabilities, and it is potentially becoming a competitive advantage. The opportunity is enormous, with Statista projecting the global autonomous vehicle market to reach $2.2 trillion by 2030.
3. Tesla stock could soar in 2025
The stock is a buy even without a robotaxi service. Vehicle deliveries grew 15% sequentially in the second quarter. With interest rates expected to come down over the next two years and financing expected to be more affordable, Tesla should see increased demand in 2025.
Moreover, the company plans to launch a more affordable model in the first half of next year. That should generate better sales, and analysts currently expect Tesla’s revenue to be up 16% next year.
The stock trades at a price-to-sales ratio (P/S) of 9, which is in line with its 10-year average. Assuming it continues to trade around the current P/S multiple, Tesla stock will move higher as revenue growth returns.
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John Ballard has positions in Tesla. The Motley Fool has positions in and recommends Apple, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.
Should You Buy Tesla Stock Before Oct. 10? was originally published by The Motley Fool
