Connect with us

Investor's Corner

Why a Tesla Model Y update during the Q4 earnings call will set TSLA on fire

Tesla Model Y (Source: Teslarati)

Published

on

Tesla is set to report its Q4 2019 earnings after the bell rings to close trading on Wednesday and if the electric car manufacturer announces during the call that Model Y delivery will begin soon, expect TSLA stock to skyrocket.

A stellar Q3 2019 performance helped Tesla stock gain momentum and set up Elon Musk’s electric car brand for its final push in the last few months of 2019. Analysts are optimistic following its historic fourth quarter, when it was able to deliver 112,000 vehicles and produce more than 104,000 units. This helped TSLA rise to a $100 billion valuation, bumping German auto giant Volkswagen on the second spot in the list of the most valuable carmakers in the globe.


UPDATED: Tesla $TSLA shares soar following confirmation of Model Y first deliveries and breakout Q4 2019 results


As for the much-awaited all-electric crossover, the production schedule of the Tesla Model Y has moved up from Fall 2020 to Summer 2020 but all signs hint that it may even come sooner. From several sightings of production-ready Model Y units, the publication of its  CARB certification, VINs registration with the NHTSA, and phone calls to future Model Y owners, rumors that the first deliveries of the Model Y will begin in February are highly-likely true.

If the Tesla Model Y premium electric crossover indeed hits the road next month, expect movement in the price of TSLA stock. And the only direction to look is up.

Advertisement

Early delivery of Model Y should scare competitors 

Tesla has struggled before in keeping its promises of delivering vehicles to customers on time. Skeptics had a point because every carmaker must do its best to meet the demand and keep their customers happy. Elon Musk and his team fine-tuned kinks in production and proved to critics that they’re taking steps in the right direction as Tesla delivered 367,000 vehicles in 2019 — that’s a 50% jump from its numbers in 2018.

Deliveries of vehicles is an accurate barometer of how Tesla is starting to walk the walk, a clear sign that there’s an improvement in the company’s fundamentals as a whole. Initial production of the vehicle is being handled by Tesla’s Fremont plant in California but the company has also started its Model Y program in China. Giga Berlin will contribute to its production as soon as July 2021, with the facility set to start its operations with the production of the all-electric crossover as well.

(Credit: Tesla Owners Silicon Valley/Twitter)

The early delivery of the Model Y to consumers also means that Tesla has underpromised and over-delivered. This is a screaming signal that competitors should worry cause whatever “advanced manufacturing technologies” Elon Musk mentioned when he recently spoke about the Model Y could work wonders for the carmaker. These innovations may be related to a casting machine that can practically cast most of the vehicle’s body in one piece, rigid wiring system, and other technologies that the market will learn about soon.

“Model Y will also have some advanced manufacturing technology that we will reveal in the future. I think it will be exciting to show the kind of manufacturing technology associated with the Model Y and it will be exciting to learn about these technologies,” Musk said.

If these manufacturing technologies take Tesla a step closer to perfecting its production line design, then it can hit its production goals in Fremont, Shanghai, and Berlin in the near future. Of course, this efficiency in Model Y production will have a chain effect across its factories and product lines. Better production means a smaller gap between supply and demand. With better efficiency, trust in the brand can soar and sales go boom.

Tesla Model Y will be king of SUV/Crossover Segment

The Tesla Model Y electric crossover that has a range of 300 miles and an impressive 0 to 60 mph time of 3.5 seconds for its quickest variant is positioned perfectly.

Advertisement

Demand for sedans in the United States has been going down fast in favor of more spacious and more functional rides such as SUVs and crossovers. There were 17 million vehicles sold in the US in 2019 and only 28% of that are cars.

Focusing on the crossover segment, the Tesla Model Y has some formidable competition in the form of the BMW X3, Audi Q5, Audi e-tron, Jaguar I-PACE, and the more affordable Toyota RAV4 and Honda CR-V.

In terms of price and size, the Model Y is comparable to the rest of the pack but the Model Y will have an option to accommodate seven passengers that others cannot offer. And of course, the other electric crossovers are all from internal combustion engine producers and they’re not doing very well. The Audi e-tron only sold 5,369 units in the US while the I-PACE sold 2,594 units. The picture is similar for other mid-sized SUVs.

With the preference of consumers leaning towards roomier vehicles, the Model Y will further prove the credibility and popularity of Tesla brand.

Tesla Model Y Performance spotted in Washington State (Source: Daily Night Society | YouTube)

Model Y can help push Tesla to sustained profitability

During the Q3 earnings call, Musk was quoted about his expectations of the Model Y.

“I’ve actually recently driven the Model Y release candidate, and I think it’s going to be an amazing product and be very well received. I think it’s quite likely to — this is just my opinion, but I think it will outsell S, X, and 3, combined,” Musk said.

Advertisement

The Model Y is the ultimate bad news for critics and competitors. If Tesla found a way to accelerate production and start delivering its all-electric crossover in February, that just means Model Y sales would be added to the books and help raise the company’s earnings in 2020.

While the Model 3 is the first mass-produced vehicle of Tesla, the Model Y will be the first affordable electric SUV that can help push it to sustained profitability.  The electric crossover that starts at $39,000 shares 75% of its DNA with its sedan sibling but even with a higher price tag, the innovations in production that Elon Musk mentioned will push the cost down.

Tesla will not only have a good profit margin for the Model Y in the United States, but there’s also a good chance that its margins will even be bigger in China where the locally-made Model 3 has received a warm reception.

The Palo Alto, California-based company can push the margins for its electric crossover further by doing what it plans to do with the Made-in-China Model 3. Localization of components will be key as this will allow Tesla to push the vehicle’s price down and practically create demand. That will work well, according to analysts from Chuancai Securities, an equity firm in China.

The Tesla Model Y will be a game-changer in the industry. If Model 3 was the straight punch to its competitors, the Model Y will be the power uppercut punch that will knock out its rivals.

Advertisement

A curious soul who keeps wondering how Elon Musk, Tesla, electric cars, and clean energy technologies will shape the future, or do we really need to escape to Mars.

Advertisement
Comments

Investor's Corner

Tesla enters new stability phase, firm upgrades and adjusts outlook

Dmitriy Pozdnyakov of Freedom Capital upgraded his outlook on Tesla shares from “Sell” to “Hold” on Wednesday, and increased the price target from $338 to $406.

Published

on

Credit: Tesla China

Tesla is entering a new phase of stability in terms of vehicle deliveries, one firm wrote in a new note during the final week of October, backing its position with an upgrade and price target increase on the stock.

Dmitriy Pozdnyakov of Freedom Capital upgraded his outlook on Tesla shares from “Sell” to “Hold” on Wednesday, and increased the price target from $338 to $406.

While most firms are interested in highlighting Tesla’s future growth, which will be catalyzed mostly by the advent of self-driving vehicles, autonomy, and the company’s all-in mentality on AI and robotics, Pozdnyakov is solely focusing on vehicle deliveries.

The analyst wrote in a note to investors that he believes Tesla’s updated vehicle lineup, which includes its new affordable “Standard” trims of the Model 3 and Model Y, is going to stabilize the company’s delivery volumes and return the company to annual growth.

Tesla launches two new affordable models with ‘Standard’ Model 3, Y offerings

Tesla launched the new affordable Model 3 and Model Y “Standard” trims on October 7, which introduced two stripped-down, less premium versions of the all-electric sedan and crossover.

They are both priced at under $40,000, with the Model 3 at $37,990 and the Model Y at $39,990, and while these prices may not necessarily be what consumers were expecting, they are well under what Kelley Blue Book said was the average new car transaction price for September, which swelled above $50,000.

Despite the rollout of these two new models, it is interesting to hear that a Wall Street firm would think that Tesla is going to return to more stable delivery figures and potentially enter a new growth phase.

Many Wall Street firms have been more focused on AI, Robotics, and Tesla’s self-driving project, which are the more prevalent things that will drive investor growth over the next few years.

Wedbush’s Dan Ives, for example, tends to focus on the company’s prowess in AI and self-driving. However, he did touch on vehicle deliveries in the coming years in a recent note.

Ives said in a note on October 2:

“While EV demand is expected to fall with the EV tax credit expiration, this was a great bounce-back quarter for TSLA to lay the groundwork for deliveries moving forward, but there is still work to do to gain further ground from a delivery perspective.”

Tesla has some things to figure out before it can truly consider guaranteed stability from a delivery standpoint. Initially, the next two quarters will be a crucial way to determine demand without the $7,500 EV tax credit. It will also begin to figure out if its new affordable models are attractive enough at their current price point to win over consumers.

Continue Reading

Investor's Corner

Bank of America raises Tesla PT to $471, citing Robotaxi and Optimus potential

The firm also kept a Neutral rating on the electric vehicle maker, citing strong progress in autonomy and robotics.

Published

on

Credit: Tesla

Bank of America has raised its Tesla (NASDAQ:TSLA) price target by 38% to $471, up from $341 per share.

The firm also kept a Neutral rating on the electric vehicle maker, citing strong progress in autonomy and robotics.

Robotaxi and Optimus momentum

Bank of America analyst Federico Merendi noted that the firm’s price target increase reflects Tesla’s growing potential in its Robotaxi and Optimus programs, among other factors. BofA’s updated valuation is based on a sum-of-the-parts (SOTP) model extending through 2040, which shows the Robotaxi platform accounting for 45% of total value. The model also shows Tesla’s humanoid robot Optimus contributing 19%, and Full Self-Driving (FSD) and the Energy segment adding 17% and 6% respectively.

“Overall, we find that TSLA’s core automotive business represents around 12% of the total value while robotaxi is 45%, FSD is 17%, Energy Generation & Storage is around 6% and Optimus is 19%,” the Bank of America analyst noted.

Still a Neutral rating

Despite recognizing long-term potential in AI-driven verticals, Merendi’s team maintained a Neutral rating, suggesting that much of the optimism is already priced into Tesla’s valuation. 

Advertisement

“Our PO revision is driven by a lower cost of equity capital, better Robotaxi progress, and a higher valuation for Optimus to account for the potential entrance into international markets,” the analyst stated.

Interestingly enough, Tesla’s core automotive business, which contributes the lion’s share of the company’s operations today, represents just 12% of total value in BofA’s model.

Continue Reading

Elon Musk

Tesla analyst: ‘near zero chance’ Elon Musk’s $1T comp package is rejected

“There is a near-zero chance that $TSLA shareholders will vote down Elon’s new proposed comp plan at the Nov 6 shareholders’ meeting.”

Published

on

tesla elon musk

A Tesla analyst says there is “zero chance” that CEO Elon Musk’s new compensation package is rejected, a testament to the loyalty and belief many shareholders and investors have in the frontman.

Tesla investors will vote on November 6 at the annual Shareholder Meeting to approve a new compensation package for Musk, revealed by the company’s Board of Directors earlier this month.

The package, if approved, would give Musk the opportunity to earn $1 trillion in stock, an ownership concentration of over 27 percent (a major request of Musk’s), and a solidified future at the company.

The Tesla Community on X, the social media platform Musk bought in 2023, is overwhelmingly in favor of the pay package, though a handful of skeptics remain.

Nevertheless, the big pulls of this vote are held by proxy firms and other large-scale investors. Two of them, Institutional Shareholder Services (ISS) and Glass Lewis, said they would be voting against Musk’s proposed compensation plan.

Tesla CEO Elon Musk’s $1 trillion pay package hits first adversity from proxy firm

Today, the State Board of Administration of Florida (SBA) said it would vote in favor of Musk’s newly-proposed pay day, making it the first large-scale shareholder to announce it would support the CEO’s pay.

One analyst said that Musk’s payday is inevitable. Gary Black of the Future Fund said today there is a “near-zero chance” that shareholders will allow Musk’s pay package to be rejected:

There is a near-zero chance that $TSLA shareholders will vote down Elon’s new proposed comp plan at the Nov 6 shareholders’ meeting.”

He added an alternative perspective from Wedbush’s Dan Ives, who said that he had a better chance of starting for the New York Yankees than the comp package not being approved.

Black’s the Future Fund sold its Tesla holdings earlier this year. He explained that the firm believed the company’s valuation was too disconnected from fundamentals, citing the P/E ratio of 188x and declining earnings estimates.

The firm maintained its $310 price target, and shares were trading at $356.90 that day.

Shares closed at $452.42 today.

The latest predictions from betting platform Kalshi have shown Musk’s comp package has a 94 percent chance of being approved:

Continue Reading

Trending