Sunday, February 25, 2024
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How the Tesla Cybertruck Will Crash TSLA Stock in 2024

Elon Musk shouldn’t have banked Tesla’s future on an unconventional and impractical new vehicle

Since CEO Elon Musk first debuted the Cybertruck, the futuristic-looking vehicle has fascinated audiences across the globe. Tesla (NASDAQ:TSLA) had originally slated production for the electric vehicle (EV) to begin in 2021, although it pushed the date to 2022 and ultimately 2023. Finally, after two years of missing deadlines, Musk announced that Tesla would start Cybertruck deliveries on Nov. 30, 2023.

Since that day, TSLA stock has dropped more than 20%. 

For all the hype that surrounded the Cybertruck’s release, it has become clear that the highly anticipated EV hasn’t been the catalyst Musk hoped it would be. This has led more than a few experts to question the EV company’s growth prospects, particularly as a troubling earnings report casts further doubt on Tesla’s future.

TSLA Stock in the Age of the Cybertruck

There’s no denying that TSLA stock is facing several obstacles as it heads further into 2024. 

The company recently reported earnings for the fourth quarter of 2023, coming in below analyst forecasts on both earnings and revenue. On top of that, Tesla warned investors that EV growth may slow down this year. That would make sense, as the EV market is recovering from a difficult year marked by falling demand. 

So, the Cybertruck seems to have debuted at an inopportune time. It doesn’t help that concerns regarding its functionality are rising, either. Reports of frustratingly long charging times and problems with how the truck performs on snowy road conditions have cast doubt over the model’s practicality and utility.

These instances haven’t set a positive tone for the Cybertruck’s first year. If an expensive truck can’t perform the functions that its consumer base needs, the EV will likely have a difficult time making market inroads. 

Scott Acheychek, CEO of REX Shares, thinks that while the Cybertruck may be visually impressive, it may also not be as practical as the vehicles it competes against. He told InvestorPlace that the Cybertruck could end up a “novelty item for tech enthusiasts and Tesla diehards.” Additionally, it won’t be easy for the EV to compete against electric versions of already-popular trucks, like Ford’s (NYSE:F) F-150 Lightning and the Chevy Silverado EV from General Motors (NYSE:GM).

Michael Schmied, a lead financial consultant at Kredite Schweiz, offered InvestorPlace further context on the Cybertruck’s limited appeal. He notes that, while the vehicle’s features may seem impressive on the surface, it still represents a venture into an unexplored area for Tesla. The company has never produced a truck or vehicle intended for off road purposes and towing.

“While the Cybertruck boasts advanced features such as an ultra-hard stainless steel exoskeleton, Tesla Armor Glass, and the ability to tow over 14,000 pounds, [it’s] a significant departure from traditional pickup trucks. Its high cost could be a deterrent for the typical pickup truck consumer. Affordability is a key factor in vehicle purchases, and until the cost of owning an EV like the Cybertruck comes down, I believe the majority of pickup truck users will stick with more traditional, and affordable, models.” 

Entering a new product market can compromise a company if the reception from consumers is poor. And since the Cybertruck is facing problems with both its design and software systems, it’s looking increasingly like Tesla will have a difficult time establishing itself as an EV truck maker. That may cast more uncertainty over its growth prospects and further compromise TSLA stock.

Other experts have even said that the Cybertruck isn’t actually a truck, noting that it’s more similar to a two-door El Camino in terms of design and structure. Since its release, even the Cybertruck’s towing capabilities have drawn criticism from drivers.

These complaints severely limit the model’s utility as a work and heavy-duty vehicle. The many consumers who purchase trucks primarily do so for work-related purposes or with a heavy-duty job or activity in mind. If the Cybertruck’s problems with towing and off-road travel persist, it will be hard to market the EV as a better option than other EV trucks. 

Rising Competition on the Road Ahead

It doesn’t help that many of Tesla’s competitors are pumping out more traditional, affordable electric trucks. The Cybertruck has a starting price of $60,990, substantially higher than the $39,900 price tag Musk originally promised. That puts it above some beloved truck models that have recently gone electric. For example, the Ford F-150 Lightning starts at $49,995 while the Chevy Silverado EV will hit the market soon for $52,000. The market will become even more crowded when the GMC Sierra EV releases this year with a starting price of $50,000.

“The growing competition in the electric truck market from companies like Rivian and Ford, with more conventional designs, could challenge Tesla’s market share,” Rob Dillan, founder of EV charging platform EVHype, told InvestorPlace. This could be a critical factor for Tesla’s long-term stock performance.”

Meanwhile, although other electric trucks like the GMC Hummer EV and Rivian (NASDAQ:RIVN) R1T boast higher price tags, the reviews more than make up for it, with emphasis placed on luxury and style. Reviews for the Cybertruck haven’t been as positive. Despite giving the EV an 8/10 rating, even the BBC’s Top Gear admits that “the way it drives […] isn’t ideal.”

Tesla has held an impressive EV market share, but it’s down significantly from the company’s roughly 79% share in 2020. The company clearly hoped that the Cybertruck would help give it an edge and retake lost ground. If anything, however, the new model is likely to drag Tesla down.

The Bottom Line

Unfortunately for Tesla, its problems aren’t likely to stop at the Cybertruck failing to drive growth. Some experts see Tesla’s latest vehicle as genuinely detrimental and fear it could end up pushing TSLA stock down further. 

Jefferies analyst Philippe Houchois stated that “cancelling [the] Cybertruck would probably be positive for shares” in a November note to investors before the start of deliveries. Instead, Houchois encouraged Tesla to focus on higher-volume vehicle opportunities. The analyst has since maintained a “hold” rating on TSLA stock and a $185 price target, below where shares currently trade.

Given TSLA stock’s poor performance of late, it makes sense that the analyst is sticking to his skeptical stance. The Cybertruck hasn’t spurred growth for Tesla so far. It’s looking like a novelty item and isn’t likely to appeal to the broader consumer base that actually buys trucks. 

Tesla appears to have picked the wrong vehicle to rely on for its turnaround. Less than three months out from its rollout, the Cybertruck has generated more uncertainty than hype. Its path forward looks highly questionable. 

On the date of publication, Samuel O’Brient 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.

Samuel O’Brient is a Reporter for InvestorPlace, where his work focuses primarily on financial markets, global economic trends, and public policy. O’Brient writes a weekly column on recent political news that investors should be following.

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