Tesla Stock Pulled Back 26.2% After a Monster Run. Is It Time to Buy the Dip?

Key Points
Tesla shares are expensive at first glance.
Two growth catalysts could make today's valuation a bargain.
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Tesla's (NASDAQ: TSLA) valuation can seem a little confusing. Even after a sharp decline, shares still trade at nearly 14 times sales. Rivian, another EV stock, trades at just over 3 times sales.
To be clear, I'm still a big fan of Rivian stock. I think it's clearly undervalued. But that doesn't mean I think Tesla stock is overvalued. In fact, there's reason to believe Tesla could add another $1 trillion to its market cap over the next few years by targeting two key areas of growth.
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1. Full autonomy is closer than you think
We've been promised self-driving vehicles for decades. The finish line may be just around the corner. More and more experts believe that we could soon see fully autonomous vehicles roaming the streets of the U.S.
"While L4 robo-taxis are now available in the first cities in the United States and China, the global rollout of robo-taxis is now expected to become reality at a large scale in 2030," predicts a recent report from global consultancy McKinsey & Co. "Similarly, L4 urban pilots for private passenger cars are expected to be pushed out from 2030 to 2032, and fully autonomous trucking is expected to reach viability by 2032, not 2031."
As expected, experts like McKinsey & Co. are still fine tuning their expectations. And further delays may be added. But there's a growing consensus that, one decade from now, self-driving cars will be the norm across most of the world. "Surveyed experts expect that it will take three to seven years for robo-taxis to be widely deployed commercially and available across all geographies," concludes McKinsey & Co's report.
If full self driving becomes a reality, expect consumers to rapidly shift their buying preferences toward brands that actually offer full autonomous capabilities. This is a big reason why Tesla is investing billions of dollars in artificial intelligence (AI). It's also why Elon Musk isn't too concerned about the company's flagging auto sales. If full autonomy is reached through rising AI investments, expect demand for Tesla's products to return in force.
2. Robotaxis could change everything for Tesla
Fully autonomous vehicles would attract hordes of new buyers to Tesla's cars. But it's really the robotaxi market that could add the most value to Tesla's business.
"Overall, experts expect that robo-taxis will be the first commercial application for L4 in mobility -- not privately owned cars," stresses the McKinsey & Co report. Major Tesla investors like Cathie Wood, CEO of Ark Invest, believe that more than 90% of Tesla's enterprise value could be tied up in its robotaxi business by the end of the decade, helping the company's stock price exceed $2,000 per share.
In short, even if consumers never flock to Tesla's products in growing numbers again, the robotaxi opportunity for Tesla alone could more than offset all of that value decline. After all, the robotaxi market is expected to be worth anywhere between $5 trillion and $10 trillion over the long term.
Whether Tesla can ultimately execute on these complementary growth catalysts remains unclear. But if it does, the stock's current valuation would likely prove more than justified.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.