Tesla’s Earnings Forecast in the Shadow of the Cybertruck’s Debut

A full four years after the audacious unveiling by the Tesla CEO, Elon Musk, the production of the first Cybertruck has finally commenced, two years behind its initial schedule.

Undeterred by the delay, Tesla showcased the first glimmers of the Cybertruck’s production on Twitter, providing a sneak peek of its employees, clad in safety vests and helmets, working on the unique, futuristic vehicle. The initial projection was for the Cybetruck production to kick off in 2021, a couple of years after the unveiling of the prototype in November 2019.

Elon Musk, however, has cautiously managed expectations concerning the speed at which Cybertruck production would scale. The “revolutionary” design of the Cybertruck, coupled with its stainless steel body, brings forth manufacturing complexities. Stainless steel, though superior in strength and durability, poses significant challenges, including increased costs and difficulty in shaping and welding. Musk acknowledged these challenges, stating: “It’s going to be hard to make the cost affordable because it is a new car, new manufacturing method.”

The uniqueness of the Cybertruck extends to its varied configurations initially announced by Tesla. These included a single-motor model offering over 250 miles of range starting at $39,900, a dual-motor model with a range exceeding 300 miles starting at $49,900, and a tri-motor model with an impressive range of over 500 miles starting at $69,900. However, in October 2021, the pricing and specifications disappeared from the Cybertruck order page, leaving customers in suspense about the final product.

In the meantime, the electric vehicle (EV) market has witnessed a surge of competition. Companies like Ford Motor Co. have unveiled electric versions of their best-selling models, while General Motors Co. and Rivian Automotive Inc. launched their respective GMC Hummer EV pickup and R1T truck.

How will the Cybertruck affect Tesla’s financials?

Amid this fierce competition, the launch of the Cybertruck is projected to boost Tesla’s annual delivery count. Deutsche Bank analyst Emmanuel Rosner predicts the delivery of 2,000 Cybertrucks by the end of the year, a minor to the forecasted 1.78 million vehicles in total. The success of the Cybertruck, however, will significantly depend on Tesla’s ability to optimise production and incorporate larger battery packs necessary for towing.

Rosner, who considers Tesla stock a “buy” with a $260 price target, voiced concerns about the potential impact on the company’s profitability in the second half of the year, due to the additional complexities introduced by the Cybertruck’s production. Tesla’s shares closed on Friday at $281.38, marking an impressive surge of 128% this year.

The anticipation leading up to Tesla’s second-quarter earnings report, scheduled for July 19, is palpable among investors. Analysts predict a year-over-year growth in revenue of 47%, amounting to $24.7bln., and an EPS of $0.81. A significant talking point for investors is the potential impact of Tesla’s price cuts during the quarter.

The gross margin is projected to drop to 18.7% from the first quarter’s 19.3%, with EBITDA expected to slide to $4.14bln. from the prior-year quarter’s $4.27bln. Investors will be closely monitoring the updates on energy storage, and eagerly anticipating progress reports from the Austin, Shanghai, and Berlin gigafactories.

Tesla’s delivery guidance for 2023 stands at 1.8mln. vehicles, a substantial increase from the 1.37mln. vehicles delivered in 2022. The earnings conference call with Elon Musk might introduce some exciting updates, including insights on the affordable sub-$30K Model 2, which is projected to start production in Mexico by 2025.

In addition to setting a date for the Cybertruck event, Tesla may also provide clarity on the benefits of the broader auto industry’s adoption of the NACS charging standard. Furthermore, it may share updates about the planned Model 3 refresh.

Tesla’s shares could swing by an estimated 8% following the report, according to options trading data. After its previous earnings report, the shares dipped by 9.8%. Over the past 90 days, Rivian Automotive (RIVN) and Lucid Group (LCID) have shown the strongest trading correlation to Tesla (TSLA).

As the Cybertruck begins to roll off the production line, amidst delays and manufacturing complexities, it is clear that the success of this vehicle will not only be determined by its sales, but also by how well it manages to integrate into Tesla’s overall business model and strategic objectives. Tesla’s upcoming earnings report will shed more light on these and other critical aspects, providing a clearer view of the EV giant’s trajectory in the near future.

Ivailo Chaushev,

Chief Market Analyst at Deltastock


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