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Tesla's Cybertruck Response Falls Short of Expectations

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4.4

Andrew R. Michaud

• December 04, 2023

Despite the hype surrounding Tesla's new Cybertruck, the response has been underwhelming. Priced a little steep, it falls short of people's expectations in terms of range on a single charge. Charging times are decent, but not outstanding. On top of that, the more affordable versions won't be available for months, if not years.

According to Wall Street analysts, the consensus is that the Cybertruck is merely acceptable. Pierre Ferragu from New Street Research remarks, "Let's face it: the Cybertruck is not going to outperform its competition in terms of performance metrics, except perhaps for the beast." Although competition has caught up with Tesla in energy density and architecture, they still lag behind.

The "beast" is the Cyberbeast variant of the truck, featuring three motors that allow it to accelerate from zero to 60 miles per hour in under three seconds. Surprisingly, it's even faster than a Porsche 911 GT3 RS, despite weighing an additional 3,000 pounds. However, the starting price for the Cyberbeast is about $100,000.

For those seeking a more affordable option, the single-motor, rear-wheel drive version starts at around $60,000. Unfortunately, this model won't be available until 2025, as stated on Tesla's website.

Ferragu also mentions in his report that the range achieved with the battery pack suggests that Tesla still outperforms its competitors in terms of efficiency. This demonstrates Tesla's continued advantage over other car manufacturers. However, the price of the Cybertruck is 20% to 34% higher than initially anticipated in 2019 when it was first revealed.

While Ferragu acknowledges that the Cybertruck is a significant product for Tesla, generating visibility and a dedicated following, he believes it won't significantly impact the company's financial performance in the medium term.

One area of innovation lies in the manufacturing process. Ferragu predicts that the stainless steel paneling and unibody design will ultimately reduce production costs. However, this cost-saving measure is not reflected in the truck's price, as Tesla seems reluctant to ramp up production too quickly.

Tesla's Innovative Approach to Building the Cybertruck

Tesla's CEO, Elon Musk, has admitted multiple times that building the Cybertruck has been a challenging endeavor. Recently, Lars Moravy, Tesla's vehicle engineering vice president, shed light on the company's innovative process for bending the selected stainless steel grade for the truck.

Analysts' Perspectives on the Cybertruck

Despite some lukewarm feedback, it's important to note that these observations are not from Tesla skeptics. In fact, several analysts, including Ferragu and Dan Ives, have given the Cybertruck a bullish rating.

Ferragu, a Tesla bull, rates the shares as a Buy, with a price target of $300 per share. Similarly, Ives, who is also a Bull, rates the shares as a Buy, with a price target of $310 per share. Although Ives believes the pricing is in line with expectations, he agrees with Ferragu that the Cybertruck won't significantly impact Tesla's financials until 2024.

RBC analyst Tom Narayan also rates the shares as a Buy, with a price target of $301 per share. Like his counterparts, Narayan views the Cybertruck positively, stating that the pricing aligns with their predictions. However, he doesn't anticipate more than 20% of the one million Cybertruck reservations to convert into sales.

Analysts Remain Unswayed

Despite some concerns surrounding the Cybertruck, none of the analysts are changing their opinions, and this sentiment extends beyond Wall Street. There haven't been any upgrades or downgrades of Tesla stock following the Cybertruck event. The average analyst price target remains unchanged at approximately $240 per share.

This lack of significant reaction is understandable. If there had been any groundbreaking developments in pricing or technology during the event, it could have influenced analysts' perspectives. However, since the event met expectations, the consensus remains largely unchanged.

Market Response and Investor Takeaways

Tesla's stock experienced a dip of 0.8% during midday trading, while the S&P 500 and Nasdaq Composite were down 0.7% and 1.1% respectively. Currently priced at around $237 per share, Tesla stock has decreased by nearly $10 since just before the Cybertruck launch. However, shares have remained relatively stable over the past week.

Investors can learn a valuable lesson from this: the stock market typically anticipates and builds up momentum before an event, only to sell off afterward.