With Little Revenue Expected, Cybertruck Could Dunk Tesla Stock

Four years ago Tesla promised a Cybertruck with a 500 mile battery range priced at $39,900, according to Wired.

On November 30, Tesla laid an egg — announcing a base Cybertruck with 50% less range — 250 miles — priced at $60,990, noted Wired, which is 53% above the amount promised in November 2019.

With two million “reservationists” — who paid $100 to preorder the Cybertruck — many questions come to mind:

• How many reservationists will ultimately buy what looks to be a gigantic disappointment for anyone who wants to use the vehicle for more than showing off?
• Will buyer disappointment translate into lower than expected Cybertruck revenue for Tesla?
• Does the 43% fall from Tesla’s peak stock price mean the EV-maker’s shares are now bargain priced?

I do not know how many people will ultimately buy the Cybertruck. My “base case” scenario is Tesla would generate $2.4 billion in Cybertruck revenue in 2024 and $6.1 billion in 2025.

That is short of Morgan Stanley’s
MS
estimate which I calculate to be $2.7 billion in 2024 revenue and $6.6 billion in 2025.

The investment bank estimates the Cybertruck will generate a tiny fraction of Tesla’s revenue. “By 2025, we forecast Cybertruck will account for less than 5% of Tesla revenues and closer to 0% of profit,” reported the Financial Times.

In the absence of some other growth catalyst, Tesla stock could keep falling further from its $407 a share peak reached in early November 2021.

Tesla’s Cybertruck Launch

The Cybtertruck Tesla announced November 30 was more expensive than promised with less range. Yet its design — which largely met expectations — appeared poised to put pedestrians at risk, according to Streetsblog.

Here are some key Cybertruck features:

• Design: “Apocalypse-bunker-on-wheels.” Social media compared the Cybertruck’s design to “a roided-out Blade Runner jalopy and an industrial refrigerator,” noted Streetsblog
• Elevated body. Despite sporting an automatic pedestrian detection system, the Cybertruck’s hood is at chest level for the six-foot-tall Tesla CEO Elon Musk and includes an “Adaptive Air Suspension” that lifts the vehicle another 10.4 inches, Streetsblog reported.
• Battering ram on wheels. The Cybertruck’s blunt flat front end, thick ”armor” windshield glass and stainless steel edges are so sharp that its approval for sale in Europe is unlikely, noted Streetsblog.
• Blinding light, fast acceleration. The Cybertruck has one giant headlight with a single bar of light which could blind oncoming drivers as it accelerates from “zero to 60 miles per hour in 2.6 seconds, which, if true, would mean it has a faster acceleration than most NASCAR and Formula 1 vehicles, with none of the accompanying engine roar to warn anyone that it’s coming,” Streetsblog wrote.

Finally, the Cybertruck’s stainless steel body raises significant quality issues. The ultra-hard stainless steel Tesla is using for the Cybertruck’s outer shell has proven hard to bend and manipulate, according to the Wall Street Journal.

Tesla has been challenged to “shape the material into body panels that line up correctly and don’t result in large gaps when installed.. and it is so hard and strong that it can be difficult to flatten,” the Journal noted.

Cybertruck Revenue Estimate

Many reservationists are likely to cancel their orders. In addition, Tesla could have problems meeting its production targets. Moreover, Tesla rivals offer compelling alternatives to the Cybertruck.

Optimistic Scenario

My optimistic scenario is for Tesla to sell $4.6 billion worth of Cybertrucks in 2024 and $15.3 billion in 2025. Here are the assumptions I used:

• Average Cybertruck price paid: $61,000.
• 2024 deliveries: 75,000 which Bernstein considers “ambitious,” according to Fortune.
• 2025 deliveries: 250,000 according to Musk, Fortune noted.

Of course Musk has warned about Cybertruck production difficulties. “I do want to emphasize that there will be enormous challenges in reaching volume production with the Cybertruck,” Musk told investors in October.

Base Case Scenario

Since Bernstein and Musk views these numbers as optimistic, it could be more realistic to expect lower deliveries while keeping the same assumption about the price.

Specifically, my base case scenario yields Cybertruck revenues of $2.4 billion in 2024 and $6.1 billion in 2025 — by assuming the following:

• 2024 deliveries: 40,000.
• 2025 deliveries: 100,000.

Some reservationists on a Reddit forum are unhappy. The Cybertruck Reddit forum “has some very disappointed customers,” according to Vice. Zack Nelson, who attended the Cybertruck unveiling and operates a YouTube channel JerryRigEverything, said the delivery event “left many attendees confused and disappointed,” according to Business Insider.

While some people are likely to buy the Cybertruck despite these feelings, Tesla faces competition from rivals supplying less expensive battery-powered trucks. These include Ford’s $49,000 F-150 Lightning, the battery-powered version of the truck that has dominated the pickup segment for decades; GM which will soon roll out its $52,000 electric Chevy Silverado, and Stellantis — preparing to offer a $58,000 RAM 1500 REV, according to Wired.

What Should Tesla Investors Do?

Morgan Stanley anticipates fewer Cybertruck shipments than my base case scenario does. “We forecast 50 deliveries in FY23 followed by 30,000 units in FY24 and 78,000 units in FY25. Our ATP assumption starts at $90k and falls to $84k by 2025,” reported the Financial Times.

What new products does Tesla have beyond the Cybertruck? Fortune says Tesla has “a product problem.” With some of the tax credit for Tesla’s Model 3 expiring in 2024, effective prices for EVs will rise at a time when many consumers are feeling squeezed.

My guess is Tesla’s stock has further to fall.