Following A Lackluster Cybertruck Debut, Is Tesla Stock Overvalued At $240?

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began deliveries of its new Cybertruck on Thursday after nearly two years of production delays due to supply chain issues and technical complications. Tesla is counting on the model, which is its first launch of an all-new passenger vehicle in more than three years, to create buzz and compete in an increasingly crowded electric vehicle market and more than a million people have paid to book a Cybertruck so far. So, will the truck be the engine of the next wave of growth for Tesla? We think this seems unlikely, for several reasons.

Vehicle prices were higher than expected. Tesla announced a starting price of $40,000 during the first unveiling event in 2019 and investors expected a price of around $50,000, taking into account inflation in the price of electric vehicle raw materials in over the last few years. However, Tesla now says the base rear-wheel-drive variant of the vehicle will cost around $61,000, more than 50% more than was originally promised. Additionally, this base variant will only be available from 2025. The dual-motor all-wheel drive variant, which will be available from 2024, costs around $80,000, while the top-of-the-line “Cyberbeast” model costs $100,000. For comparison, Rivian’s highly acclaimed (and slightly smaller) R1T has a starting price of $73,000, while Ford’s more conventionally styled F-150 Lightning starts at around $50,000 . The higher price could mean that a good portion of initial pre-orders, which required a $100 refundable payment, will not follow through on their orders.

Overall, we think the Cybertruck will be a niche vehicle for Tesla, aimed at affluent customers. For perspective, the Model S sedan, which starts at $75,000, and the Model Y, which starts at around $80,000, together sold about 16,000 units in the most recent quarter, which is less than 5% of Tesla’s total volumes. We might see slightly higher volumes on the Cybertruck. Tesla, for its part, said it ultimately plans to build around 250,000 Cybertruck pickups per year after 2025. While we think this figure may be a bit high given the vehicle’s high price, Tesla could eventually introduce lower variants or reduce entry prices, as it did recently with its Model Y and Model 3.

Overall, TSLA stock has seen little change, falling slightly from levels of $235 in early January 2021 to around $240 now, compared to an increase of around 20% for the S&P 500 over that period of around 3 years.

Overall, TSLA stock’s performance relative to the index has been quite volatile. The stock’s returns were 50% in 2021, -65% in 2022, and 95% in 2023. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022, and 19% in 2023, which indicates that TSLA underperformed the S&P in 2022. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult in recent years for individual stocks; for other heavyweights in the consumer discretionary sector, including AMZN, HD and TM, and even for mega-cap stars GOOG, MSFT and AAPL.

On the other hand, the Trefis High quality walletwith a collection of 30 titles, has has outperformed the S&P 500 every year during the same period. Why is that? As a group, stocks in the HQ portfolio have generated better returns with less risk relative to the benchmark; less of a roller coaster ride as evidenced by HQ Portfolio Performance Metrics. Given the current uncertain macroeconomic environment characterized by high oil prices and high interest rates, could TSLA face a similar situation as in 2022 and underperform the S&P over the next 12 months – or will it see a sharp rise?

We currently remain relatively neutral on Tesla stock, with a price estimate of $237, which is slightly below the current market price. We continue to believe that Tesla will remain a big beneficiary of the long-term transition to cleaner transportation and energy production, with the company benefiting from its well-oiled supply chain, superior battery and drivetrain technology , and its advance in terms of software and autonomy. -driving technology. However, Tesla stock currently trades at around 69 times consensus 2024 earnings, which could limit near-term upside. Competition is also intensifying and besides the Cybertruck, Tesla’s model range is aging, with its other four vehicles remaining visually the same since their launch. This contrasts with traditional automakers, which typically overhaul their vehicle models every seven to eight years. Furthermore, Tesla’s price cuts in the United States and China are having an impact on margins. Tesla’s 2023 profits are expected to decline year over year. See our analysis on Tesla valuation: Is TSLA stock expensive or cheap? for more details on Tesla’s valuation and how it compares to its peers. For more information on Tesla’s business model and revenue trends, view our dashboard at Tesla income: How does TSLA make money?

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