Tesla reverses latest AI moves, but stock tumbles as vehicle deliveries miss analysts’ targets

Tesla held its second AI Day on Friday evening, with the company providing an update on its Optimus robot and progress being made around complete self-driving, or FSD, and the Dojo supercomputer.

Tesla Inc. shares TSLA,
-7.79%
fell 5% before the market opened on Monday after the company announced on Sunday that it produced more than 365,000 vehicles and delivered more than 343,000 in its just-ended third quarter. While the number of vehicles delivered marked a record for Tesla, it was below Wall Street estimates. Analysts were looking for about 371,000 deliveries, according to FactSet data.

“Historically, our delivery volumes have been skewed toward the end of each quarter due to regional batch builds of cars,” Tesla said in a statement. “As our production volumes continue to grow, it becomes increasingly difficult to secure vehicle transport capacity and at a reasonable cost during these peak logistics weeks.”

The company’s stock ended Friday’s session down 1.1%, compared to the SPX of the S&P 500 index,
+2.98%
down 1.5%. Tesla shares are down 24.7% this year, while the S&P 500 index has fallen 24.8%.

Baird Equity Research was looking for deliveries of 385,000 vehicles in the third quarter, but analyst Ben Kallo says Tesla is well positioned for the fourth quarter. “Despite weakness in Q3, Q4 setup is strong,” he wrote in a note posted on Sunday. The analyst pointed to reports that put fourth-quarter production targets at 495,000 vehicles, helped by the ramp-up of Tesla factories in Berlin and Austin, as well as the return to full production at its Shanghai plant.

See: Tesla Announces Record Deliveries, But Numbers Still Fall Short of Analysts’ Targets

Baird maintained his outperformance rating for Tesla.

While Tesla’s deliveries lacked consensus, they were closely in line with JPMorgan’s model, according to analyst Ryan Brinkman. “We continue to see the potential for a positive price-to-cost surprise resulting from the vehicle price increases instituted following the Russian invasion of Ukraine, which were intended to offset inflation then in rise in battery metals,” he wrote.

JPMorgan maintained its underweight rating for Tesla but set a price target of $153 for December 2023, down from $137 previously. “We remain cautious on valuation,” Brinkman wrote, and expect a decline of up to 42% from the Tesla stock price target, with risk of multiple compression as competition increases and price increases. distinction is narrowing between Tesla and traditional automakers.

The analyst felt that the AI ​​Day event lacked positive catalysts.

Tesla showed off a prototype of its humanoid robot Optimus which took to the stage at the event in Palo Alto, Calif., before turning around and waving to the audience. A next-generation version of Optimus was to be worn on stage.

“Early working versions of its Optimus humanoid robot seemed to us similar in capability to those obtained by Honda many years ago (with its ‘ASIMO’ robot) and much less capable than those presented more recently by Boston Dynamics (of elsewhere now majority-owned by Hyundai),” Brinkman wrote.

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Truist Securities analyst William Stein was more positive about the Tesla event, citing “significant progress” in the company’s three major AI projects. The analyst noted that at last year’s AI Day, Optimus was represented by a person on stage wearing a robot costume. “This year’s Optimus was a real (think Asimo) robot,” he added. “While the live demo only showed the robot walking, waving and dancing, a recorded demo showed the robot performing mundane tasks like lifting boxes and watering plants.”

Tesla CEO Elon Musk, Stein noted, plans to sell Optimus to consumers within three to five years.

The company has also shown impressive progress in hardware infrastructure, training datasets, and the types of models used to build FSD features, according to Stein. “From a business perspective, TSLA noted that over the past year the number of users has grown from just 2,000 to 160,000,” he wrote. “Additionally, the company expects to deliver a significant upgrade to the FSD in about a month, and it believes the FSD could ship globally by the end of this year (although regulatory hurdles would prevent this ).”

Stein also pointed to significant improvements in the D1 chip for Dojo, the supercomputer training “tile” and “accelerator” technology designed to make Dojo scalable. Truist, which has a buy rating on Tesla shares, raised its share price target to $348 from $333.

Baird’s Kallo is also optimistic about the prospects for Dojo and FSD. “Dojo is intended to be used to improve the computational efficiency of TSLA’s automotive fleet video training analysis, thereby enhancing its FSD offering,” he wrote. “We believe this computing platform is a key differentiator for TSLA that could significantly enhance its already industry-leading FSD.”

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The analyst also noted that one of the main goals of Tesla’s AI Day is to attract talent to the company. “This is a critical component to advancing its initiatives as labor shortages in the market continue, especially for highly skilled engineers,” he wrote. “One of TSLA’s key advantages is its ability to recruit top talent in a highly competitive market.”

Of 42 analysts polled by FactSet, 27 have an overweight or buy rating on Tesla shares, 11 rate holding stock and four rate the stock underweight or short.

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