Tesla's Bet on Robotics Business: The Dual Dilemma of Sales Stagnation and Valuation Bubble

Tesla is trying to pin its future on the robotics business, striving to compensate for the pressure brought by its current sluggish sales and high valuation.

Earlier this month, Musk claimed on his social platform X that about "80% of Tesla's value will come from Optimus." However, the reality is that the market expects Tesla's earnings to decline by nearly 30% in 2025, and its Robotaxi business is still years away from profitability, facing fierce competition from rivals like Waymo, a subsidiary of Alphabet.

Currently, Tesla's stock price is about 155 times its expected earnings for the next 12 months, making it the highest-valued stock among the "Tech Seven." However, the company's stock price has fallen more than 2% this year, ranking at the bottom of the S&P 500 index.

For investors, Musk's latest "robot story" is yet another lifeline thrown out to support its high valuation amid the company's growth engine stalling. As the company's strategic focus shifts between electric vehicles, autonomous driving, and robotics, Tesla is betting on its CEO's ability to paint a sci-fi future to maintain investor confidence.

The Contradiction of High Valuation and Stagnant Growth

Tesla is currently facing a core contradiction: its valuation level resembles that of a high-growth company, yet its revenue growth has stagnated over the past two years.

Data shows that Tesla's forward P/E ratio of about 155 has essentially returned to the levels seen during the tech stock frenzy of 2021, when optimistic sentiment about electric vehicles becoming mainstream first pushed the company's market value above the trillion-dollar mark. This valuation not only leads among the "Tech Seven"—with the second-highest valuation, Nvidia, having a forward P/E ratio of only 31—but also ranks higher than all U.S. listed companies with a market capitalization exceeding $100 billion, with only Palantir Technologies Inc. having a higher P/E ratio.

Dmitry Shlyapnikov, an analyst at Horizon Investments, pointed out, "Tesla's pricing is like that of a growth company, but there has been almost no meaningful revenue growth over the past two years." Meanwhile, Tesla's performance has been dragged down by a slowdown in industry-wide electric vehicle demand, a trend that began in 2023 and is expected to worsen in 2024. The global slowdown in auto sales and concerns over stricter auto tariffs have collectively hit the company's stock price, which has fallen about 25% from its peak in mid-December last year.

From Electric Vehicles to Robotics: A Shifting Growth Narrative

From the investors' perspective, they are experiencing Musk's constantly changing narrative of the company's growth.

Tesla's initial bet was to dominate the global electric vehicle market, and it once achieved success. However, in April 2024, Musk changed the focus, declaring that autonomous vehicles would become the company's main focus, a move that once propelled the stock price to soar Subsequently, Musk fully supported Trump in the 2024 election. After Trump's victory, the market hoped that Musk's close relationship with the new government could clear obstacles for Tesla's autonomous driving, leading to another surge in stock prices.

As of today, Musk is no longer involved with the Trump administration, and Tesla's autonomous driving project is progressing slowly. The Robotaxi service launched in Austin faced troubles on its first day, and its ride-hailing service in California is not fully autonomous. Although Tesla was approved to begin testing autonomous vehicles in Nevada this Thursday, market confidence in its ability to dominate the field is waning.

Steve Sosnick, Chief Strategist at Interactive Brokers, stated:

"The promised revolution of autonomous taxis seems insufficient, so the shift to humanoid robots is another attempt to realize this sci-fi future."

Betting on Optimus: The Future is Still Unknown?

To provide investors with a new growth story, Musk is betting on the Optimus robot. Dmitry Shlyapnikov believes:

"Musk needs to provide investors with a different growth story, and Optimus is the answer."

This also explains why Musk's unprecedented $1 trillion compensation package is closely tied to the Optimus project.

However, the market's acceptance of this new story remains uncertain. Thomas Thornton, founder of the hedge fund Hedge Fund Telemetry, expressed skepticism:

"At this stage, you can label the robot with any valuation. But the market has not done any research on robots. What companies are out there? How is their technology? How much can they earn? Is there really a demand for personal robots?"

Whether Musk's renewed focus on Optimus can rescue the stock price from its slump remains to be seen. Notably, Tesla's technology itself also has issues, such as its embedded door handles and electrical systems, which could become fatal flaws in crash incidents, making it difficult for passengers to escape from a burning vehicle.

Investing in Tesla: Betting on Musk Himself

Ultimately, for many investors, Tesla's value goes far beyond electric vehicle sales or financial report numbers. It is essentially a bet on Musk's own abilities, believing that he can continue to create value as transportation and technology evolve.

As Steve Sosnick said:

"Tesla's valuation has never been entirely about being a car company, but more about betting on Musk's ability to turn sci-fi futures into reality."

Shlyapnikov from Horizon Investments expressed a similar view:

"If you truly believe Elon Musk is a genius who will change the world through his inventions, then there are no other stocks to buy." He concluded, "Investing in Tesla is the only way to add 'Elon exposure' to a public portfolio." Risk Warning and Disclaimer

The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk