With Tesla set to begin preliminary Cybertruck deliveries at the end of the month, an analyst wrote Monday that the EV giant would be better off shelving the much anticipated vehicle. Tesla stock advanced Tuesday after gaining ground Monday.
Jefferies analyst Philippe Houchois lowered his firm's price target on TSLA to 210, down from 250, while maintaining a hold rating on the shares. The analyst then added a few words on the Cybertruck.
"However unlikely just a few days before first deliveries, canceling Cybertruck would probably be positive for shares," Houchois wrote Monday. "With 2024 already a lost year for growth, it would help Tesla refocus on an edge that was built on simplicity, scale and speed."
Tesla stock advanced 2.4% to 241.31 Tuesday during market action. On Monday, TSLA dropped early before adding 0.6% to 235.60. Tesla stock has gained more than 20% in November ahead of Cybertruck deliveries, planned to begin on Nov. 30.
Third Quarter Triggers Tesla Pessimism
TSLA shares sank after the company announced worse-than-expected Q3 earnings and revenue on Oct. 18. Tesla reported third-quarter earnings down 37% to 66 cents per share, the lowest in two years for Chief Executive Elon Musk-led Tesla.
Meanwhile, quarterly revenue increased 9% to $23.35 billion. Tesla's auto gross profit margins, excluding regulatory credits, fell to 16.3%. Auto gross margins, excluding regulatory credits and leases, came in at 18.1% in Q2, down from 19% in Q1. That is below the 20% gross margin "floor" Tesla previously targeted.
Elon Musk on the earnings call also preached caution, offering investors warnings about the upcoming Cybertruck and the broader economy. The following day, Tesla stock fell 9.3%. Tesla did announce that initial Cybertruck deliveries will begin on Nov. 30, but Musk said it will take 12-18 months before the new vehicle is a "significant positive-cash-flow contributor."
"I just want to temper expectations for Cybertruck," Musk told investors during the Q3 earnings call. Musk said there will be "enormous challenges" in reaching volume production with the Cybertruck. He added Tesla will end up producing around 250,000 Cybertruck units per year. Musk said his best guess is Tesla will reach that output sometime in 2025.
On Nov. 6, Morgan Stanley analyst Adam Jonas wrote investors should look for a number of factors that would signal the Tesla stock slide was halting.
Jonas said Tesla must stop missing consensus EPS estimates while successfully launching new vehicles including, but not limited to, the Cybertruck. The Morgan Stanley analyst added Tesla must demonstrate its business model is moving toward licensing and software and other products that have "relevance beyond the auto market."
"The Cybertruck bar has been significantly lowered," Jonas wrote. "While we continue to view the model as relatively insignificant within the grand scope of Tesla's future portfolio, we would not underestimate the impact of launch/ramp execution on sentiment."
The Cybertruck will be the EV maker's first new passenger vehicle since the Model Y launched in early 2020.
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Tesla Targets Record Q4
Meanwhile, Tesla is looking to meet its goal of delivering 1.8 million vehicles in 2023. Seven-weeks into Q4, Tesla China insurance registrations, a rough gauge for vehicle deliveries, totaled 71,800 for the quarter, down around 2% compared to the same point in Q3.
With the first Cybertrucks coming at the end of November, the EV company unveiled its new Model 3 in China on Sept. 1 with official sales beginning on Oct. 19. Tesla started delivering the Model 3 on Oct. 26. The global EV giant also launched a slightly updated Model Y in China earlier in October.
Through the end of Q3, Tesla delivered about 1.3 million vehicles globally for the year, meaning the company needs to deliver 480,000 in Q4 to reach 1.8 million. That's 3% more than its record 466,000 deliveries in the second quarter. Tesla reiterated its 1.8 million vehicle delivery goal in its third-quarter earnings.
However, since Oct. 18, analyst projections have dropped. Wall Street consensus has Tesla vehicle deliveries in 2023 totaling 1.79 million, just below that 1.8 million target, according to FactSet. Meanwhile, Wall Street is currently expecting 473,000 deliveries in Q4.
Analysts' average 2023 EPS estimate has also fallen 7% since Q3 earnings. Wall Street is predicting 2024 earnings will now undercut 2022, with analysts expecting EPS of $3.87 — down 14% vs. the $4.50 view before Q3 earnings.
Cybertruck And Tesla Stock
TSLA has surged about 90%, broadly outperforming the broader S&P 500 index in 2023 as investors bet that the EV maker's growth story was intact, despite near-term growth woes. Tesla stock is building the right side of a double-bottom base giving it a 278.98 buy point, according to MarketSmith analysis.
Tesla stock ranks sixth in the 35-stock IBD automaker industry group. The S&P 500 component has a 90 Composite Rating out of a best-possible 99. Tesla stock also has an 89 Relative Strength Rating and an 88 EPS Rating.
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