Tesla’s (NASDAQ:TSLA) electric pickup truck is helping to haul the company’s share price uphill, with its founder Elon Musk championing the prototype vehicle’s progress with a high-profile demonstration on Nov. 21, with preorders of 250,000 during the following five days and with a surprising third-quarter profit that topped analysts’ expectations.
The futuristic-looking electric pickup truck, named Cybertruck, is capable of accelerating from 0-60 mph in as little as 2.9 seconds and offers a travel range of up to 500 miles on a single charge. Tesla Inc.’s share price has roared ahead 74.3 percent in the past six months between May 28 and Nov. 26, despite giving back 2.21 percent on Nov. 26 when it dipped to $328.92.
Tesla’s shares jumped 17.1 percent on Oct. 24 for its biggest single-day rise since May 2013 after reporting third-quarter 2019 earnings per share (EPS) of $1.86 vs. an expected loss of $0.46 per share. The results were fueled by earnings before interest, taxes, depreciation and amortization (EBITDA) of $876 million, beating analysts’ consensus forecasts of $646 million.
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Investors Must Be Patient to See Tesla’s Electric Pickup Truck Climb
Bob Carlson, who leads the Retirement Watch advisory service, cautioned that investors who are expecting electric pickup trucks to capture a big share of the current annual sales of three million pickup trucks are going to need to “wait for a while.”
A key limiting factor is that current battery technology does not allow electric pickups to perform well enough to serve as work trucks, Carlson told me. The electric pickups coming to market beginning in 2020 will appeal only to those who will use the trucks as “status symbols” and for weekend hobbies, he added.
“Unlike with electric cars, Tesla isn’t going to have a first-mover advantage with electric pickup trucks,” Carlson said.
Rivian, an electric pickup truck rival manufacturer backed with $500 million from Ford Motor Co. (NYSE:F), is likely to have the first electric pickup truck on the mass market, and it will offer both “styling and features” to rival anything Tesla produces, Carlson continued.
“Once young firms establish the demand for electric pickup trucks and battery technology improves, the legacy vehicle manufacturers will join the market,” Carlson said. “Their brand names and distribution networks will make it difficult for any but well-funded new firms to compete.”
Tesla’s Electric Pickup Truck Still Faces Treacherous Terrain
The management teams of Detroit’s traditional auto manufacturing giants such as Ford and General Motors (NYSE:GM) can “breathe a sigh of relief” after Tesla’s recent unveiling of its “Cybertruck” prototype, wrote Brian A. Johnson, an automotive analyst with Barclays Capital Inc., in a Nov. 22 research note. He rates Tesla as “Underweight/neutral” with a price target of just $200.00 per share, which would be a massive drop from the company’s Nov. 21 share price of $354.83 when he published his update.
One of the key elements of the bullish Tesla and bearish legacy Detroit automakers outlook in recent months has been that the newcomer’s pickup truck would shift the largest profit pool in the U.S. market to the Musk-led manufacturer, Johnson wrote. But after the unconventional design of the Cybertruck, it is clear that the legacy car company executives, such as GM CEO Mary Barra and Ford’s global head of electrification Ted Cannis, have additional breathing room to pursue their respective electric vehicle strategies. Both executives attended Barclays’ recent Global autos conference, where attendees polled at the event indicated that they viewed dividend-paying GM as undervalued compared to Ford.
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“While investors had feared a category killer, the futuristic sci-fi movie-like truck was not that,” Johnson wrote. “While the design and armored features may actually expand the market by drawing in younger drivers who are gaming and sci-fi fans, these are buyers who are not likely to have been in the market for a King Ranch or Ram HD.”
With Tesla having hit recent highs after notching its 3Q 2019 profit, rising 39 percent since Oct. 23 through Nov. 21, while the S&P 500 only gained about 3 percent, the lack of universal support for the Cybertruck and its design finally may bring a top to the swing trade on Tesla, Johnson wrote. However, Tesla is planning a media day about its electric vehicle battery and its management likely will talk about aggressive cost reduction targets, he added.
Analyst Critiques Tesla’s Electric Pickup Truck Design and Features
Musk described the Cybertruck as having a monoplane design with an “exoskeleton” composed of thick, ultra-hard stainless steel, differing from the traditional body-on-frame design of the major U.S. pickups. The truck also has adaptive air suspension with adjustable ride height, offering a maximum 16-inch ground clearance. The pickup truck’s interior includes a 17-inch touchscreen, similar to the Model S/X, and features two three-seat rows. The Cybertruck’s pricing starts at $39,900, but Johnson noted that Tesla’s Model 3 only briefly sold at that price point.
The developments call into question the bullish narrative that some analysts are ascribing to Tesla, Johnson wrote. If Tesla were valued like a niche automaker rather than a disrupter of the mobility market, the Cybertruck’s “polarizing design” could be a positive, he added.
“Indeed, there may be something to be said for avoiding Toyota‘s (NYSE:TM) path of creating a capable truck, made in Texas and targeted at the heart of the rugged, work truck market – only to garner about 5 percent share of the market as it failed to sway brand loyalists,” Johnson opined. “However, we think it should do damage to the Tesla narrative that the pickup truck would unlock a huge addressable market.”
At the recent Barclays auto conference, Barra announced that GM plans to launch its all-electric pickup in late 2021. Ford also has pointed to that timeline for an electric F-150. Both timelines are consistent with Tesla’s goal of starting production of its initial variants in late 2021.
While many observers feared the battle for a share of the initial electric truck market would heat up after Tesla’s introduction of its prototype, Johnson envisions the Cybertruck as an adjacent category to the traditional pickup markets which GM, Ford and Rivian are likely addressing.
Kramer Features Tesla’s Electric Pickup Truck on Her Radio Program
Hilary Kramer, who hosts a national radio investment program called “Millionaire Maker” and leads the 2-Day Trader advisory service that has notched profits in 20 of its first 25 trades for an average return of 8.70 percent, featured the Cybertruck introduction on her latest show.
Ford’s prototype electric F150 trucks can tow 1 million pounds and they look like normal pickups, Kramer said. That design is a smart move, she added.
“The body can look like anything,” Kramer said. “Musk decided to make his work vehicle look like something that escaped from the ’80s, half DeLorean and half spaceship. That’s going to get pushback from your target audience, which expects a high-powered truck to look like a truck. The F150-EV looks like a truck. The only thing that will shock truck buyers when it comes out — hopefully in the 2021 model year, which is not too long to wait — is the power.”
Kramer, who also leads the GameChangers advisory service that has booked 33 profitable trades in its last 39 closed positions, added that she always is looking at private companies and startups that will one day become opportunities for everyday investors. Rivian, powered by venture capital, is one of them and is based in “good old Dearborn, Michigan,” where Ford is headquartered. It is working collaboratively with Ford to reengineer the electric work vehicle.
“For now, if you like where the company is going, the easiest thing to do is invest in Ford for the long term,” Kramer said.
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Otherwise, to be honest, the electric vehicle business is filled with many “niche hopefuls and also-rans,” Kramer said.
“Toyota stalled,” Kramer said. “GM hasn’t impressed me yet, even if they revive the Hummer brand to align the prototypes with a sense of rugged gravitas.”
GM surrendered the truck market to Ford years ago, Kramer said. As for the hopefuls, they are more dream weavers than sustainable businesses right now, she continued.
A few are taking reservations but still won’t deliver until 2021, when Ford will be ready to roll.
Ford’s big planned pullback from making cars and instead focusing on trucks “sounds good in theory,” but will produce reduced overall sales to cover fixed costs, Kramer said. It may require a time horizon of at least three years for global growth to justify an investment in Ford, even though it pays a dividend that currently yields more than 6 percent, Kramer added.
Stock investors still must tread carefully due to economic weakness, international conflicts, negative interest rates in Europe, rising U.S. government debt, China balking at ending its unfair trade practices and U.S. House Democrats seeking to impeach President Trump. But Musk-led Tesla is forging ahead with its plans to lead the world’s adoption of electric cars and trucks and not letting any obstacles block their continuing progress.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. Follow Paul on Twitter @PaulDykewicz.