Investors in electric vehicle company Tesla Inc TSLA saw shares drop on the week after the company reported third-quarter financial results that came in below estimates from analysts.
While there are plenty of potential catalysts for Tesla in the future such as FSD, robotaxis, Taxi Bot, more vehicles, and the launch of the Cybertruck, one Tesla investor sees more short-term pain ahead.
What Happened: Analysts have been mixed on Tesla going forward after the company reported third-quarter financial results. A conference call that saw an overall cautious tone from the company and CEO Elon Musk was also among the concerns from analysts and investors.
With short-term concerns, Tesla could have a dark chapter that lasts a year, according to Deepwater Asset Manager co-founder and Managing Partner Gene Munster.
“Tesla’s September results and outlook commentary revealed a double whammy of pressures on the business, prolonged margin pressure, and dampened demand outlook,” Munster said.
Munster said the next year could be the most difficult period of time for Tesla since the ramp-up of the Tesla Model 3 in 2019.
One key item from the quarterly report was gross margins, which were significantly lower than many were expecting.
“Gross margins are central to the Tesla investment case because the metric best gauges whether the company is on track to be valued as a tech company or just another automaker.”
Munster said the miss by Tesla on gross margins was worse than anticipated.
“Even worse, the potential for margin improvement over the next year was essentially taken off the table.”
Another item that may have spooked investors was comments from Musk on Tesla’s goal of average annual unit growth of 50%.
“It’s not possible to have a compound growth rate of 50% forever or you will exceed the mass of the known universe,” Musk said.
Related Link: Trading Strategies For Tesla Stock Post Q3 Earnings Miss
What’s Next: One of the biggest items shared during the third quarter results was the fact that the highly anticipated Cybertruck will begin deliveries in November for Tesla, later revealed to be a Nov. 30 delivery event.
Musk was cautious about the outlook of the ramp-up for the Cybertruck, but investors and analysts remain bullish on the potential of the catalyst that has been years in the making.
Tesla confirmed that pre-orders for the Cybertruck are over one million, which is a huge number, but could be lower than third-party estimates, which are closer to two million.
“Given Cybertruck will take orders away from the F Series, I believe Cybertruck will be the best-selling truck in the U.S. in 2025 or 2026.”
The F-Series from Ford Motor Co F is currently the bestselling truck in the U.S. annually and has been for decades. Munster saw around 500,000 to 750,000 of the Cybertruck pre-orders materializing and Tesla’s ramp up getting to around 500,000 Cybertrucks delivered annually and the vehicle also taking market share away from the popular Ford truck.
Another positive takeaway from Munster is the tough place that traditional automakers and Tesla rivals find themselves in today.
“Tesla has the upper hand when it comes to building a car company with an electric focus from the ground up. Today, traditional car companies are facing multiple headwinds when it comes to making the shift to electric vehicles.”
Munster said traditional carmakers have two options in the future. The car companies can release a vehicle with similar features to Tesla vehicle and sell it at cost, which would be around 10% to 25% higher than the comparable Tesla vehicle. Or, traditional automakers can subsidize the vehicles to try and take away market share from Tesla, which will also result in increased losses.
“We believe car companies that have been around for 50+ years will eventually (10 years from now) be forced to restructure or go out of business.”
Munster also sees a bright future ahead for Tesla.
“I believe the long-term opportunity remains intact: The company has a pole position in what will be a massive market transition to electrification,” Munster said.
TSLA Price Action: Tesla shares traded at $213.03 at the time of writing versus a 52-week trading range of $101.81 to $299.29. Shares are up 97% year-to-date in 2023 and were down around 15% over the last week.
Read Next: Here's How Many Vehicles Tesla Has Delivered & Produced In Each Quarter Since 2019
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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