Don’t Back Up the Cybertruck for TSLA Stock

Tesla’s (NASDAQ:TSLA) futuristic (a polite way of saying odd) Cybertruck will finally have its big delivery event on Thursday. And even though Tesla CEO Elon Musk said on the company’s third quarter earnings call in mid-October that there are already more than 1 million people who have orders for the quirky looking angular vehicle, the Cybertruck may not move the needle for Tesla investors anytime soon.

Shares of Tesla have nearly doubled this year (despite a 20% pullback from its 52-week high) and the stock now trades at more than 60 times 2024 earnings estimates. So, the electric car giant is clearly a risky investment.

Philippe Houchois, an analyst at Jefferies, recently cut his price target on Tesla’s stock to $210 a share. That’s more than 10% below the current price.

The rationale? Houchois argues that the Cybertruck is likely to be a “niche product” and that the company would be better off focusing on ramping up production for the more mainstream Model 3 sedan and Model Y SUV.

That could help Tesla combat increased (and intense) competition from rival pure-play EV makers such as Rivian (NASDAQ:RIVN), Lucid (NASDAQ:LCID) and China’s Nio (NYSE:NIO) as well as traditional auto giants like Ford (NYSE:F), General Motors (NYSE:GM), Volkswagen (OTCMKTS:VWAPY) and Nissan (OTCMKTS:NSANY).

“With 2024 already a lost year for growth, it would help Tesla refocus on an edge that was built on simplicity, scale and speed,” Houchois wrote in a report, adding that the Cybertruck is “off-mission” for Tesla and that the company should be putting more financial resources into higher volume global segments.

Elon Musk Cautions Cybertruck Fans

Even Musk has conceded that investors shouldn’t get too optimistic about the Cybertruck just yet. He said during the third quarter conference call that “I just want to temper expectations for Cybertruck.”

“It’s a great product, but financially, it will take … a year to 18 months before it is a significant positive cash flow contributor. I wish there was some way for that to be different, but that’s my best guess,” he added.

Musk noted the complexity involved in manufacturing the Cybertruck and even joked that “we dug our own grave” with the vehicle.

“Cybertruck’s one of those special products that comes along only once in a long while. And special products that come along once in a long while are just incredibly difficult to bring to market to reach volume, to be prosperous,” he said.

That’s not exactly what Tesla investors want to hear. It’s increasingly looking like the Cybertruck could wind up being a vanity project for Musk that doesn’t pay any dividends for Tesla shareholders.

Some Wall Streeters already worry about the fact that Musk has so much sway over what happens at Tesla. Musk, while clearly a visionary, lacks a clear second in command that could take over… let alone rein him in.

An analyst at HSBC who has a “sell” rating on Tesla recently pointed out in a report that the company faces a “singleman” risk — namely that Musk is too prominent.

There’s also the fact that Musk has numerous other obligations competing for his attention like SpaceX, The Boring Company, Neuralink and X (formerly Twitter).

The Bottom Line on TSLA Stock

Even Dan Ives, an analyst at Wedbush who is one of the more bullish Tesla analysts and has praised the Cybertruck for being an innovative product, is a bit guarded about what the Cybertruck will do for the stock in the near-term.

Ives wrote in a recent report that “the ramp of production for Cybertruck will be difficult” and that “Cybertruck does not significantly move the financial needle for Tesla” in 2024.

If Tesla fans are cautious, investors should be as well. Tesla’s stock likely needs to pull back even further before its expensive shares are pricing in the possibility that the  Cybertruck won’t live up to the considerable hype. Don’t back up the Cybertruck to buy Tesla shares at these lofty levels.

As of this writing, Paul R. La Monica did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.