It has been another week, and analysts at Goldman Sachs are warning about Tesla, while analysts from Bank of America took a field trip to its factory. Additionally, UBS analysts adjusted its outlook on a Chinese Tesla rival, while Ford gets a downgrade.
A warning from GS and a field trip from BofA to TSLA
This April 2024 quote from Tesla (TSLA) CEO, "buddy in chief" and appointed co-leader of the incoming Department of Government Efficiency, Elon Musk, has stood as the company's north star for quite a while:
"[Tesla] should be thought of as an AI robotics company. If you value Tesla as just an auto company, you just have to fundamentally; that’s just the wrong framework. If you ask the wrong question, then the right answer is impossible. If somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor in the company."
One of those people who values Tesla as "just an auto company" is Goldman Sachs analyst Mark Delaney. In a note published on December 4, Delaney expressed concern about the EV maker, noting that Tesla’s deliveries this year are unlikely to grow compared to last year.
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Previously, Tesla executives forecasted that deliveries would grow year over year for 2024, and at least 515,000 units would be sold this quarter.
However, the GS analyst's warning pales in contrast to what was recorded in a December 5 note that saw Bank of America analysts led by John Murphy to Tesla's Austin Gigafactory, where they oversaw EV production growth, rode in a robotaxi and interacted with its Optimus humanoid robot.
"We visited TSLA's gigafactory in Austin, TX, which included meeting with IR, a factory tour, and a ride & drive session," Murphy said. "The trip gave us increased confidence that TSLA is well-positioned to grow in 2025+ with its core EV business (new vehicles will expand its TAM) and launch of its robotaxi offering, and longer-term from its investments in Optimus."
Related: Tesla analyst offers bold predictions after Elon Musk pay ruling
One of the trip's highlights was a ride-along demonstrating the company's full self-driving software. Unlike other trips with analysts behind the wheel, this went suspiciously smoothly.
"TSLA showcased the capabilities of FSD, which were impressive and much improved from prior versions. The Cybertruck and Model Y we rode in were equipped with versions 12.5 and 13.2 and drove seamlessly to a charging station several miles away despite abnormal road conditions, traveling on roads under construction and taking a tough left turn against traffic."
Additionally, he projected that new vehicles would come, despite reports.
"TSLA aims to launch a lower-cost vehicle in 1H:25, which will increase its TAM. The vehicle is projected to cost less than $30k, including the $7,500 EV credit currently available in the US. The lower bill of materials could come from several areas such as de-contenting, making the motor more efficient and thereby enabling a smaller battery, and changing the interior, among other possible areas. TSLA also confirmed that the low-cost model won't be its only new model in 2025."
Murphy reiterated BofA's Buy rating and increased its price target on TSLA stock from $350 to $400.
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In November 2024, Dearborn-based automaker Ford (F) broke a personal record that is very commendable. It posts record EV sales in November and the first 11 months of 2024, selling about 11,000 EVs in November and contributing to the 85,000 EVs it sold this year.
Though Ford is going strong, the free market dictates there must be a choice. Its biggest challenge comes from crosstown rival General Motors GM, which offers an EV portfolio that includes pickup trucks and crossover SUVs from well-known brands such as Chevrolet and GMC.
In a note published on December 5, Wolfe Research analyst Emmanuel Rosner downgraded its rating of Ford stock from Peer Perform to Underperform.
Here, Rosner warned that the Blue Oval faces significant downside risk heading into 2025, citing potential price cuts, an absence of inventory restocking, and the automaker's recent inventory buildup in the fourth quarter.
Additionally, the analyst raised concerns about Ford’s cost structure and believes its guidance into 2025 will let down investors, as they aren't fully reflected in their numbers.
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BofA gets into Polestar
Geely brand Polestar (PSNY) is having a moment. The former Volvo-linked automaker escaped a dire financial situation that threatened to delist it from the NASDAQ, but it is anticipating brighter skies ahead.
Recently, the cool Swede released a new model called the Polestar 3, a spacious electric crossover SUV starting at $67,500. In a review of the car, YouTube tech authority Marques Brownlee, better known as MKBHD, praised the car, admitting that he likes certain elements like the styling, but there are clear flaws.
“I really like this one, but there are a few weird things about it. It’s amazing how far the highest and lowest lows are from each other in this thing,” Brownlee said.
Said lows include the estimated 270 miles of range as tested and the vehicle’s reliance on touchscreen controls.
“The glove box only opens with a button on the touchscreen. There isn’t even a handle,” the Youtuber said. “Some things are several clicks away; I don’t want to do that while I’m driving.”
“At the end of the day, it’s kind of like, I have a crush on this car, but I know it’s not for me.” He added, “It’s amazing, but that gap—it’s crazy. Keep working on it, though, Polestar. Please, please don’t stop working on these.”
Bank of America analyst John Babcock may not be an avid viewer of car YouTube, but in his research note initiating coverage on Polestar on December 5, he noted that the brand is entering a milestone in its sales growth and progressing in improving its balance sheet.
However, he warned that there is still a long way to go before it can achieve a sustainable level of positive free cash flow.
“We initiate coverage of PSNY at Neutral with a $1.25 [Price Target], implying a potential upside of ~20%. PSNY offers pure-play exposure to the growing EV market, is nearing an inflection point in sales volumes, and is improving its earnings profile," Babcock said.
Babcock also raised concerns about growth, as higher-income early EV adopters have already gotten their cars, leaving the EV market a game of price for what he calls "largely powertrain agnostic;" buyers who will buy with their wallets instead of their conscience.
"For these consumers, the affordability of EVs, range anxiety, the rapid evolution in technology, and declining residual values pose challenges to adoption," Babcock said. "Further, the potential relaxation of CAFE and EPA pollution standards consumers could make ICE vehicles more affordable on a relative basis, potentially encouraging consumers to delay the purchase of EVs. This could be further compounded by the removal of EV credits, which would raise the cost to the consumer."
Additionally, Babcock raised that Polestar is majority-owned by Geely, which already causes problems for it, save for future legislation.
"PSNY also relies heavily on suppliers based in China. It is already subject to European Union (EU) and US tariffs for the vehicles it manufactures in China," he said. "PSNY has sought to mitigate future impacts by building a diversified manufacturing base with locations in the US and South Korea, in addition to China. However, there is risk PSNY could be subject to additional restrictions."
UBS gives a warning on XPeng
In late November, Chinese automaker XPeng (XPEV) reported positive growth, record revenue, and a strong gross margin after a quarter of strong sales. It reported Q3 2024 gross margins of 15.3% growth that its CEO Xiaopeng He attributed to new developments in its business, including the launch of its Tesla Model 3-rivaling MONA M03.
"Our core competencies and execution capabilities have been significantly transformed. The successful launch of M03 and P7+ marks the beginning of a strong growth cycle underpinned by our major product cycles," He said.
Despite the positivity, analysts are still skeptical about XPeng.
Related: Analysts mixed on Tesla's Chinese rivals
In a note published by UBS analyst Paul Gong on December 6, XPeng stock was downgraded from a Neutral to Sell rating while also raising its price target from $8.20 to $8.80.
Gong wrote that despite XPeng stock jumping 54% over the past three months, its recent stock price may be overvalued.
“XPeng’s share price has risen over 50% since September as newly launched MONA M03 and P7+ reported higher-than-expected initial order intakes and monthly deliveries. While we share the market’s excitement for XPeng’s new EV momentum and fast cost optimization, we believe the upside is more than priced in and caution investors against downside risks not yet priced in,” he wrote.
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