HSBC Revises Tesla Stock Price Target Amid Market Developments

HSBC Adjusts Tesla's Stock Price Target

HSBC analyst Michael Tyndall has notably raised the price target for Tesla (NASDAQ:TSLA) shares, increasing it to $124 from the earlier target of $118. Despite this upward adjustment, he has maintained a Reduce rating on the stock. This revision follows Tesla's third-quarter delivery report, revealing that the company successfully delivered 463,000 vehicles during this period, which marked a 6% increase from the previous year and a 4% rise compared to the last quarter. These figures were in line with the overall market consensus while exceeding HSBC's projections by 10%.

Challenges in Energy Storage Deployments

Despite strong vehicle delivery numbers, Tesla's energy storage deployments have fallen short of expectations, achieving only 6.9 gigawatt-hours this quarter. While this reflects a remarkable 73% increase year-over-year, it represents a concerning 27% decline from the last quarter, falling short by 23% compared to the consensus estimates and 25% behind HSBC's own forecasts. Management has indicated that energy storage deployments can fluctuate significantly over time, leading to this unexpected drop.

Looking Ahead to 2024

For Tesla to align with the consensus outlook for 2024, a year-over-year growth of approximately 1% in deliveries will be crucial during the fourth quarter. Third-quarter production numbers only showed a modest increase of 1.5% above delivery figures, suggesting that management anticipates only slight growth as they finish out the year.

Upcoming Innovations: The Robotaxi Event

The anticipated Robotaxi event is generating excitement in the market as observers speculate about what it might reveal. While details are still limited, rumors suggest the event may take place in Los Angeles, possibly at Warner Bros studios. Attendees are eager to learn more about the level of autonomy expected from the Robotaxis, relevant data on miles driven autonomously, regulatory hurdles, and when commercial availability might start.

Competitive Landscape in Autonomous Vehicles

Tesla is entering a competitive arena, facing off against established players such as Waymo, which is already providing over 100,000 rides weekly in the United States. Additionally, Baidu (NASDAQ:BIDU) has made significant progress with over 7 million completed rides in China. The automotive sector is keenly observing how Tesla's offerings will stack up against those of its competitors as the market evolves.

Concerns Over Timing and Valuation

HSBC has raised concerns regarding the timeline for the delivery and commercialization of several pre-revenue ventures at Tesla, including Dojo, Full Self-Driving (FSD), and the Optimus AI Robot. They suggest that the market may be overly optimistic, expecting Tesla to introduce these technologies sooner than what HSBC believes is realistic. Moreover, Tesla's stock has exhibited a trend of surging prior to major announcements, only to drop once those details are publicly shared. This pattern highlights the disparity between the enthusiasm surrounding Tesla and the actual performance of the company.

Developments in Battery Technology

In a further push for innovation, Tesla is set to work on developing new battery cells tailored for its upcoming Cybertruck and robotaxi by 2026. Nonetheless, the pursuit of their 4680 battery cells has met challenges, with significant loss rates during initial production testing. The company plans to start integrating this technology into the Cybertruck's battery system by mid-next year, with a production goal of producing between 2,000 and 3,000 Cybertrucks weekly.

Shifts in Analyst Ratings

Amid these developments, the Bernstein SocGen Group has chosen to maintain its Underperform rating on Tesla, suggesting that investor focus may be shifting more towards the robotaxi initiative. However, they voice skepticism about whether Tesla can outpace its rivals in autonomous driving technology. Conversely, Goldman Sachs reaffirmed a Neutral stance, focusing on the recent vehicle delivery and production metrics.

Concluding Thoughts on Market Position

Tesla has made significant changes recently, including discontinuing the most economical Model 3 version in the U.S. The brand now offers the Model 3 Long Range Rear-Wheel Drive as its entry-level offering. This shift is attributed to increased tariffs on Chinese goods, which impact the batteries used in the previously available model. Truist Securities has adjusted its price target for Tesla to $236 while maintaining a Hold rating on the shares.

Frequently Asked Questions

What is the new price target for Tesla shares according to HSBC?

The price target for Tesla shares has been raised to $124 from the previous $118.

How many vehicles did Tesla deliver in the third quarter?

Tesla delivered 463,000 vehicles in the third quarter, indicating a 6% year-over-year increase.

What challenges are Tesla's energy storage deployments facing?

Tesla achieved 6.9 gigawatt-hours in energy storage, which is a 27% decline from the previous quarter and below expectations.

What upcoming event is generating excitement for Tesla?

The upcoming Robotaxi event is highly anticipated, with many looking forward to new insights into Tesla's autonomous vehicle initiatives.

What changes have been made to Tesla's Model 3 offerings?

Tesla has discontinued its most affordable Model 3 variant and now offers the Model 3 Long Range Rear-Wheel Drive as the entry-level model.

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