The reveal of Tesla Inc TSLA's Semi and Roadster met wide enthusiasm.
J B Hunt Transport Services Inc JBHT and Wal-Mart Stores Inc WMT pre-ordered the electric truck within the first 24 hours, and Tesla’s stock spiked as much as 4.3 percent.
But the Street, while conceding awe, didn’t consider the vehicles near-term game-changers. Here's what they had to say.
Semi features surpassed expectations.
The Class 8 truck’s enhanced autopilot, acceleration capabilities, 30-minute charging, automatic braking, lane tracking, single-gear operations, four electric motors, central seating, wrap-around glass cabin and dual touchscreens impressed analysts.
More importantly, the 500-mile range far exceeded expectations spanning 200 to 450 miles.
“The Tesla truck appears to best current diesel truck performance in almost every measurable way,” Morgan Stanley analysts Ravi Shanker and Adam Jonas wrote, noting that the truck was “even more ambitious than we had hoped.”
The outperformance expands Tesla’s total addressable market.
Loup Ventures managing partner Gene Munster expects the Semi to inflate Tesla’s TAM by 15 to 20 percent. Bernstein agrees.
“Tesla's addressable market for Semi Trucks may be considerably larger than we had estimated – and could potentially amount to 15 percent to 20 percent of our total projected company revenues in 2025,” Bernstein analyst Toni Sacconaghi Jr. wrote.
See Also: This Analyst Still Thinks Tesla's Competition Is 'Completely Toast' Following Semi Event
Advanced features also pave the way for services revenue.
At a rate of 7 cents per kilowatt-hour, Tesla could see annual charging revenues as high as $14 billion, according to Bernstein estimates. The opportunity could be compounded by additional touchscreen services.
“The extent of in-cab connectivity and telematics seems impressive and has potential to be a services business over time,” Shanker and Jonas wrote.
The Semi will initially cost more than diesel competitors but ultimately drive savings.
Musk promised a two-year payback in fuel savings driven by lower energy costs and fewer maintenance requirements, but the first-year payments will be a hurdle.
Jefferies expects the Semi to cost about 35 percent more than diesel competitors, while Munster anticipates a future value between $225,000 and $275,000 against diesels’ $150,000.
But if it sells, the payoff would be significant.
“This would add about 15 to 20 percent to Tesla’s top and presumably bottom line in the year 2025,” Munster wrote.
The Semi will be widely disruptive.
Morgan Stanley dubbed the trailer “the future of trucking,” and Buckingham conceded its potential for greater disruption than previously anticipated.
“While barriers still exist (fleets like to test vehicles first and need a reliable service network) and the trucking industry is historically slow to adopt new technologies, we think it is hard to downplay the potential negative impact from Tesla to our coverage universe,” Buckingham analyst Neil Frohnapple wrote.
Tesla may hit hurdles in its rollout.
Jefferies noted that competitors appear “well advanced” in electric trucks, Munster foresees production delays, and Bernstein anticipates a charging infrastructure investment upwards of $1 billion. On top of these circumstances, drivers may resist the change.
“Truckers are notoriously conservative and we expect adoption of the semi to be relatively slow,” Oppenheimer analysts Colin Rusch and Noah Kaye wrote.
For now, Tesla can leverage consumer and investor excitement to raise capital...
“An untapped opportunity in trucking should continue to stoke investor’s optimism for the next three years,” Munster wrote.
...And lean on the Roadster to boost brand appeal.
With 1.9-second zero-to-60 acceleration and a single charge sustaining a 630-mile trek, the second edition Roadster is “brand-enhancing,” according to Bernstein.
“We expect the Roadster to have an enthusiastic response and be a source of cash via reservations,” Oppenheimer wrote.
Munster sees a $1 billion annual opportunity in capturing 25 percent of the exotic car market.
Although, the Roadster may not well align with Tesla’s production and pricing goals.
The project is notably low-volume.
“We find battery size and range to be at odds with Tesla's mission of developing more affordable EVs,” Jefferies analysts Philippe Houchois, Graham Phillips and Ashik Kurian wrote.
Overall Thesis: Still A Model 3 Story
Tesla has a full plate with its passenger vehicles, gigafactory, solar segment and battery business, and Bernstein worries the truck and Roadster projects, while near-term stock catalysts and demonstrative of Tesla’s innovation, further detract from its “core automotive franchise.”
“We can't help worrying that Tesla may be taking on too much organizationally – which could distract it from ensuring Model 3's commercial success, which we believe is the critical driver of the company's fortunes,” Sacconaghi wrote.
Morgan Stanley forecasts the Semi unit representing no more than 10 percent of Tesla’s current market cap.
“We expect the Tesla semi to be more impactful for the trucking industry than Tesla itself,” Shanker and Jonas wrote.
Tesla’s announcements sparked no ratings changes.
- Bernstein: Market Perform, $265
- Buckingham: No rating
- Jefferies: Underperform, $240
- Loup Ventures: No rating
- Morgan Stanley: Market Perform, $379
- Oppenheimer: Market Perform
Image credit: Tesla Twitter
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