As the Cybertruck launch event fast approaches, an analyst at Jefferies says cancelling the electric pick-up truck could prove to be positive for Tesla shares.
The Tesla Analyst: Philippe Houchois maintained a Neutral rating on Tesla and reduced the price target from $250 to $210.
The Tesla Thesis: “With 2024 already a lost year for growth,” a Cybertruck cancellation would help Tesla refocus on an “edge that was built on simplicity, scale and speed,” Houchois said in a note published on Monday.
The analyst called it “climbing out of self-drug holes.” Cybertruck is an “off mission” product, he said. Laying out his case, the analyst said the EV will only bring in modest incremental growth, produce no manufacturing leverage and serve as a drag on profit and cash.
The EV pickup truck may have diverted resources from high-volume global segments and supply of 4680 cells for Model Y, he said.
The Cybertruck is a double negative on affordability, Houchois noted. Higher rates have impacted all automakers and bigger cuts in new vehicle prices have dragged residual values, he said. “Allocating capital to support residuals would be a better use than Cybertruck,” he added.
“Tesla looks stuck in a slow lane for another 12-18 months, unable to capitalize on peer delays while European legacy OEMs launch $/€25k EVs next year and Chinese carmakers set a new pace of shorter product cycles,” the analyst said.
As such, the analyst reduced his 2023 and 2024 EBIT estimates for Tesla by 15% and 24%, respectively, to $8.7 billion and $10.6 billion, respectively. He also lowered free cash flow estimate by 36% and 31%, respectively.
On the flip side, the analyst sees some positives such as small hikes for the Model 3 refresh, some easing of China pressure and new incentives offered to reduce year-end stocks. Ramping-up of the 4680 cells may be the most critical variable for 2024 margins, he said.
Also, among the positives are the potential expansion at Giga Berlin to accommodate the $25,000 model, and new market initiatives such as in India, the analyst said. He sees more Chinese taking to full-self driving technology. “Tesla’s AI-inspired vision based approach vs sensors/map continues to screen better than alternatives on scalability and is gaining traction with Chinese OEMs,” he said.
“We appreciate future value from FSD (incl licensing) or Optimus, but not as near-term substitutes to solid core performance,” Houchois said. In the long term, as the battery EV penetration grows globally, Tesla will be among one of a handful of global low-cost producers, along with BYD Co. Ltd. (OTC:BYDDY) (BYDDF), Stellantis N.V. (NYSE:STLA) and Toyota Corp. (NYSE:TM), he added.
Tesla Price Action: Shares of Tesla were down 0.4% to $233.15 at last check Monday, according to Zenger News Pro data.
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