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Tesla (TSLA) stock is advancing once more, after dropping off following third-quarter earnings and revenue, with the Cybertruck delivery event on the horizon. However, it remains to be seen if TSLA will be able to meet its goal of delivering 1.8 million vehicles in 2023.
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Tesla reported worse-than-expected Q3 financials on Oct. 18 leading shares to fall as analysts questioned the company’s near-term strategy and whether a growth stock works if its EPS is not jumping in 2024. However, TSLA has gained ground in November ahead of Cybertruck deliveries beginning at the end of the month.
Meanwhile on 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.”
This follows Morgan Stanley analyst Adam Jonas writing on Nov. 6 that Tesla must stop missing consensus EPS estimates while successfully launching new vehicles, including, but not limited to, the Cybertruck.
“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.”
Tesla stock has surged in 2023 as investors bet that the EV maker’s growth story was intact, despite near-term growth woes. With Tesla due to begin preliminary Cybertruck deliveries on Nov. 30, the top question for investors is always, when is it a good time to buy or sell Tesla stock.
Tesla Targets Record Q4
Tesla is also 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.
Stock Falls After Earnings Amid Growth Concerns
TSLA shares sank after the company reported 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. 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.
Tesla Stock And Musk
There is never a dull moment for Tesla and Musk, with the two inextricably linked. After Musk took over Twitter on Oct. 28, 2022 purchasing the social media platform for $44 billion, some longtime Tesla stock bulls worried Musk’s focus on Twitter, along with negative attention, would weigh down Tesla stock.
Musk appeared to lessen those fears when he hired Linda Yaccarino, NBCUniversal’s advertising chief, as the new CEO for X Corp., formerly known as Twitter. The Tesla chief added Yaccarino will focus on business operations while he will work on product design and new technology.
At the time, Wedbush analyst Dan Ives wrote the news ends some of the “distraction risk around the Tesla story.”
However, Tesla stock cut back below a key technical level early last Thursday, following a four-day, almost 18% rally. The pullback also followed comments made on X, formerly Twitter, by Chief Executive Elon Musk in support of an antisemitic post.
On Nov. 9, HSBC initiated coverage of Tesla stock with a reduce rating and 146 price target. Analyst Michael Tyndall wrote that Tesla vehicles may well be the main driver of revenue and profits currently, but the future for Tesla is about robots, autonomous vehicles, energy storage and supercomputers.
“We see considerable potential in Tesla’s prospects and ideas, but we think the timeline is likely to be longer than the market and valuation is reflecting,” Tyndall wrote.
The analyst added that Chief Executive Elon Musk presents a “considerable singleman risk.”
Tesla A Monster Stock Over Much Of Its History
Almost single-handedly, Musk has turned the auto industry on its head, essentially forcing it to get aboard the electric-vehicle train.
It’s a reason why Tesla has been a monster stock over much of its history, especially during its stratospheric run from mid-2019 to late 2021. The stock hit a bear market low of 101.84 on Jan. 6, but roared back until Q1 earnings.
On April 19, Tesla reported a big first-quarter earnings decline while revenue missed views. Profit margins for the global EV giant also fell below 20% as the company executed an aggressive price-slashing strategy in the first part of 2023.
Tesla reported revenue increasing 24% to $23.33 billion with EPS of 85 cents, a 20% decline compared to 2022.
The EV company’s total gross profit came in at $4.5 billion, with Tesla’s profit gross margin at 19.3%, down from 23.8% in Q4 and 29.1% a year earlier.
Tesla’s Global Price Cutting Strategy
Throughout 2023, Tesla has slashed prices worldwide multiple times, starting in January and continuing into April. For much of the first part of the year, the only exception was China, where Tesla cut prices significantly in late October before reductions in early January.
Tesla announced in early October that it delivered 435,059 vehicles during the third quarter, well below expectations and down 6% vs. Q2. Tesla followed the delivery miss by chopping U.S. Model 3 and Model Y prices, a major surprise to Wall Street. It cut the base Model 3 RWD price by $1,250 to $38,990 and the Model Y Long Range by $2,000 to $48,490.
To maintain sales momentum, Tesla has aggressively cut vehicle prices throughout the year, which has dropped auto gross profit margins, excluding regulatory credits, below 20%. Tesla’s auto gross profit margins excluding regulatory credits peaked at 30% in Q4 2021.
In the U.S., Tesla has removed its standard range Model S and Model X versions in the U.S. and dropped the price of the Model X all-wheel drive version below $80,000. This now makes the Model X eligible for the federal $7,500 tax credit under the Inflation Reduction Act (IRA), confirmed by the Internal Revenue Service on September 6.
Ahead of releasing the revamped Model 3 in China, Tesla on August 13 cut prices on two Model Y vehicle trims and began offering a limited-time insurance subsidy for the older Model 3.
On August 16, Tesla fired another shot in the EV price war, nearly doubling discounts on its luxury Model S and Model X vehicles in China.
Earlier in the year, Tesla reduced prices in several European markets. Tesla also dropped the price of its electric vehicles in Israel and Singapore in order to increase demand, expanding a worldwide discount push that began in China in January.
Tesla Stock: Betting On Autonomous Vehicles And The Cybertruck
Musk is betting big on the Cybertruck and autonomous vehicle technology, along with a possible tailwind from the Inflation Reduction Act (IRA).
Musk has long touted Tesla’s Full Self-Driving (FSD) technology and the potential value it brings to the brand.
Tesla has started rolling out its FSD beta for new vehicles equipped with Hardware 4, the company’s newest computer system that contains more ports for data-collecting cameras.
The move comes after Elon Musk live-streamed 45-minutes of himself on Aug. 25 using “FSD v12 beta” to drive around Palo Alto. Musk had to make an “intervention” one time during the drive, when his vehicle tried to run a red light.
On Sept. 1, Tesla reduced the price of FSD in the U.S. to $12,000, down from $15,000.
Meanwhile, on Aug. 24 Reuters reported that the National Highway Traffic Safety Administration (NHTSA) says it’s close to ending its two-year long investigation of Tesla’s driver-assist systems Autopilot and Full-Self Driving.
However it’s unclear if NHTSA regulators will take significant action against the EV giant.
NHTSA in late July sought more information about Tesla’s self-driving monitoring systems, according to reports. Specifically, regulators wanted to know more about the “Elon mode,” in which some people, including Musk, have disabled the driver monitoring or alerts while self-driving.
In his livestream FSD ride, Musk frequently looked at his phone, but got no nags to pay attention to the road.
Cybertruck Hype
Meanwhile, the Cybertruck delivery event is expected to take place on Nov. 30. The Cybertruck will be the EV maker’s first new passenger vehicle since the Model Y launched in early 2020.
However, Tesla still hasn’t released prices or key specs that would affect Cybertruck demand and profitability.
On July 15, Tesla posted a photo to X of the first Tesla Cybertruck made at its Austin plant. Tesla stock responded jumping 3.2%.
The global EV giant also said during its Q3 release that it continues to “make progress” on its next-generation platform. Since the Tesla investor day in early March, the company has remained mostly silent on its next-generation vehicle, which will likely be produced at its new plant in Mexico. At the annual shareholder meeting, Tesla teased a vehicle silhouette.
Musk told investors on Oct. 18 Tesla is laying the groundwork to begin construction at its Mexico plant, but with some caveats.
“We want to get a sense for what the global economy is like before we go full tilt on the Mexico factory,” Musk said.
“If interest rates start coming down, we will accelerate,” he added.
The Long-Awaited Semi Hauler Unveiled
In Dec. 2022, Tesla unveiled its long-awaited Semi, an 18-wheel, long-haul electric freight truck, five years after it was first announced. However, in March, Tesla ordered a voluntary recall of 35 Semi trucks due to a parking brake issue.
Tesla began delivering its long-haul Semi trucks to PepsiCo (PEP) in December. Further, Musk has indicated there are plans to build out a charging network for long-haul trucks.
Musk did not specify how much the eighteen-wheeler costs. The Semi is capable of traveling an estimated 500 miles per charge. It can accelerate from zero to 60 in 20 seconds, Tesla says. The company expects to ramp production over the next year and aims to deliver 50,000 units in 2024.
Before the recall, PepsiCo planned to deploy 36 Tesla Semi trucks, with 15 in Modesto and 21 in Sacramento.
Pepsi placed its order for 100 EVs when the Semi was first announced in 2017.
Is Tesla Stock A Buy?
Tesla stock rose 2.3% on Nov. 15 to 242.84, retaking its 50-day line for the first time in several weeks.
TSLA shares sank after the company reported worse-than-expected Q3 earnings and revenue on Oct. 18. However, Tesla stock has gained nearly 20% in November, with preliminary Cybertruck deliveries beginning Nov. 30.
The stock is building the right side of a double-bottom base giving it a 278.98 buy point, according to MarketSmith analysis.
Since the beginning of 2023, Tesla stock has surged around 90%, broadly outperforming the broader S&P 500 index.
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 a 91 Relative Strength Rating and an 88 EPS Rating.
The market status is showing a “confirmed uptrend.” Tesla stock is more than 15% below its official buy point, but there is a trendline running from the July 19 high that could offer an early entry, currently around 253, for aggressive investors. A move above the Nov. 15 intraday high 246.70 could offer an opportunity to start a position.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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