It’s another week and analysts are keeping an eye on some Chinese automakers. Also, a new Tesla bull has emerged from the void and Morgan Stanley analysts have taken an interesting look at one of the most well-known sports car and motorsports brands.
Tesla's new bull
William Blair analyst Jed Dorsheimer has initiated his coverage of Elon Musk-led Tesla (TSLA) with a strong rating on Aug. 29, but his even bolder claim differs slightly from that of enthusiastic optimists like Wedbush's Dan Ives.
In his analyst note, he celebrated Tesla in an almost poetic way, touting the company's “Apple-like ecosystem for the future of energy,” which includes electric vehicles, artificial intelligence, robotaxis and robots working in tandem with humans for a supposed “better world.”
“Looking ahead, fleets of robotaxis have the potential to improve vehicle utilization, and humanoid robots allow energy to be reallocated from menial tasks,” Dorsheimer said.
While touting the viability of Tesla's latest products, Dorsheimer noted that another key function of Tesla is its energy business, which consists of its Megabuck and Powerwall energy storage solutions.
He sees it as “the most underrated component of Tesla’s history.”
“The three key drivers for energy storage are grid stabilization, building data centers and integrating renewables,” Dorsheimer said. And despite the delay in the launch of Tesla products such as fully autonomous driving, robotaxis and its Optimus robot, he believes Wall Street can focus on the energy sector.
Dorsheimer expects Tesla's energy sector to grow at a rate of 50% and account for 25% of the company's revenue in 2028, compared with just 6% in 2024.
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The Chinese connection
Americans who know anything about cars know that Chinese automakers can beat established brands like Tesla and General Motors on price, but behind the veil lies a sobering truth about most brands on the market.
Many of them don't make money.
One of the most prolific examples is Xiaomi, a company originally known for its smartphones and consumer electronics. Its first electric vehicle, the $30,000 SU7 four-door compact sedan, has been a resounding success for the brand.
However, it is Second quarter 2024 results They show that he is losing up to $9,200 per car.
In fact, only two Chinese EV makers are profitable: BYD and Li Auto.
On August 28, Li Auto (LAAF) In its Q2 2024 earnings report, the German automaker reported better-than-expected results despite narrow margins in a “price war” that pushed prices down in the People's Republic. This included a 25.5% increase in vehicle deliveries.
In response to the results, analysts at two different Western banks reacted differently and adjusted their results accordingly.
In his analyst report published on August 29, JPMorgan analyst Nick Lai maintained his Neutral rating but lowered his target price on Li Auto shares from $21 to $19. He noted that while his results reflected the company's own estimates, Lai recommends investors take another look ahead if the automaker does not develop new electric vehicles by 2025.
Alternatively, Bank of America analyst Ming Hsun Lee raised his price target on Li Auto from $30 to $31, reiterating a Buy rating on the automaker's stock.
XPeng's Mona Lisa
Last week, analysts at JP Morgan, Barclays, Bank of America and Citibank cut their price targets on Chinese electric carmaker XPeng, citing disappointing second-quarter 2024 losses and revenue.
In a statement, XPeng (XPEV) Co-President Dr. Hongdi Brian Gu said the company's cost savings through “technical improvement and revenue from technical collaboration in (its) strategic partnership with Volkswagen” have helped the company increase its profit margin.
Additionally, XPeng executives laid out a schedule of new models to be launched from the second half of 2024 through 2026, plans to enter new markets and further development in self-driving car technology.
More EV business:
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- Gavin Newsom's electric vehicle mandate is under threat from the US Supreme Court
- BMW's clever new EV app is a privacy nightmare
However, on August 28, XPeng made good on its promise and introduced something very attractive to consumers and analysts: a new electric vehicle called the MONA M03.
Priced from an exorbitant $16,800 to around $21,850, the MONA M03 could prove to be a masterpiece like Tesla's Model 3, which, ironically, is the inspiration for its name, according to XPeng's CEO.
According to CarNewsChina, XPeng one-ups Tesla by offering the Mona an extensive list of “must-have accessories” and options that include “a plug-in instrument panel, a fragrance dispenser, an adjustable soft headrest pillow along with a memory foam waist support and an ice crystal sunshade.”
Shortly after the presentation, Macquarie analyst Eugene Hsiao upgraded XPeng's stock from Neutral to Outperform, with a $10 price target. Hsiao mentioned that the MONA M03 is “a similar name and a similar car” to Tesla's Model 3 “but at almost half the price.”
A test drive of the new car also revealed that a nearly $17,000 base M03 was “competitively priced with features only seen in cars priced 45 to 95 percent higher.”
Ferrari
The Prancing Horse and the Bull
We all remember the memorable scene from the first “Fast and Furious” movie.
A black Ferrari F355 Spider sits at a traffic light on the Pacific Coast Highway, and alongside it is a heavily modified fluorescent orange Toyota Supra, driven by characters played by Paul Walker and Vin Diesel.
“Nice car. What's the retail price for one of these?” Walker's character asks the Ferrari driver next to him.
“More than you can afford, my friend Ferrari,” the anonymous man driving the Ferrari replies sarcastically before revving his car's engine.
“Smoke it,” Vin Diesel's character tells Walker's character, setting off a dangerous street race in which the Ferrari is left behind.
Although the Ferrari (CAREER) Lost in that movie over 23 years ago, the company is winning in real life.
The Scuderia Ferrari F1 team currently sits third in the Formula 1 Constructors' Championship, following lead driver Charles Leclerc's victory at the Italian Grand Prix in Monza.
The most important thing is that they are winning financially. According to Second quarter 2024 results According to data published on August 1, adjusted EBITDA increased by 13.7% year-on-year, with net profit of 413 million euros, or approximately 457 million dollars.
In an analyst note published on August 27, Morgan Stanley analyst Adam Jonas praised Ferrari's “resilient and proven business model,” sharply raising his price target from $400 to $520 and maintaining his Overweight rating.
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Interestingly, Jonas doesn’t see Ferrari as just another car brand, like Ford or GM. While much of the stock price of outliers like Tesla is based on the potential of Elon’s ai and robotics initiatives, Jonas sees Ferrari as a luxury brand selling a lifestyle, like Hermes and the brands within the Louis Vuitton Moët Hennessy (LVMH) luxury goods conglomerate.
China is, however, one factor that separates the Prancing Horse from the makers of luxury saddles and Birkin bags. Jonas noted that Hermès revealed that 54% of its adjusted profit comes from the Asia-Pacific region, excluding Japan, and that it had previously revealed that 22% of its online customers are repeat shoppers.
By comparison, only 7% of Ferrari's profits are made in China. Moreover, the Maranello-based company's order book is so extensive that it will be very busy for more than two years, with most of the limited edition models selling out before they are announced to the general public.
In November 2023 Automotive News Europe reportFerrari CEO Benedetto Vigna has said the earliest anyone will be able to take delivery of a new car bearing the Prancing Horse badge will be 2026.
“Ferrari’s extremely low exposure to China, coupled with its fierce brand loyalty, stands out among its luxury peers,” Jonas and other analysts wrote in their note. “No other major listed luxury goods company reveals a higher percentage of repeat customers and a lower customer mix in China.”
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