RBC Capital maintained a positive position on Tesla Inc (NASDAQ:) on Monday, reiterating an Outperform rating and a $293.00 price target.
The investment firm highlighted the potential importance of Tesla’s Full Self-Driving (FSD) technology spreading in China, highlighting the opportunity for the company to charge subscription fees for a large fleet of vehicles equipped with this advanced system.
RBC Capital has highlighted the importance of FSD in its investment thesis for Tesla, suggesting that success in China could help Tesla establish itself as the software industry standard. The company has also floated the possibility that regulators will make Level 2+ autonomous features, similar to past safety requirements like seat belts and airbags, mandatory because of their life-saving potential.
Tesla’s FSD technology is said to be five times safer than the average US vehicle, according to the company’s crash data.
The company expects that while more Level 2+ autonomous driving entities may emerge initially, Tesla’s position could be strengthened in the long term. Additionally, RBC Capital sees an opportunity for Tesla to potentially license its FSD software to other manufacturers, although this remains a minor aspect of its valuation thesis.
Regarding concerns about the possibility of Chinese companies replicating Tesla’s software, RBC Capital pointed out that FSD not only includes software, but also a vast array of driving data and algorithm training conducted primarily in the United States. United. This unique combination may provide a safeguard against replication attempts.
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In its valuation of Tesla, RBC Capital attributed 20% to FSD technology, assuming Tesla achieves an 8% market share in the segment. The company remains optimistic about Tesla’s growth prospects in the Chinese market and the wider adoption of its autonomous driving technology.
Insights from InvestingPro
In light of RBC Capital’s optimistic valuation of Tesla Inc (NASDAQ:TSLA), it is worth considering some additional insights provided by InvestingPro. With a robust market capitalization of $609.39 billion and a high P/E ratio of 44.52, Tesla’s financial stature is evident. Although the company’s P/E ratio has adjusted slightly to 39.31 over the trailing twelve months as of Q1 2024, it still reflects a high valuation, likely due to its leading role in the automotive industry and its technologies innovative such as the complete autonomous driving system.
InvestingPro tips highlight that Tesla holds more cash than debt, which is a solid indicator of financial health, especially as it ventures into new markets like China with its FSD technology. Additionally, Tesla’s significant return over the past week, with a total return of 18.47%, suggests positive investor sentiment that may be tied to developments such as the potential of FSD in China. However, it is important to note that 20 analysts have revised earnings downwards for the coming period, indicating that there may be challenges ahead despite the current optimism.
For those wishing to delve deeper into Tesla’s performance and future prospects, InvestingPro offers a series of further suggestions. In fact, 15 other InvestingPro tips are available at: https://www.investing.com/pro/TSLA. To gain access to these insights and make more informed investment decisions, use the coupon code PRONEWS24 to get an additional 10% discount on an annual or two-year subscription to Pro and Pro+.
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