TESLA: Fundamental Analysis + NEXT Target
Updated
According to reports, Tesla is about to recall more than 350,000 vehicles equipped with driver assistance software due to government concerns that the system could cause accidents.
At first glance, the solution appears straightforward. However, it involves software that Musk described as "vital" to the company's survival last year. Of course, it could raise more questions about Tesla's autopilot systems.
Investors have no reason to sell TSLA stock as a result of this news. However, this is something that will need to be closely monitored in the coming months.
The National Highway Traffic Safety Administration (NHTSA) issued a recall notice yesterday, stating that Tesla's self-driving software package "may allow the vehicle to behave unsafely at intersections," adding that the system "may not respond sufficiently to changes in posted speed limits or inadequately account for driver adjustments to speed the vehicle to exceed posted speed limits."
In response, Tesla is voluntarily recalling the vehicles and intends to resolve the issue via an over-the-air (OTA) firmware update. The Model S, Model X, Model 3, and Model Y equipped with the Full-Self-Driving beta are affected by the recall.
Despite the name "Full Self-Driving," it does not make a Tesla car fully autonomous, and the company has long faced questions about the system's marketing and how owners use it. The software has proven to be a profitable addition for Tesla: the option currently costs $15,000, or $199 per month in the United States.
Tesla made no response to the NHTSA notice. Tesla has specified 18 warranty claims that are likely to be related to the circumstances described by NHTSA, and the company is not aware of any injuries or deaths related to those conditions, according to the notice.
Surprisingly, Tesla stock barely reacted to the announcement, possibly due to the recall notice's relatively simple solution. Tesla, like many other automakers, conducts recalls to address a variety of issues.
However, this does not mean that investors can rest easy and ignore the situation. Autopilot or Full Self-Driving technology is a key component of Tesla's case and the primary reason the company's valuation outperforms the rest of the industry. Musk stated in a 2022 interview that addressing full autonomous driving was "extremely important" for the company, stating that "it's really the difference between whether Tesla is worth a lot of money or not worth anything."
The NHTSA said in a statement that it would continue to monitor the recall to ensure that Tesla's measures were effective, and that a broader investigation into Tesla's software systems remained open and active. Government officials expressed concern that the technology would force drivers to be less cautious than is necessary to ensure their safety.
There's also a chance that Tesla will have to invest in new equipment to address the government's concerns, which could mean a refund or a costly upgrade for hundreds of thousands of cars already on the road whose owners have purchased the service. Some of the recall conditions, such as requiring Autopilot to limit the speed of Tesla vehicles to a predetermined limit, may make Autopilot less appealing to consumers.
Nothing in this news suggests that Tesla is nearing the end of its life cycle. However, for the stock to reach the potential that some believe it has, the company must survive this period of government scrutiny. Cathie Wood of Ark Invest predicted in 2022 that Tesla stock could be worth $4,600 per share - more than 20 times its current price - by 2026, assuming robot cabs are in service by then.
Even in Ark's worst-case scenario, in which Tesla's stock price is set at $2,900, autonomous revenue is expected to be around $50 billion by 2026.
As the government takes action, Tesla is likely to spend more time tweaking existing systems and less time developing new ones, reducing the company's chances of meeting Ark's 2026 goal. As a result, Tesla's other initiatives, such as its cyber truck, are even more important for growth.
Tesla investors do not need to get out of the way, but they should exercise caution given the challenges that lie ahead.
At first glance, the solution appears straightforward. However, it involves software that Musk described as "vital" to the company's survival last year. Of course, it could raise more questions about Tesla's autopilot systems.
Investors have no reason to sell TSLA stock as a result of this news. However, this is something that will need to be closely monitored in the coming months.
The National Highway Traffic Safety Administration (NHTSA) issued a recall notice yesterday, stating that Tesla's self-driving software package "may allow the vehicle to behave unsafely at intersections," adding that the system "may not respond sufficiently to changes in posted speed limits or inadequately account for driver adjustments to speed the vehicle to exceed posted speed limits."
In response, Tesla is voluntarily recalling the vehicles and intends to resolve the issue via an over-the-air (OTA) firmware update. The Model S, Model X, Model 3, and Model Y equipped with the Full-Self-Driving beta are affected by the recall.
Despite the name "Full Self-Driving," it does not make a Tesla car fully autonomous, and the company has long faced questions about the system's marketing and how owners use it. The software has proven to be a profitable addition for Tesla: the option currently costs $15,000, or $199 per month in the United States.
Tesla made no response to the NHTSA notice. Tesla has specified 18 warranty claims that are likely to be related to the circumstances described by NHTSA, and the company is not aware of any injuries or deaths related to those conditions, according to the notice.
Surprisingly, Tesla stock barely reacted to the announcement, possibly due to the recall notice's relatively simple solution. Tesla, like many other automakers, conducts recalls to address a variety of issues.
However, this does not mean that investors can rest easy and ignore the situation. Autopilot or Full Self-Driving technology is a key component of Tesla's case and the primary reason the company's valuation outperforms the rest of the industry. Musk stated in a 2022 interview that addressing full autonomous driving was "extremely important" for the company, stating that "it's really the difference between whether Tesla is worth a lot of money or not worth anything."
The NHTSA said in a statement that it would continue to monitor the recall to ensure that Tesla's measures were effective, and that a broader investigation into Tesla's software systems remained open and active. Government officials expressed concern that the technology would force drivers to be less cautious than is necessary to ensure their safety.
There's also a chance that Tesla will have to invest in new equipment to address the government's concerns, which could mean a refund or a costly upgrade for hundreds of thousands of cars already on the road whose owners have purchased the service. Some of the recall conditions, such as requiring Autopilot to limit the speed of Tesla vehicles to a predetermined limit, may make Autopilot less appealing to consumers.
Nothing in this news suggests that Tesla is nearing the end of its life cycle. However, for the stock to reach the potential that some believe it has, the company must survive this period of government scrutiny. Cathie Wood of Ark Invest predicted in 2022 that Tesla stock could be worth $4,600 per share - more than 20 times its current price - by 2026, assuming robot cabs are in service by then.
Even in Ark's worst-case scenario, in which Tesla's stock price is set at $2,900, autonomous revenue is expected to be around $50 billion by 2026.
As the government takes action, Tesla is likely to spend more time tweaking existing systems and less time developing new ones, reducing the company's chances of meeting Ark's 2026 goal. As a result, Tesla's other initiatives, such as its cyber truck, are even more important for growth.
Tesla investors do not need to get out of the way, but they should exercise caution given the challenges that lie ahead.
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