One reason Tesla (NASDAQ: TSLA) stock commands such a premium rating relative to their peers is the ability of the company to convince investors that it is much more than just an automaker. Tesla aims to improve its auto software in the coming years and take advantage of those improved capabilities – and investors are buying into the story.
Not only does the company plan to increase the price of Autopilot over time as it gets closer to fully self-driving capabilities, but it also wants to eventually be able to make its cars deploy in an autonomous “. robotaxi “ride-sharing service. However, autopilot is still far from proving this level of intelligence. Sure, it’s improved over the years, but only in small, incremental ways – not enough to put technology within a fighting opportunity to drive autonomously in a robotic taxi service.
But is Tesla about to give investors a reason to take the company’s autonomous driving ambitions more seriously? CEO Elon Musk now says that Autopilot will soon see a step change.
Model 3. Image Source: Tesla.
Autopilot is about to get a total rewrite
“The [full self-driving] improvement will come as a quantum leap, “Musk said Twitter on Friday, “because it is a fundamental architectural rewriting, not an incremental adaptation.”
This architectural rewriting for Autopilot will be deployed as part of a “limited public release in 6 to 10 weeks,” Musk said. Of course, Musk has overpriced several times when it comes to self-driving technology, so investors should not rely on the company adhering to this timeline. However, this tweet gives investors insight into why Musk has said that Tesla could potentially start deploying a robotic taxi fleet where regulation already allows this year. A “quantum leap” improvement in Autopilot could prove technology that is much closer to complete self-control.
“I drive the thriving edge alpha in my car personally,” Musk said on Twitter. “Nearly zero interventions between home and work.”
Model S. Image source: The Motley Fool.
Justified Tesla’s scary share price
Why does it all matter? If Tesla can demonstrate an “quantum leap” improvement in its Autopilot software, investors could give more weight in their analysis to the potential monetization of this rapidly improving technology in deciding how much the stock should be worth today.
Following a huge rise in Tesla’s share price, the company now has a market capitalization of about $ 350 billion, despite generating less than $ 1 billion in continued 12-month free cash flow. Without enhanced Autopilot features and higher monetization levels of their auto software, the growth file seems reasonably priced if it is not priced at this level. But as the company’s robotic taxi service and the potential for higher Autopilot prices in the future begin to seem like realistic expectations, it will become easier for investors to justify Tesla’s current share price.
