Elon Musk just unveiled the new Tesla (NASDAQ:TSLA) Cybertruck, revealing a remarkable feat of engineering. The futuristic-looking electric vehicle (EV) features a low center of gravity making it difficult to tip over; it is incredibly fast, doing the quarter-mile in under 11 seconds; and it’s bulletproof! This will have important implications for TSLA stock.
Video showed someone unloading a machine gun into the side of the Cybertruck without penetrating the stainless steel plating. The EV raced a Porsche 911 and beat the sports car, all the while the Cybertruck was towing a second Porsche 911. And Musk maintains the EV’s low center of gravity and wide stance similar to the Tesla Model S means it won’t tip over in a crash.
As exciting and awe-inspiring as the Cybertruck event was, should investors buy Tesla stock because of it? Full truck production won’t begin until 2024 and Tesla produced fewer EV cars in the third quarter than in the second. Yet it’s still on track to produce a massive 1.8 million vehicles this year, so let’s take a closer look at whether TSLA stock is a buy.
A visionary automaker
There’s no question that what Tesla achieved over the past decade or so completely changed the automotive industry. TSLA stock showed the world mass-produced EVs could be popular with consumers and profitable for the company.
Every major automaker now has an EV division. Some like General Motors (NYSE:GM) and Ford (NYSE:F) declared their future will be fossil fuel-free. With falling consumer demand , that remains to be seen. Yet it’s clear that Tesla was the driving force in that vision in a way that more timid, earlier forays into the field like the Toyota (NYSE:TM) Prius or Nissan (OTCMKTS:NSANY) Leaf could not match.
Tesla produced 430,000 EVs in the third quarter. That’s a 10% drop sequentially, but a 25% increase over the year-ago figure. It maintains the drop was due to planned production shutdowns for factory upgrades, which it announced at the end of the second quarter. Year to date Tesla has made 1.35 million vehicles. Full-year target production volume of 1.8 million EVs remains unchanged. That implies it will produce 450,000 vehicles in the fourth quarter or 2% more than in 2022.
Tesla is the world’s largest EV maker, but maybe not for long. China’s BYD (OTCMKTS:BYDDF) is poised to overtake it in the fourth quarter.
As good as it gets — for now
Musk admits China is its biggest competitor. He told The New York Times Dealbook conference recently, “There’s a lot of people out there who think that the top 10 car companies are going to be Tesla followed by nine Chinese car companies. I think they might not be wrong.”
The launch of the Cybertruck might not change that calculus. The debut of the new vehicle won’t significantly impact Tesla’s finances, at least not for a while. It can pack a lot of gear into its bed, but its design does not appear particularly practical.
What it does do is remind people of the technological prowess on display at Tesla. There could be a halo effect from the Cybertruck onto Tesla’s other EVs. EVs aren’t as green as they’re touted to be, but many car buyers will consider moving over to them anyway. The Cybertruck and Tesla’s lineup of vehicles could benefit from the transition.
Worth the price?
Tesla’s stock is not cheap. It trades at 77 times earnings, goes for 8 times sales, and over 200x free cash flow. Shares are up 95% year to date and Tesla was part of the Magnificent 7 group of tech stocks that helped lift the S&P 500 higher this year.
Yet the EV maker launched a series of price cuts to keep sales growing. That caused a hit to profits and margins. I view the Cybertruck unveiling as a non-event for investors for now. And with the stock at such lofty valuations amid slowing buyer demand, I think investors should sit on the sidelines for now.
On the date of publication, Rich Duprey did not hold (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.
