In anticipation of Tesla’s upcoming preliminary Cybertruck deliveries slated for the end of this month, Jefferies analyst Philippe Houchois expressed reservations on Monday, suggesting that the electric vehicle (EV) giant might benefit from shelving the highly anticipated vehicle. The stock of Tesla experienced a marginal decline on Monday.
Houchois revised his firm’s price target on TSLA to $210, a decrease from $250, while maintaining a hold rating on the shares. The analyst took a skeptical stance on the Cybertruck, stating, “However unlikely just a few days before first deliveries, canceling Cybertruck would probably be positive for shares.” He further argued that refocusing on Tesla’s core strengths, built on simplicity, scale, and speed, could be advantageous, especially with 2024 already perceived as a challenging year for growth.
During Monday’s market action, Tesla stock edged down 0.3% to $233.50 in above-average volume. Despite this minor dip, TSLA has exhibited a nearly 17% gain in November, leading up to the anticipated Cybertruck deliveries scheduled to commence on November 30.
At the time of this publication, Tesla Inc stock (TSLA) has witnessed a surge.
Tesla Inc
Current Price: $234.80
Change : +1.21
Change (%): (0.52%)
Volume: 90.0M
Source: Tomorrow Events Market Data
The pessimism surrounding Tesla has roots in the company’s disappointing third-quarter performance, which saw shares plummet after the announcement of worse-than-expected earnings and revenue on October 18. Tesla reported a 37% decline in third-quarter earnings to 66 cents per share, marking the lowest figure in two years for CEO Elon Musk-led Tesla.
Quarterly revenue, however, increased by 9% to $23.35 billion. Notably, Tesla’s auto gross profit margins, excluding regulatory credits, experienced a decline to 16.3%, falling short of the 20% gross margin “floor” previously targeted by the company.
During the earnings call, Elon Musk cautioned investors about the upcoming Cybertruck and the broader economy, contributing to a 9.3% decline in Tesla stock the following day. Musk emphasized that while initial Tesla’s Cybertruck deliveries are set to begin on November 30, it will take 12-18 months before the new vehicle becomes a “significant positive cash flow contributor.” He acknowledged “enormous challenges” in achieving volume production with the Cybertruck, projecting an output of approximately 250,000 units per year by 2025.
Morgan Stanley analyst Adam Jonas weighed in on November 6, indicating that factors such as meeting consensus EPS estimates, successful vehicle launches, including the Cybertruck, and a transition toward licensing and software were crucial for halting the decline in Tesla stock. Jonas acknowledged that while the Cybertruck’s significance might be relatively minor in Tesla’s overall portfolio, launch and ramp execution could significantly impact market sentiment.
Despite these challenges, Tesla remains steadfast in its goal to deliver 1.8 million vehicles in 2023. With the first Cybertrucks set for delivery in late November, the company introduced its new Model 3 in China on September 1, with official sales starting on October 19. Tesla’s global deliveries reached about 1.3 million vehicles by the end of Q3, leaving the company with the task of delivering 480,000 vehicles in Q4 to achieve its ambitious annual target.
However, analyst projections have lowered since October 18, with Wall Street consensus predicting 1.79 million deliveries in 2023, just below the 1.8 million target. The average 2023 EPS estimate has also fallen 7% since Q3 earnings, and analysts are now expecting 2024 earnings to fall below 2022 levels.
Despite these challenges, TSLA has seen a remarkable 90% surge in 2023, outperforming the broader S&P 500 index. Investors are optimistic about Tesla’s growth story, evident in the stock’s construction of the right side of a double-bottom base, presenting a potential buy point at $278.98, according to MarketSmith analysis. Tesla stock currently ranks sixth in the 35-stock IBD automaker industry group, with a 90 Composite Rating, a 90 Relative Strength Rating, and an 88 EPS Rating.
Source: Investor’s Business Daily
