Tesla's Lack of ‘One More Thing’ Moment Underwhelms Wall Street
(Bloomberg) -- The string of disappointments for Tesla Inc. investors continued after the much-anticipated Model Y unveil was largely found to be underwhelming.
Tesla did announce what it promised. A crossover vehicle that is largely similar to the Model 3, so it allows the company to keep a lid on the price. Production, as expected, will not begin until 2020, which some say might get pushed out to 2021. Yet, the market was expecting more - a “one more thing” moment - a la Apple Inc’s Steve Jobs.
“There was no ‘one more thing’ - nothing incremental to get the Tesla bulls excited. No updates on self driving, mobility as a service, etc.,” Cowen analyst Jeffrey Osborne wrote in a note to clients.
Analysts also flagged the lack of updates on Models S and X, which are Tesla’s highest-margin platforms, and are currently experiencing a slow down in global sales. “Many investors were hoping a refresh announcement would be made, which would spur additional demand,” Osborne added.
Tesla shares reflected the disappointment, and were down as much as 5 percent Friday. The stock has fallen about 16 percent this year, amid a series of setbacks, including multiple job cuts that fueled growth concerns, worries about slowing demand, exit of high-profile executives, and a continued tussle with the U.S. Securities and Exchange Commission.
Here’s what analysts had to say after Thursday’s Model Y event.
Cowen, Jeffrey Osborne
“Tesla’s Model Y reveal underwhelmed us.”
“The Y shares about 75 percent of the parts with the 3 and really just looks like a bigger version. The night held no surprises - no S/X refresh, no new software, and no details on first quarter 2019.”
“We believe the event was more of a capital raising effort and branding exercise. We do not see the new Model Y igniting elevated demand or enthusiasm for the Tesla brand.”
Rates underperform, price target $200.
BofAML, John Murphy
“All automakers are increasingly chasing the CUV segment and will be launching a slew of
new models, which will likely drive an overcrowded market.”
“This will eventually lead to pressure on price, margins, and returns for the entire industry (Tesla included).”
“Tesla appears to be late to the game, which puts the theoretical profit/cash flow opportunity for the Model Y at risk.”
Rates underperform, price target $225.
RBC Capital Markets, Joseph Spak
“Even though Model Y is a bigger market than Model 3, we believe orders could be muted.”
“The vehicle isn’t available for nearly two years and consumers may realize that putting down money early for the Model 3 didn’t yield many benefits.”
“This should be a more profitable vehicle than the Model 3 (just as CUVs built off shared car platforms are more profitable for all automakers).”
“The event felt a little more subdued than other Tesla events we have attended.”
Morgan Stanley, Adam Jonas
“Model Y indeed looks like it shares a lot with the Model 3.”
“This is great from a purchasing and production scale economics perspective, but it looks much more similar to the Model 3 than we had expected.”
“Likely to cannibalize the Model 3, in our opinion. The Model Y offers substantially greater space, nearly identical performance, and nearly as much range as a Model 3, and it has 2 extra seats in a 3rd row which is a very big deal, especially for the U.S. market.”
“Pricing of Model Y is modestly more than the comparable Model 3, and many might argue you get a lot more bang for the buck in the Y.”
Rates equal-weight, price target $260.
Bernstein, Toni Sacconaghi
“The Model Y will follow a staggered roll out akin to the Model 3, with the most expensive models being released in Fall 2020, followed by the base model in Spring 2021.”
“We remain concerned about the manufacturing timeline.”
“Last night’s unveiling essentially reaffirmed Tesla’s target of ‘volume’ production by the end of 2020. This timeline appears similar to the original timeline for the Model 3 ramp, which was ultimately delayed by 9-12 months.”
“Model Y could enjoy a smoother ramp due to its shared platform.”
Baird, Ben Kallo
“We think vehicle specifications came in towards the higher end of expectations.”
“While there is always risk to the production ramp, the Model Y will share a significant portion of components with the Model 3 which could mitigate some risk.”
Rates outperform, price target $465.
Canaccord Genuity, Jed Dorsheimer
“While details were limited in terms of cell configuration, we suspect the Y will share similar architecture in terms of on-board Si-based inverter and Gigafactory cell configuration.”
While anticipates that the Model Y will take time to be a meaningful contributor for Tesla, views the design and development as further evidence that the company is moving far faster than the legacy automakers and still has a commanding lead in electric vehicles.
Says the launch may have fallen shy of “whisper expectations.”
Rates buy, price target $450.
Loup Ventures, Gene Munster
“The biggest surprise was Model Y initial shipments will begin in the fall of 2020, a year later than we had anticipated.”
“This timing likely implies the company is postponing the costly Model Y ramp in 2019 to conserve cash; it would be infeasible to do a $35k Model 3 and a Model Y ramp at the same time.”
“We now believe it’s more likely Tesla will raise money in 2019.”
“Based on our conversations with the buy side investors, we believe the company can successfully raise enough cash ($1 billion-$2 billion) to reach long term profitability.”
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