Tesla will find it difficult to leapfrog existing players like Uber and Waymo, says Toni Sacconaghi

Right now is Bernstein senior research analyst Tony Saganaki. Good morning to you. What do you expect we're going to hear? We've been waiting for this news for a long time. I think it's exciting to many but also for many there's a there's some skepticism about when it will actually arrive. Good morning Andrew. Yes I think the consensus is that Tesla will announce a dedicated robo taxi model likely to avail be available at some point in the future. Let's say 27 or 28 that Tesla will demonstrate a a application whereby a ride hailing app that it will provide some kind of update on where they are on full self driving and maybe also potentially announce that it's doing some robo taxi trials. I expect if they did that those would have to be within a company and driver. But nevertheless starting trials in one or more cities in the U.S. I think that's generally what's expected amongst investors. There are big questions about whether Tesla will provide updates on Optimus robot or whether it will provide an update on new models particularly you know the revamped models expected early next year or a lower cost model expected in 27. But but I think the focus will ultimately be on a robo taxi you know unveiling itself and an accompanying ride hailing app. So Tony we're looking at the stock now at two hundred forty three dollars ninety cents. If in fact they make this announcement how does this change the game how does this change how we would value this company. Well you know I think investors are applying different probabilities and discount rates to a robo taxi service going forward. And so I think it's widely anticipated. But but as you noted at the outset there are lots of questions. There are technical questions about whether Tesla can get to the reliability level with a more limited sensor suite. They only have cameras. Other competing autonomous vehicles have LIDAR and radar. So there's a technical question. I think there's a regulatory question. There's a timing question. And you know how competitive is this space going to be or price is going to be driven down and how much value will there be to be captured. So investors are ascribing different probabilities and timing. What are the probabilities. Are you ascribing to those things and how are you doing the valuation. Well here's how I think about it. Andrew is I think it will be difficult for Tesla to leapfrog existing players. Uber Waymo and others are doing level four robo taxi service today in multiple cities even if Tesla is able to leapfrog. I think it will be a limited you know a limited year advantage. So let's say in a year Tesla has level five robo taxis that can go anywhere. They have a ride hailing service. My guess is competitors are going to catch up reasonably quickly. So this notion of having sustained outside profits even if Tesla were to leapfrog given the technical hurdles and the regulatory hurdles I think are difficult. And the valuation of Uber is one hundred and fifty billion dollars. The valuation of Uber you know probably in the U.S. is half of that. Seventy five billion. Tesla stock today embeds. We think six hundred billion dollars beyond the core auto business. Much of that ascribed to robo taxi. So we struggle with that. That differential given the probabilities that I know. Let me ask you this in terms of the competition piece of it which is to say you made the argument that you think that Uber and Waymo will have an advantage maybe given LIDAR and other things over Tesla. There is an argument to be made and maybe you'll disagree with it which is that you know they have a number of the number. They have thousands tens of thousands of these cars on the street today that have cameras on them. They're taking in data that that can't really be matched. If you look at some of their self-driving features right now they clearly seem to be the leader or the most advanced in terms of where that would be if you were to sort of set set aside what Waymo is doing. Is there an argument you made that they will leapfrog everybody and that they in some ways already have. Well I think the bold case is they will leapfrog. I think it's very difficult to say they already have because we you know Waymo is doing 100000 rides a month right now with essentially a perfect safety record in multiple cities. Tesla is nowhere close to that.