Gene Munster: Tesla Investors Will Be Rewarded After A Longer-Than-Expected Shift To Autonomy

Tesla Inc TSLA CEO Elon Musk sets ambitious schedules for futuristic tech rollouts, but the firm’s Wednesday earnings report justified skeptics' concerns. 

Apart from Model 3 delays, Tesla reported a 27-percent earnings-per-share miss, a significant quarter-over-quarter gross margins reduction and the firm’s first-ever investment scaleback to limit cash burn.

“Tonight’s Tesla results once again add further evidence that the shift to EV [electric vehicles], autonomy and renewable energy will take longer than we expect,” Loup Ventures managing partner Gene Munster said in a Wednesday night note. “That said, we believe investors will be rewarded for their patience as Tesla works through the production difficulties of the Model 3.”

The Big Picture

Production bottlenecks limited Model 3 deliveries to just 222 this quarter.

Munster told Benzinga the miss was likely a fixable factor of complications in facility construction, but accordingly cut December delivery forecasts from 5,400 to 2,500 units, March deliveries from 35,000 to 10,700, and 2018 deliveries from 200,660 to 190,582.

The expected delays correspond with a profitability pushback from December 2019 to September 2020 — a feat to be achieved by the concurrent activation of Level 5 autonomy and a 2019 Model 3 production ramp — and a cut to 2023 gross margin estimates from 30.5 percent to 28 percent.

But the setbacks don’t affect Munster’s bullish thesis.

“The last wave to the Tesla story generally will begin gaining traction in 2020 and continue through 2030 as the company begins to inch towards its mission statement of accelerating the global adoption or renewable energy driven by Tesla solar and storage solutions,” he said. 

A Decided Leader

While assured by Tesla’s energy opportunities, Munster is no less optimistic about the firm’s auto prospects. In fact, he predicts Tesla to be one of three to five automakers dominating the industry in 10 years, as its electric vehicle and autonomy projects are considered to be unrivaled.

“Putting it all together, we believe the Tesla story represents the biggest opportunity in tech over the next five years,” Munster said.

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A Tesla Model S. Courtesy photo.