This week, tesla (NASDAQ:TSLA) finally launched the cyber truck at their event on November 30. Some analysts think canceling the product entirely will boost the stock price. Meanwhile, others, like Cathie Wood, believe Tesla's stock price will rise due to investor optimism.
To better understand, let's look at the reasons on both sides and analyze the numbers.
Why it could hurt the stock price
A key reason for the pessimism came from Elon Musk himself. He admitted that the cyber truck would be financially costly for Tesla, would be difficult to scale for production, and would not generate positive cash flow until 2025.
In two years, Musk projects that the company will be able to begin mass producing the cyber truck in 250,000 units. Analysts estimate the price to be around $60,990. With two million pre-orders from cyber truck This already means $15.2 billion in revenue in 2025. Not bad. However, some things could shatter this dream.
First, the car was projected to cost just $39,000 when it was introduced in 2019. It received a lot of praise because it would cost $10,000 less than the most popular pickup truck (the Ford F150) being significantly more modern. However, Tesla is likely to launch the cyber truck around $60,990 due to increased material costs. Its direct competitors have also been forced to price their trucks at roughly the same price.
Additionally, Musk has repeatedly emphasized that it would be difficult to scale production, as the cyber truck It is so advanced that the manufacturing process will be very different from that of sedan production. In general, both the demand and supply of cyber trucks they are in danger.
Additionally, Tesla's free cash flow, which is the key number used to value companies, has already declined due to the company's price cuts and operating expenses. cyber truck and ai, resulting in a 44% decline in profits year over year. Since even more investment is needed to scale production of the cyber truckFree cash flow will continue to decline and I think it will worsen valuation and sentiment in the near term.
Why it could boost the stock price
However, the enthusiasm around cyber truck by itself could drive up the stock. When Tesla launched the Model Y In 2020, the hype around the company also led to higher sales of the Model 3.
Most importantly, despite the high initial prices, management will likely be able to reduce costs in the future. We cannot forget that Tesla still has the highest margins in the industry thanks to Musk's genius. Its production process involves fewer parts and is more agile than that of any other automobile company.
Finally, Tesla has already established itself as a premium brand. Many of the two million who pre-ordered will still be eager to purchase the cyber truck.
my verdict
However, considering that Tesla's price cuts have not been effective in boosting sales, the company has more fundamental problems to address than the cyber truck. Although the truck could become a crown jewel for Tesla, I think the cash burn will only worsen investor sentiment.
He cyber truck The launch will likely do little in the short term to boost Tesla's stock, but in a few years it could boost its stock price when it starts making money.
