Tesla: Shares Rally as Robotaxi Testing Expands to Arizona

Key Morningstar Metrics for Tesla

• Fair Value Estimate: $250.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

Bloomberg reported that Tesla TSLA received approval to begin testing its robotaxi, an autonomous driving ride-hailing service, in the US state of Arizona. Tesla shares were up 4% at the time of writing on Sept. 22.

Why it matters: Arizona is the fourth state where Tesla will be testing its robotaxi service, following current testing in Texas, California, and Nevada. The expansion to a new market signals that the current testing is going well enough to expand.

• Tesla’s rapid testing expansion would let it quickly offer robotaxis in multiple cities when the software develops to the point where Tesla can move from testing to a full product.
• A market entrance in multiple cities supports our view that robotaxis will quickly expand and gain market share. We think Tesla will eventually capture 30% of the US and Canada ride-hailing market by 2035.

The bottom line: We maintain our $250 fair value estimate for narrow-moat Tesla. We view shares as significantly overvalued, with the stock trading more than 75% above our fair value estimate. In our view, Tesla’s robotaxi business is nearly priced for perfection.

• We continue to forecast Tesla’s full robotaxi service to launch in 2028, two years behind management’s guidance for a 2026 launch. We define a full launch as a robotaxi with no Tesla employees on board and no geofencing. Currently, robotaxis in testing have both.
• Tesla’s autonomous driving system offers the ability to scale and enter new markets. This is because its camera-only approach can take its ability to drive safely in one place and recognize how to drive safely in a different location. This should allow Tesla to grow faster than peers.