The sell-off in Tesla stock may only begin after the Robotaxi event, experts warn

Fundamentals over hype.

That's the lesson for Tesla ( TSLA ) investors after the EV maker's disappointing robotaxi event caused a disconnect between the stock's lofty valuation and reality.

A lack of details surrounding rollout plans and regulatory approvals, plus no mention of the more affordable regular EVs Wall Street wants more of.

CFRA analyst Garrett Nelson compared the event to “watching a movie with lots of plot twists and special effects, and at the end, you walk out scratching your head.”

It's probably not the reaction Musk was hoping for, as it's safe to say analysts “scratched their heads” when he showed off the CyberCab and RoboVan concepts. Now, the big issue for investors is reassessing Tesla's stock price.

On Friday, Tesla was sold more than $60 billion off its valuation, a sharp reversal from the stock's recent run. Shares are up 70% since Musk started tweeting about AI in April. The rally brought Tesla's market value above $760 billion before the Robotaxi announcement—more than 14 times GM's ( GM ) market cap and nearly 18 times Ford's ( F ).

Nelson, who has long been bullish on Tesla, warned Friday's drop “could happen” as Wall Street reassessed.

“There's a growing disconnect between the high valuation of the stock and the reality that Tesla's earnings growth has hit a wall,” he told me, noting that the drivers of medium-term growth are “unclear.”

In a note to clients, Bernstein's Tony Sacconaghi reiterated his belief that Tesla's valuation is detached from fundamentals, writing the Robotaxi event was “short for immediate deliverables or incremental revenue drivers.”

Sacconaghi estimates that Tesla's automotive business is worth about $200 billion, suggesting that about $600 billion of the valuation rests on its less proven initiatives, including full self-driving (FSD), robotaxis and humanoid robots.

As my colleague Akiko Fujita has written, robotics is an expensive venture, and may be years away from being profitable.

The absence of near-term catalysts comes at an already challenging time for Tesla. Unsustainable demand and competition from GM's preferred EVs have squeezed sales and margins in recent quarters, and that's a trend that pros are unlikely to change anytime soon.

In Q2, the company reported an operating margin of 6.3%, up from 14.6% just two years ago.

Guggenheim's Ron Jusico, who sees a fair value of around $153 per share, told me that post-Robotaxis event, investors will “return to focusing on the fundamentals of the business,” which he characterized as “very poor.”

“A business trading at 100 times next year's earnings, with little to no free cash flow, is really hard to underwrite,” he adds.

With its shares down 9% on Friday and down more than 17% over the past year, it's safe to say Tesla has a lot to prove its fundamentals. Its next big test will be third-quarter earnings, due after the bell on October 23.

Will it be more hype than basic? Buckle up!

Sean Smith An anchor in Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips about contracts, mergers, staffing situations, or anything else? Email seanasmith@yahooinc.com.

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