HSBC analyst Michael Tyndall adjusted the price target for Tesla (NASDAQ:TSLA) shares to $124, up from the previous $118, while maintaining a Reduce rating on the stock. The revision follows Tesla's third-quarter delivery report, which showed the company delivered 463,000 vehicles, marking a 6% increase year-over-year and a 4% rise quarter-over-quarter. These figures aligned with consensus estimates but were 10% higher than HSBC's projections.
Tesla's energy storage deployments, however, did not meet expectations, achieving 6.9 gigawatt-hours in the quarter. This represented a significant 73% increase from the previous year but a 27% decline from the previous quarter, falling 23% short of the consensus and 25% below HSBC's forecast. According to company management, energy storage deployments can be uneven over time.
To align with the consensus outlook for 2024, Tesla would need to grow its deliveries by approximately 1% year-over-year in the fourth quarter of 2024. With third-quarter production only 1.5% higher than deliveries, it appears that Tesla's management is anticipating modest growth in the final quarter as well.
The upcoming Robotaxi event is expected to be a focal point in the short term. Although details remain sparse, the event is rumored to be hosted in Los Angeles, potentially at Warner Bros studios. Industry observers are anticipating the event to generate significant attention and possibly include a few surprises. Key questions that need addressing include the level of autonomy of the Robotaxis, the amount of data on miles driven autonomously, regulatory approval challenges, and the timeline for commercial availability.
Tesla is not alone in the autonomous vehicle space, with competitors such as Waymo already operating over 100,000 rides per week in the United States and Baidu (NASDAQ:BIDU) having completed 7 million rides in China. The market is watching to see how Tesla's offerings will compare.
HSBC has expressed concerns over the timing of the delivery and commercialization of Tesla's pre-revenue opportunities, such as Dojo, Full Self-Driving (FSD), Optimus, AI Compute, and other projects. The firm suggests that the market's valuation of Tesla may be optimistic, anticipating a quicker timeline to market than what HSBC believes is realistic.
The stock has shown a pattern of rallying ahead of major events and then declining as details emerge, a trend HSBC attributes to the disparity between the excitement of Tesla's announcements and the company's fundamental performance.
In other recent news, Tesla Inc. is set to develop new battery cells for its Cybertruck and upcoming robotaxi by 2026. However, the development of these 4680 battery cells has faced challenges, with high loss rates during test production. Tesla plans to incorporate this technology into Cybertruck batteries by mid-next year, with the aim to produce between 2,000 and 3,000 Cybertrucks weekly.
In the analyst sphere, Bernstein SocGen Group maintained its Underperform rating on Tesla, highlighting a shift in investor attention to Tesla's robotaxi. Despite this shift, the firm expressed doubts about Tesla's capacity to outpace competitors in the autonomous driving market. Meanwhile, Goldman Sachs reaffirmed its Neutral stance on Tesla, focusing on the company's third-quarter vehicle deliveries and production numbers.
Tesla has also discontinued its most affordable Model 3 variant in the U.S., now offering the Model 3 Long Range Rear-Wheel Drive as its entry-level electric vehicle. This change follows increased tariffs on Chinese goods, affecting the previously offered model's battery cells. Truist Securities adjusted its price target for Tesla to $236, maintaining a Hold rating on the electric vehicle manufacturer's shares.
InvestingPro Insights
To complement HSBC's analysis, recent data from InvestingPro offers additional perspective on Tesla's financial position and market performance. As of the latest available data, Tesla boasts a substantial market capitalization of $779.56 billion, reflecting its dominant position in the electric vehicle market.
InvestingPro Tips highlight that Tesla "holds more cash than debt on its balance sheet" and that "cash flows can sufficiently cover interest payments." These factors suggest a strong financial foundation, which could be crucial as the company navigates the capital-intensive development of new technologies like Robotaxis and autonomous driving systems.
However, the company's valuation metrics present a mixed picture. Tesla is currently trading at a P/E ratio of 62.59, which InvestingPro characterizes as "trading at a high earnings multiple." This high valuation could align with HSBC's concerns about the market's optimistic expectations for Tesla's pre-revenue opportunities.
It's worth noting that Tesla has shown a "strong return over the last month" with an 18.24% price increase, and a significant 47.89% gain over the past six months. These performance metrics may reflect the market's anticipation of upcoming events like the Robotaxi announcement.
For investors seeking a more comprehensive analysis, InvestingPro offers 19 additional tips on Tesla, providing a deeper understanding of the company's financial health and market position.
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