Could this development send Tesla shares into overdrive?
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Tesla (NASDAQ:TSLA) stocks have emerged as one of the top performers in 2023. As the share price inches closer to $300, it feels like a distant memory when investors had doubts about Tesla's direction.
So, did I lose the opportunity to make a purchase? Well, perhaps not. Here's a potential event that could cause a significant increase in the stock price.
Tesla has been leading the way in the development and advocacy of self-driving technology. The company has achieved noteworthy progress in this field, primarily through its widely recognized Autopilot feature.
The Chief Executive Officer, Elon Musk, has been outspoken about his concept for vehicles that can drive themselves, and has set impressive objectives for the independent driving capabilities of Tesla cars. He is confident that the company will successfully achieve complete ability for cars to drive on their own this year. Additionally, he has hinted that the upcoming Tesla model will possess a mode that is close to being entirely autonomous.
Musk expresses his thoughts openly. Nevertheless, he has a track record of making exaggerated claims and failing to deliver as promised. Thus, it might not happen immediately or with the upcoming car model, but I firmly believe that Tesla will eventually bring fully self-driving vehicles to market, very possibly before their rivals do.
The widespread use and potential prosperity of autonomous cars rely on various elements such as progress in technology, rules and regulations, public approval, mindfulness of safety measures, and improvements in infrastructure.
Despite the considerable curiosity and promise surrounding autonomous cars, there also exist certain unknowns.
However, in my opinion, it is evident that self-driving vehicles are an integral aspect of the future. Nonetheless, in the event of unsuccessful trials, we may encounter further postponements.
In the United States, producers have the freedom to release self-driving cars without any physical controls, as long as they adhere to additional criteria. On the contrary, in the United Kingdom, experimental trials are authorized only under the condition that a human driver is prepared to assume control of the vehicle when deemed necessary.
This technology is certainly feasible, but it might take a while for it to be fully embraced worldwide.
The top electric vehicle producer has indicated that it intends to utilize self-driving cars as a component of a transport service where individuals can request rides, just like with Uber and Bolt.
Musk has previously introduced the idea of a "Tesla Network". This would enable individuals who own self-driving Tesla vehicles to potentially use their cars as autonomous taxis when they are not personally utilizing them.
Therefore, despite the current surge in Tesla's vehicle sales, autonomous vehicles have the potential to become a significant source of income within a mere five-year timeframe.
Following the recent rapid increase, Tesla's current valuation in terms of its forward price-to-earnings ratio stands at approximately 90, indicating an exceptionally high price. Nonetheless, it is important to note that stocks with promising growth prospects typically trade at elevated multiples.
In the meantime, Porsche AG, which also shows great potential in the electric vehicle industry, has a much lower price-to-earnings ratio of only 19 and offers a dividend, unlike Tesla.
Therefore, although I hold a positive outlook on Tesla's prospects in self-driving cars, the stock has become quite pricey. I am refraining from taking any action for now, but I am closely monitoring the progress of autonomous vehicles. If we witness a seamless path towards widespread acceptance, I anticipate the value of the company's shares to increase substantially.
Could this advancement cause Tesla shares to surge?
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James Fox does not have any ownership in the mentioned stocks. The Motley Fool UK has endorsed Tesla. The opinions expressed about these companies in this article are those of the writer and may not align with the official recommendations made in our subscription services like Share Advisor, Hidden Winners, and Pro. At The Motley Fool, we believe that incorporating a variety of perspectives improves our abilities as investors.
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