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Tesla’s autonomous vehicle launch, slated for 2026, is whetting investors’ appetites as Elon Musk positions it for revenue-generating unmanned transportation.

Regulatory progress in California and Texas, as well as improvements in FSD version 13, give the endeavor tangibility. Experts like Dan Ives see full self-driving capabilities as a game changer, and Morgan Stanley sees the emergence of robot cabs as critical to the company’s valuation.

However, Tesla faces challenges, particularly profitability pressures in the auto sector due to competition from BYD and European electric car makers. In the first quarter of 2024, gross profit margins on car sales fell to 16.4 percent, and November sales in the U.S. sagged 23 percent, with China posting its first annual sales decline. Plus, the cost of building infrastructure for FSD and robotaxis is squeezing free cash flow. {

While Cybertruck production is picking up at the Gigafactory in Texas and the Megapack energy storage segment is thriving, those aren’t enough to dramatically improve Tesla’s cost structure. That’s why the FSD and robotaxi plans are vital to the stock price.

The bullish scenario for Tesla is based on the potential for full-fledged autopilot (FSD) to serve as the core of its robotaxi fleet, transforming low-multiplier car revenue into high-margin AI services revenue.

On the contrary, the “bearish” option emphasizes implementation risks and competition. Waymo has already completed 14 million robotaxi rides by 2025, creating a working service that Tesla cannot yet match.

Morningstar rated TSLA as overvalued ahead of its Q4 2025 quarterly earnings report, suggesting that full implementation may not happen until 2027 or 2028, and California’s FSD regulation adds to the uncertainty. Moreover, Tesla will face competition from Nvidia and Uber, which will make it difficult to enter the market.

Morgan Stanley downgraded Tesla to a “hold” rating with a $425 price target, citing a divergence in valuation from the real performance of the auto business. This gap between the compelling narrative of artificial intelligence and the current realities of profitability creates a dilemma for investors.

As of now, TSLA is currently listed at $378.67 and its capitalization has once again crossed the $1.2 trillion mark. What’s next for the company?

Shares of Tesla, Inc. (NASDAQ: TSLA) closed Monday trading at $378.67, up 0.63% , with a slight decline to $377.87 at the close. The 52-week price range of $138.80 to $479.86 is indicative of the inherent volatility in the stock related to supply cycles, margin news and developments in autonomous driving. With a market value of over $1.2 trillion, Tesla remains a significant player in the S&P 500 and Nasdaq-100 indexes.

Analysts’ forecasts vary widely: Wedbush’s Dan Ives has a $600 target (buy rating), betting on autonomy market entry in 2026, while Morgan Stanley downgraded to a “hold” with a $425 target price, indicating a high valuation.

The overall consensus forecast ranges from $380-$420. Tesla’s inflated P/E ratio reflects expectations of future software and autonomy revenues, which have yet to be confirmed.

Geopolitical risks, including cyber threats, could affect the corporation’s operations. Investors will be closely watching the August 2026 robotaxi presentation for key data on FSD’s performance, geographic expansion and auto segment profitability, which will determine TSLA’s ability to hold its premium valuation.