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The Cybertruck Is Finally Here: What It Means for Tesla Stock

Motley Fool - Mon Dec 4, 2023

After a long wait, Tesla's (NASDAQ: TSLA) Cybertruck has finally arrived, four years after CEO Elon Musk stood on stage to unveil the futuristic vehicle.

Though mass production has taken longer than expected, Musk was clearly pleased to present what he's called the company's "best product ever."

Thursday's delivery event featured much of the fanfare that has helped distinguish the Tesla brand. Like an automotive version of Willy Wonka, Musk showed off footage of the Cybertruck being shot with various guns, competing and winning in a truck pull against the Ford F-150 Lightning, an F-350 diesel, and a Rivian R1T, and beating the Porsche 911 in a quarter-mile race while towing another Porsche 911.

Tesla's new truck can tow 11,000 pounds and has a payload capacity of 2,500 pounds, showing that can compete with pickup trucks in utility, and the all-wheel drive version has a range of 340 miles.

Following the event, Tesla announced pricing for the vehicle, ranging from $60,990 for the rear-wheel drive, which won't be available until 2025, to $99,990 for the high-end Cyberbeast. The all-wheel-drive model starts at $79,990.

A Tesla Cybertruck on a track

Image source: Tesla.

What the Cybertruck means for Tesla

The Cybertruck launch comes as the EV leader endures a string of negative headlines, with revenue growth slowing and profit margins declining, and Musk spent much of the third-quarter earnings call bemoaning interest rates, production challenges, and broader economic headwinds. At the same time, Tesla's brand no longer seems as distinctive as it once was; the EV market has become crowded with new entrants from start-ups like Rivian and legacy automakers like Ford and GM.

However, the delivery event, which is likely to spawn plenty of video sharing, is a reminder of why the Tesla brand has engendered such cultish devotion. No other auto CEO could have pulled off the kind of launch Musk just did, in the style popularized by Steve Jobs, and no other business leader in the world commands the level of attention that he does, even if it's sometimes for the wrong reasons. While Tesla has long been regarded for its engineering prowess, the event also showed that the company has been an ingenious marketer as well, building a devoted following while avoiding the conventional advertising that most automakers do.

If the Cybertruck has an immediate impact on Tesla's business, it's likely to be by creating a halo effect for the brand as a whole. More than once during the event, Musk said that the vehicle "looks like the future," and consumers tend to be attracted to brands that are associated with innovation, rather than stodgy legacy brands churning out utilitarian commodities.

If Tesla has lost some of its brand buzz in recent years, as it had been nearly four years since it released a new vehicle, it likely regained some of it with the Cybertruck launch.

Is Tesla stock a buy?

While the Cybertruck could rejuvenate the Tesla brand, its impact on the company's financials is likely to be modest in the near term. Tesla has the capacity to produce at least 125,000 Cybertrucks at its Austin Gigafactory and Musk says the company aims to produce 250,000 a year starting in 2025. By comparison, the company is targeting 1.8 million vehicles produced this year.

However, the Tesla chief has acknowledged that Cybertruck production has been more difficult than expected and estimated that it would take a year to 18 months before it was a significant contributor to cash flow. He also noted that over a million people had already reserved the Cybertruck, before the launch event.

As a stock, Tesla has maintained its premium in spite of the business's recent challenges, and the Cybertruck is likely to help protect its valuation even if it isn't expected to improve the bottom line for at least a year.

However, Musk has warned in the past about pressure from macroeconomic headwinds, and Tesla's price cuts reflect a more competitive market and price-sensitive customer. It's unclear when that pressure will subside, but analysts expect revenue to decline in the current quarter, and earnings estimates continue to fall.

In other words, despite the fanfare over the Cybertruck, patient investors could rewarded with a better entry price on Tesla stock over the coming months, as a splashy launch event isn't enough to solve the business's current challenges.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Porsche Automobil Se and Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.

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