Why Shares of Uber Are Sinking Today (Hint: It Has to do With Tesla)

Shares of the ride-hailing giant Uber (NYSE: UBER) traded roughly 4.5% lower in the final half-hour of trading today after a Wall Street analyst cited a potential threat to Uber's business model and long-term strategy.

Competition from Tesla could be an issue

In a research note, Wedbush analyst Scott Devitt maintained a "neutral" rating on Uber and an $85 price target but noted that Tesla's soon-to-launch robotaxis present a threat to the company's long-term vision. The news comes after Bloomberg reported that Tesla plans to launch robotaxis in Austin on June 12.

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In the note, Devitt said that a fully autonomous ride-hailing fleet could significantly disrupt Uber's human-powered fleet. Tesla's CEO Elon Musk has also indicated that Tesla may try and set up its own ride-hailing network rather than partnering with an existing player.

Meanwhile, Uber has positioned itself as the strategic partner for autonomous vehicle companies, having already formed partnerships with Waymo and Pony AI, among others. Uber believes that its massive fleet, operational platform, and regulatory expertise make it an ideal partner for self-driving companies looking to scale.

It's still early for autonomous driving

While the market seems to be taking Wedbush's concerns seriously, I think it's still too early to say that Uber is in trouble.

It will take Tesla time to scale, and it could still take awhile for autonomous ride-sharing to gain widespread traction. Plus, Musk and Tesla have never run a ride-hailing fleet before. They may still end up partnering with Uber.

Uber has transformed itself financially, becoming profitable and generating significant free cash flow. I also think there will likely be more than one winner in the autonomous space. Interested investors can buy the dip here.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Uber Technologies. The Motley Fool has a disclosure policy.