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Tesla Sees Delivery Delays but Wood Reiterates $3,000 Target Price

tesla

Cathie Wood of ARK Invest, who is among the most prominent Tesla bulls, has reiterated the $3,000 target price for the EV (electric vehicle) company even as TSLA admitted to delays in the delivery timelines for upcoming models.

Tesla had unveiled its Cybertruck pickup in 2019 with much fanfare. While the event was marred by a broken window of the model despite the company claiming that it was durable, the model has reportedly surpassed over 1.2 million orders. To put that in perspective, the company sold just about half a million cars last year. Also, the all-electric Lightning model of the F-150, whose ICE (internal combustion engine) model has been America’s best-selling pickup for over three decades, has received only about 130,000 orders.

Tesla Cybertruck

When the Cybertruck was launched in 2019, Musk had said that it would be available by the end of 2021. However, the timeline got stretched since then and now the company expects that the model will be available only by the end of 2022. Ford would take the lead at least in terms of the delivery timeline as the company expects to start delivering the F-150 Lightning by spring next year. Tesla also extended the delivery timeline for Roadster.

EV pick-ups

Meanwhile, the first-mover advantage in EV pickups might be with Lordstown Motors which is coming up with its Endurance model. The company has been surrounded by multiple controversies and was also grappling with a shortage of cash. However, it seems to have put the worst behind with a new leadership team in place. The company has also secured funding that will help it continue its operations beyond 2022. That said, whether Endurance can make its mark in a market where it would compete with the current best-seller F-150 and the formidable Cybertruck, remains to be seen.

Tesla Berlin Gigafactory

Tesla currently produces cars at the Freemont plant in the US and the Shanghai Gigafactory. However, its Berlin Gigafactory is expected to come online later this year. Over the years, Tesla has gone through several production hiccups. However, the pace of ramp-up at the Shanghai Gigafactory was quite smooth and left Tesla bears surprised.

Musk has reportedly told employees that September would be “the craziest month of deliveries Tesla will ever have.” Incidentally, in September 2019, a leaked Tesla email showed that the company was aiming for 100,000 deliveries in the quarter. The deliveries fell short of the target but ended up being better than what analysts were expecting.

The rally in Tesla stock began in October 2019 and since then it has only kept on strengthening. The stock rose a massive 740% last year and its market cap swelled above the combined market cap of all leading automakers put together. The stock has looked weak in 2021 and is trading flat for the year even as the S&P 500 is up almost 20% over the period.

Cathie Wood

Meanwhile, Cathie Wood has reiterated her bullish views on Tesla. “Our estimate for Tesla’s success has gone up. The main reason for that is their market share. Instead of going down from year-end 2017 to today, it has actually gone up fairly dramatically,” said Wood while maintaining her base case $3,000 target price on the stock.

Wood has been a long-time Tesla bull and ARK holds the stock in several ETFs including the flagship ARK Innovation ETF (ARKK) where the Elon Musk run company is the top holding. Notably, Wood has sold all the Chinese names in ARKK. She warned of a valuation reset in Chinese stocks amid the crackdown in China. Recently, she has been buying JD.com shares but those were not for ARKK but a different ETF.

Notably, Chinese stocks have come off their 2021 lows as there hasn’t been any new crackdown on the tech industry over the last couple of weeks.

Gene Munster on Tesla

Gene Munster of Loup Ventures expects Tesla’s market capitalization to rise to $2 trillion by 2023. Munster had correctly predicted Apple’s market capitalization reaching $2 billion. However, he sees Apple’s entry into the EV industry as a big risk for Tesla. Given its fan following and strong brand and history of coming up with premium products that buyers love, Apple could be the biggest challenge that Tesla investors should watch out for.

Tesla valuation

Musk, who has last year tweeted that he finds Tesla stock too high, tried to justify the company’s valuation during the earnings call. Using a hypothetical example Musk said that it can generate as many revenues from Robotaxis and FSD (full self-driving option) as it is making from selling cars. He also said that all these revenues would be almost gross profit and would add to its net income.

Taking the example of annual revenues of $60 billion, Musk said, “So — and the pace you get 20 PE on that, it’s like $1 trillion and the company is still in high-growth mode. So, I think there is a way to sort of like justify the valuation of the company where it is using just the cars and nothing else, the cars with FSD.” He added, “And I suspect at least some number of investors are taking that approach.”

Wall Street is divided

Wall Street is possibly not as divided on any other stock as it is on Tesla. According to the data from TipRanks, the stock has an average target price of $697.50 which is a discount of almost 5%. Meanwhile, there is a lot of dispersion in its target prices and they range between a low of $150 and a high of $1,200.

While many see Tesla as a disruptor and a play on not only EVs but also autonomous driving and robotaxis, others see it as an overvalued automaker. To be sure, It’s not possible to justify Tesla’s market cap if we consider it only as an automaker. In fact, it has never been possible to do so ever in the company’s history.

The real value for Tesla investors would come from the software part of the business where Musk sees the price of the FSD option to eventually rise ten-fold to $100,000. But then, currently, the company’s profits have entirely been coming from the sales of carbon credits. As for the FSD, it is being investigated after multiple crashed and even the name is under scrutiny as it is not fully autonomous as the name may reflect.

Tesla stock was trading almost flat in post markets on Friday. US markets are closed today on account of the labor day holiday.

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Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.