Tesla (TSLA) Model Y Underwhelms, Weighs on Stock; Wedbush Weighs In


On Thursday, Tesla (TSLA) unveiled its new Model Y crossover electric vehicle. The company has been discussing this launch for some time now, as the new car will be Tesla’s first mass-marketed SUV, essentially Model 3 for the SUV market. There was plenty of excitement surrounding the car, but the company’s stock dropped 5% as investors were underwhelmed by the announcement.

Even so, Wedbush analyst Daniel Ives maintains his Outperform rating on TSLA stock and $390 price target, which implies nearly 45% upside from current levels. (To watch Ives’ track record, click here)

Tesla’s Model Y will come in four variations, Standard Range, Long Range, Dual Motor AWS and Performance. The latter three models will be available in the Fall of 2020, with prices ranging from $47,000 to $60,000 and 0-60 MPH performance ranging from 3.5 seconds (Performance) to 5.5 seconds (Long Range). The Standard Range, which is expected to come in at $39,000, will be available in Spring 2021.

Ives says, “these price points were music to the ears of Tesla bulls as the digestible prices for a SUV crossover coming out of Tesla could be the 1-2 punch that makes Model Y a potential game changer for the company over the coming years.” The analyst continues, saying he was “impressed with the interior and feel of the Model Y on the road as it did not drive like a crossover SUV and will be a major competitive advantage when this it hits the road.”

As Tesla has been plagued with production challenges, Ives notes “the Fall 2020 production date may be a bit later (3 months later than we were and many on the Street were modeling) but we believe Tesla is being conservative with its targets to avoid any of the well documented production headaches it faced with the Model 3 coming out of Fremont in 2018.”

Ives is extremely excited over the largeness of the market. He says, “the TAM of this market is massive and we ultimately believe over the next three years Model Y could comprise roughly 15%-20% of overall unit sales for Tesla and thus be a major shot in the arm for Musk & Co. going forward.” He “strongly disagree[s]” with bears who say “the 1Q demand air pocket will persist,” and continues “to believe Europe Model 3 deliveries and pent up demand in 1H, a bounce back of US demand in 2H on the heels of a $35k Model 3, and improved profitability trajectory will be the focus of the Tesla story heading into the next 12 to 18 months.”

All in all, though the company makes a desirable product, distractions and challenges are rampant. TipRanks analysis of 25 analyst ratings shows a consensus Hold rating, with nine analysts Buying, seven analysts recommending Hold and nine Selling. The average price target among these analysts stand at $312.57, suggesting the stock could rise about 13%. (See TSLA’s price targets and analyst ratings on TipRanks)