Citizens says Tesla near-term optimism is too high

Investing.com -- Citizens began coverage of Tesla with a Market Perform rating on Thursday, citing concern that valuation expectations for the company's Optimus robot and Robotaxi products imply too near a launch timeline.

Analyst Andrew Boone said in a note that Citizens said it is launching coverage because of the potential of "physical AI," comparing the opportunity to how AI is currently accelerating knowledge work.

The firm said Tesla has the necessary assets to advance the field, including leading autonomy models, its own silicon, advanced manufacturing, state-of-the-art batteries and "CEO Elon Musk's engineering prowess."

Still, Citizens said the "grand vision will take time to achieve," and expects Optimus to face "a new level of production complexity, with delays and greater spending," describing Tesla as being at the beginning of an Optimus investment cycle.

On Robotaxis, Citizens doubts Tesla's camera-only autonomous vehicle system "can be as effective as an AV system that uses LiDAR, radar, and cameras for inputs and supercomputers to power driving algorithms."

The firm expects "significantly more incidents than current leading AV driving systems," which could create liability issues or pause service.

Citizens said its 2027 and 2028 revenue estimates are 4% and 12% below consensus, respectively.

Tesla shares closed at $394.06 on Wednesday, which Citizens said implies a trading multiple of 70.2 times and 10.8 times its 2028 estimated EV/EBITDA and EV/Revenue, a premium to auto and energy peers that the firm said is warranted given Tesla's optionality.

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