After the closing bell sounded on Wall Street yesterday, investors learned just how difficult the past quarter has been for Tesla (NASDAQ:TSLA). To put it lightly, it hasn’t been good. The electric vehicle (EV) leader reported adjusted earnings of $2.3 billion or $0.66 per share, a decrease of 37% since last year. This figure represents its smallest profit within the last two years, and it fell short of analysts’ tempered forecasts of 73 cents per share. Additionally, Tesla also missed analysts’ forecasts for third-quarter revenue while its gross profit margins declined by almost 18%. The underlying takeaway is that the company’s aggressive price cuts haven’t proven effective at driving growth or demand. Now, TSLA stock is struggling as markets react to the disappointing Q3 report. However, one recent announcement from Elon Musk might give investors some hope.
Many fans have been waiting anxiously for news of the Tesla Cybertruck. Musk addressed it on the call, and while he stressed the importance of tempering expectations, Tesla tweeted yesterday that the first deliveries are scheduled for next month. While that hasn’t been enough to boost TSLA stock, it still warrants a closer examination. This development offers some insight into just how much of an impact this product will have when it gets to market.
TSLA Stock in the Age of the Cybertruck
It’s going to be hard for TSLA stock to overcome the disappointing Q3 earnings report. As of this writing, it is down 9% for the day, and its current trajectory suggests it has further to fall. This is hardly surprising, especially given the company’s valuation, which many experts believe is too high. InvestorPlace contributor Larry Ramer recently posed the question: “Is the Musk bubble finally bursting?” Well, it may not have fully burst, but the air seems to be slowly draining out.
With Tesla facing a difficult road ahead, more eyes than ever will be on the Cybertruck. Musk recently shared the company’s post on X, which highlights that production on the hotly awaited vehicle is moving along as scheduled.
Q3 Shareholder Update → https://t.co/sXBSeLibSL
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HighlightsCybertruck production remains on track for later this year, with first deliveries scheduled for November 30th at Giga Texas.
Production of our higher density 4680 cell is progressing as planned & we continue building… pic.twitter.com/FqpseLujaA
— Tesla (@Tesla) October 18, 2023
On the call, the CEO strongly implied that the Cybertruck’s production could have been handled better. He admitted that Tesla “[dug] its own grave” with the vehicle. As The Verge reports:
“On Tesla’s Q3 earnings call Wednesday evening, CEO Elon Musk said he wanted to “temper expectations” as production ramp-up for Cybertruck will be extremely difficult. Musk says Tesla is targeting a quarter million Cybertrucks per year in the future, but that won’t happen until after 2024, and confirmed that more than 1 million people have reserved the truck.”
With that in mind, it’s hard to believe that the Cybertruck will save TSLA stock. Although interest is clearly high, that doesn’t mean that demand will continue. The vehicle may be eye-catching, but it is both expensive and impractical. Additionally, Tesla’s competitors are producing similar products, which will likely be offered at more affordable prices. On top of all that, Musk has broken promises he’s made regarding the Cybertruck’s production before. At this point, it’s hard to take any of his delivery forecasts too seriously.
The Road Ahead
When the Tesla Cybertruck hits the road, it will certainly spark some buzz for the company. Retail investors will be excited, and TSLA stock may get a slight bump. But investors should see the bigger picture. Tesla has failed to stoke demand for its EVs by slashing prices. Why should an impractical, highly-priced truck with limited utility change anything?
At the end of the day, the Cybertruck is a vanity product that won’t replace the pickup truck. Don’t expect workers to trade in their beloved Ford (NYSE:F) or Chevy pickups for something that looks like it was designed for a science-fiction movie. Even if they want to make the switch to driving electric, a truck from Rivian (NASDAQ:RIVN) would make more sense.
Even if TSLA stock does see a slight boost from the Cybertruck buzz, the company will still be facing significant problems ahead. This is a time to double down on lower-cost EV stocks with lower valuations.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
