Concerns that Tesla cannot ramp up enough sales of its vehicles compete with other more hopeful long-term views.
Elon Musk and Tesla’s senior management offered a four-hour presentation this week on the future of the electric vehicle maker.
Musk told shareholders and analysts alike that the session was designed to offer a long-term view, rather than forecasts for the next few quarters.
But with no specific announcements, other than confirmation of a new Gigafactory to be built in Monterey, Mexico, the response was mixed.
Some analysts were not impressed with Tesla’s “master plan” to use its platform to lower costs for the electric vehicle manufacturer by 50%.
Bernstein senior analyst Toni Sacconaghi has a price target of $150 a share with an underperform rating, concerned that the electric vehicle manfacturer can not sell enough cars despite its discounts since it is not launching any new vehicles.
“We believe that in the near-to medium term, Tesla is unlikely to ramp up new models fast enough to meet volume expectations of 2.4M in 2024, especially since the next-gen platform appears to still be in the design phase,” he wrote in March 2 research note.
Tesla had slashed prices by up to 20% for some of its models so that buyers could qualify for the $7,500 federal tax credit, but the discouunts only “underscore the highly competitive nature of the auto market, where sustained high margins and high volume is unprecedented, and which we believe is necessary to justify Tesla’s premium valuation.”
Tesla Shares Fall After Presentation
Shares of Tesla declined by as much as 6.5% on Thursday after falling more than 5.5.% in after-hours trading following the close of trading on March 1.
The electric vehicle maker said the platform would enable Tesla to cut costs by 50%, but details were not provided at its investor day on March 1 held at its headquarters in Austin, Texas.
In response, Musk tweeted, “Detailed whitepaper with calculations & assumptions to be released by Tesla shortly.”
The four-hour long meeting did not provide details on when when deliveries of its Cybertruck would start or if Tesla is actually moving forward with a cheaper $25,000 model.
The meeting was “somewhat disjointed and fairly technical” and despite presentations from numerous executives it was merely “a message of hope for widespread electrification than a roadmap for Tesla,” Sacconaghi wrote.
Tesla’s meeting with shareholders, car owners, analysts and the media lacked crucial information on prices and what models of vehicles would be produced from the new lower cost platform.
“Tesla provided no incremental information (pricing, offering and timing) on its forthcoming low-cost vehicle/platform,” he said.
The EV manufacturer can not produce a lower priced model by 2025, Sacconaghi added.
“We do not believe that Tesla can deliver a low cost offering in volume before 2025, and believe that Tesla will need to lower prices in interim to hit its growth targets over the next two years,” he said.
Tesla Bulls Maintain Position
Morgan Stanley analyst, Adam Jonas, a Tesla bull, believes that Tesla’s “audacious efforts on vertical integration are about to pay off.”
Jonas, who maintains a price target of $220 a share, believes that other EV manufacturers will have a tough time competing with Tesla.
“We leave the investor day at Giga Austin asking which of Tesla’s competitors can keep up with the planned spending of upwards of $170bn for the build-out of their manufacturing base for EVs and stationary storage,” he wrote.
The March 1 investor day should “increase” investor confidence, wrote Goldman Sachs analyst Mark Delaney.
“Tesla provided significant insights into how various teams are working to reduce cost, scale, and improve capabilities,” he wrote. “We believe the company was able to show good progress in areas such as casting, 4680 cells (such as with the dry coating of the electrodes), semiconductors/power electronics and software.”
But Delaney acknowledged that investors sought more substantial news about Tesla’s plans for the short-term such as when a “third generation vehicle could be shipping, and therefore the lack of clarity beyond the comment that they’re working as fast as they can and it could be in the next couple of years is likely to be viewed as a disappointment to some.”
Tesla has hinted at manufacturing a $25,000 model to attract more drivers into switching to purchasing an EV, but critics dislike the idea.
Greg Wester, who is a product manager and an owner of a 2018 Tesla Model 3 who does not own any shares of Tesla, tweeted, “Tesla is like BMW or Audi. Nobody wants to see a premium brand sell an $18k car.”
Wedbush analyst Dan Ives reacted positively to Tesla’s investor day, stating that the company is beating its competitors.
“For investors its crystal clear just how far ahead Tesla is ahead of the rest of the auto industry when it comes to producing/scaling EVs with last night another display of the pure breadth and scale of Tesla globally,” he tweeted. “This was a showcase event for Musk and the Tesla community.”
Even though investors had sought more details about future models and sales projections, Ives is confident that Tesla can deliver a cheaper EV.
“The reality is the Street will and has always walked away from Tesla investor days ‘wanting more’,” he tweeted. “But in my opinion that’s the Tesla/Musk DNA and seeing the forest through the trees yesterday presented all the ingredients in the recipe for a cheaper vehicle sub $30k likely by 25.”
Gary Black, a Tesla bull, did not change his price target and maintains his prediction of $370 a share after the presentation.
“$TSLA is still our top position,” he tweeted. “I didn’t change my $370 PT. No change in our long term thinking about the stock.”