With Little Revenue Expected, Cybertruck Could Dunk Tesla Stock

Four years ago, Tesla promised a Cybertruck with a 500-mile battery range for $39,900, according to Wired.

On November 30, Tesla laid an egg by announcing a base Cybertruck with 50% less range – 250 miles – priced at $60,990, noted Wired, or 53% above the amount promised in November 2019.

With two million “reservists” – who paid $100 to pre-order the Cybertruck – many questions come to mind:

• How many reservists will end up purchasing what seems like a gigantic disappointment to anyone who wants to use the vehicle for purposes other than showing off?
• Will buyer disappointment translate into lower-than-expected Cybertruck revenue for Tesla?
• Does the 43% drop from Tesla’s peak stock price mean the electric vehicle maker’s shares are now at a bargain price?

I don’t know how many people will ultimately buy the Cybtertruck. My “base case” is that Tesla would generate $2.4 billion in Cybertruck revenue in 2024 and $6.1 billion in 2025.

It’s far from that of Morgan Stanley
M.S.
estimate that I calculate at $2.7 billion in revenue in 2024 and $6.6 billion in 2025.

The investment bank estimates that the Cybertruck will generate a tiny fraction of Tesla’s revenue. “By 2025, we expect Cybertruck to account for less than 5% of Tesla’s revenues and closer to 0% of profits,” the report reported. Financial Times.

Absent another growth catalyst, Tesla stock could continue to fall from its high of $407 per share reached in early November 2021.

Tesla Cybertruck launched

The Cybtertruck Tesla announced on November 30 was more expensive than promised with less autonomy. However, its design – which largely met expectations – seemed likely to put pedestrians in danger, according to Street Blog.

Here are some key features of the Cybertruck:

• Design: “Bunker-on-Wheels of the Apocalypse.” » Social media compared the Cybertruck’s design to “a withered Blade Runner jalopy and an industrial refrigerator,” noted Street blog
• Raised body. Although it has an automatic pedestrian detection system, the Cybertruck’s hood is at chest level with six-foot Tesla CEO Elon Musk and includes an “adaptive air suspension” that lifts the vehicle an additional 10.4 inches. Street blog reported.
• Ram on wheels. The Cybertruck’s flat, blunt front, thick “armored” windshield glass and stainless steel edges are so sharp that its approval for sale in Europe is unlikely, noted Street Blog.
• Blinding light, rapid acceleration. The Cybertruck features a giant headlight with a single light bar that could blind oncoming drivers as it accelerates from “zero to 60 miles per hour in 2.6 seconds, which, if true, would mean that it has faster acceleration than most NASCAR and Formula 1 cars.” vehicles, without any accompanying engine roar to warn anyone of its arrival,” Street Blog wrote.

Finally, the Cybertruck’s stainless steel body poses significant quality issues. The ultra-hard stainless steel that Tesla uses for the Cybertruck’s outer shell has proven difficult to bend and manipulate, according to the Wall Street Journal.

Tesla was challenged to “shape the material into body panels that align properly and do not result in large gaps when installed…and it is so hard and strong that it can be difficult to flatten,” a declared on Newspaper note.

Cybertruck revenue estimate

Many reservists are likely to cancel their orders. Additionally, Tesla may struggle to meet its production targets. In addition, Tesla’s competitors offer interesting alternatives to the Cybertruck.

Optimistic scenario

My optimistic scenario is that Tesla sells Cybertrucks for $4.6 billion in 2024 and $15.3 billion in 2025. Here are the assumptions I used:

• Average Cybertruck price paid: $61,000.
• Deliveries 2024: 75,000 what Bernstein considers “ambitious”, according to Fortune.
• Deliveries 2025: 250,000 according to Musk, Fortune note.

Of course, Musk warned of the difficulties in producing Cybertrucks. “I want to emphasize that there will be enormous challenges in achieving volume production with the Cybertruck,” Musk told investors in October.

Reference scenario

Since Bernstein and Musk consider these numbers optimistic, it might be more realistic to expect lower deliveries while keeping the same assumption regarding price.

Specifically, my base case scenario gives Cybertruck revenues of $2.4 billion in 2024 and $6.1 billion in 2025, assuming the following:

• Deliveries 2024: 40,000.
• Deliveries 2025: 100,000.

Some reservists on a Reddit forum are unhappy. Cybertruck Reddit forum “has some very disappointed customers,” says Vice. Zack Nelson, who attended the Cybertruck unveiling and operates a YouTube channel JerryRigEverything, said the delivery event “left many attendees confused and disappointed,” according to Business insider.

Although some people are likely to buy the Cybertruck despite these feelings, Tesla faces competition from rivals providing cheaper battery-powered trucks. These include Ford’s $49,000 F-150 Lightning, the battery-powered version of the truck that has dominated the pickup segment for decades; GM which will soon launch its electric Chevrolet Silverado at $52,000, and Stellantis – is preparing to offer a RAM 1,500 REV at $58,000, according to Wired.

What should Tesla investors do?

Morgan Stanley forecasts fewer Cybetruck shipments than my base case. “We forecast 50 deliveries in FY23, followed by 30,000 units in FY24 and 78,000 units in FY25. Our ATP assumption starts at $90,000 and drops to 84 000 by 2025,” reported the Financial Times.

What are the new Tesla products beyond the Cybertruck? Fortune says Tesla has “a product problem.” With some of the tax credit For Tesla’s Model 3 which expires in 2024, effective prices for electric vehicles will increase at a time when many consumers feel squeezed.

My guess is that Tesla shares have fallen further.