(US) Tesla: Looking Beyond the Numbers
By Vincent Lau, Head of Equity Research, Rakuten Trade.
Tesla Inc. (TSLA) shares are smoking after a disappointing earnings report. Sales are slumping, strategy is confusing, and competition is catching up. But wait! Elon Musk is doubling down, claiming there's still plenty of reason to be optimistic. So, is this a buying opportunity or a burning wreck?
Here’s a breakdown for you:
1. The Road for Affordability
Tesla is on the high road for the launch of more affordable models with the aim of boosting its sales and profit margins. Originally planned for the second half of 2025, the new model would be expected earlier, potentially as soon as late 2024. While specifics are scant, Musk hinted at leveraging both current and next-generation platforms for these offerings.
2. Price Adjustment
In response to sluggish sales, Tesla implemented widespread price reductions across its vehicle lineup, particularly in China, Europe, and the US. Notably, the cost of its Full Self-Driving (FSD) software was slashed by a third, reflecting the company's commitment to making its technology more accessible. These measures aim to invigorate demand and maintain Tesla's competitive edge in the EV market.
3. Future Mobility – Robotaxi and Rideshare
Beyond affordability, Tesla is heavily invested in self-driving technology (FSD), autonomous capabilities, and advancements in artificial intelligence (AI). Elon Musk emphasizes that a core focus for Tesla is solving the problem of autonomy and enabling it for a large fleet of autonomous taxis ("robotaxis") and rideshare vehicles. This future vision of autonomous transportation contributes to the perceived attractiveness of TSLA shares.
Despite market uncertainties and analyst revisions, Tesla remains undeterred in its pursuit of innovation and market expansion. While the stock has seen modest growth, analysts offer mixed opinions, yet maintain a Target Price of USD177.68. As Tesla continues to navigate challenges, investors eagerly await forthcoming earnings updates for insights into its trajectory.
In conclusion, Tesla's journey is one of resilience and innovation. By prioritizing affordability, stimulating demand through price adjustments, and pushing the boundaries of autonomy and AI, Tesla aims to maintain its position as a trailblazer in the EV industry. As the company presses forward, the future holds promise for both Tesla and its shareholders.
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Vincent Lau, a licensed research analyst by the Securities Commission Malaysia, who spearheaded the formation of Rakuten Trade Sdn Bhd's digital research team for retail investors. Presently, he serves as the Head of Equity Sales, leading digital news-driven trading ideas. With nearly 20 years in corporate finance, Lau has held prominent roles at Kenanga Investment Bank, RHB Islamic Bank, Standard Chartered Bank, and Hong Leong Islamic Bank. Lau is a graduate of Flinders University, holding a Bachelor of Commerce, and the University of Malaya, where he earned an MBA.
