Tesla is hosting a highly anticipated investor event on March 1. There will be plenty of discussion, including Tesla’s growing electric business and increased cash flow, but what Wall Street really wants to see is the EV maker planning a new car.
More than a few analysts believe that a new, lower-priced Tesla (ticker: Tesla) will be needed to guarantee Tesla’s growth through the end of the decade as well as protect its market share against all-EV models coming from traditional auto makers. :TSLA) is required.
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Coming into Friday’s trading, Tesla stock was up nearly 64% year to date. Wells Fargo analyst Colin Langan wrote in a Friday report that after a rally like this, a new factor is needed to help the stock rise. He believes the $30,000, third-generation vehicle could be that catalyst.
The Model S and X are Tesla’s first generation vehicles. Today, they are worth approximately $100,000 each. The Model 3 and Y are built on the second generation platform and cost around $50,000 to $60,000 each.
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“The new generation’s $30,000 price dramatically expands Tesla’s addressable market,” Langan said. Tesla’s current lineup only covers
About 55% of the total auto market according to analyst. With the $30,000 vehicle, Tesla’s line up will cover about 95%.
New Street Research analyst Pierre Ferragu and Bernstein analyst Tony Sacconaghi both agree. “The most important issue for Tesla going into the analyst day is the status of its next-gen, low-cost vehicle platform,” Sacconaghi wrote in a Wednesday report.
He says Tesla needs a low-cost EV to meet investors’ high growth expectations. “Our research has indicated that EV models that typically struggle to increase volume beyond the third or fourth year of introduction,” he wrote.
The Model 3 made its debut in 2017. Model Y coming in 2020.
Wall Street expects Tesla to sell more than one million Model Ys in 2023. This would likely make it the best-selling car on the planet, including gasoline-powered cars. Growth from there can be difficult: getting sales of a single model to two million units a year is a very tall order.
Currently, the Toyota Motor(TM) Corolla is the best-selling model in the world, with approximately 1.1 million sales expected in 2022. The Model Y was the fourth best-selling vehicle, with approximately 760,000 units shipped.
Langan, for his part, rates the shares at Hold. His target for the price is $190. Sacconaghi rates the shares on SELL with a target price of $150 per share. Rates Ferragu’s shares at Buy and has a price target of $150.
Ferragu acknowledges the need for a low-cost car and thinks one will be ready by 2025. He also believes the car could retail for around $25,000, given battery costs and Tesla’s lead in EV manufacturing.
He sees a low-cost Tesla selling more than one million units by 2026. He also believes that both the Model 3 and Y could easily sell more than one million units a year. He does not share Sakonaghi’s concerns.
Beyond a new car, Ferragu sees good potential for Tesla’s energy-storage business in 2023. This is another topic that should come on March 1st.
“For as long as we can remember, Tesla has been constrained in energy storage,” Ferragu wrote in a Wednesday report. “And [with] New Megapack fab ramps up in Lathrop, which quadruples company’s output
capacity, we expect an inflection point in 2023 to 2024.
The Megapack is Tesla’s energy-storage product for utilities. They help power companies make wind and solar generation assets more reliable by storing energy so that it can be released into the grid when the sun isn’t shining and the wind isn’t blowing.
He sees energy storage adding 20 cents and 55 cents to Tesla’s earnings per share in 2023 and 2024, respectively. Earnings at that level would be a pleasant surprise for investors.
Wall Street currently estimates earnings per share of approximately $4.10 and $5.60 for 2023 and 2024, respectively. Much of this comes from Tesla’s car business.
Canaccord analyst George Giannarkas thinks Tesla may have a few more things in store for investors on March 1. It is looking for new commercial vehicles along with stock buybacks. Tesla has a commercial product: Shipping of its Semi truck began in December.
Gianarkas bought Tesla shares. His price target is $275 per share.
Cheaper Teslas, new commercial vehicles, new storage businesses, and potentially access to capital to fund buybacks have a lot in store for shareholders this coming week.
Tesla stock closed down 2.6% at $196.88. The S&P 500 and Nasdaq Composite were off 1.1% and 1.7%, respectively.
Improvement and Amplification: Tesla’s Model Y was introduced in 2020. An earlier version of this story incorrectly stated 2022.
Write to Al Root at [email protected]
