Tesla Semi Is On Track For A 2026 Launch. Will It Help Tesla’s Underperforming Stock?

Tesla (NASDAQ:TSLA) stock rallied by close to 7% in Tuesday’s trading, after the company revealed new details about its semi-truck which has faced a series of delays since it was first unveiled back in 2017.

Tesla says that the truck remains on track for deliveries to customers by 2026, noting that it was building out its Nevada manufacturing facility for the truck, looking to boost annual production capacity of 50,000 units per year eventually.  The company says that the long-range Semi would have a range of up to 500 miles with the vehicle weighing in at  23,000 lbs, while the standard range truck with a smaller battery would be able to do 300-mile trips with its unladen weight standing at 20,000 lbs.

During the Semi’s unveiling in late 2017, Tesla estimated that the truck would start at $150,000 with the long-range model priced $180,000, there have been reports that trial customers have been paying about $250,000 per vehicle, indicating that prices have increased. This is roughly double the price of diesel class 8 trucks. However, Tesla’s vehicle does have some advantages, including high power and much better efficiency, which should translate into lower operating costs and a faster payback period. The increasingly stringent regulatory environment could also help Tesla. Although medium and heavy-duty diesel trucks constitute under 6% of vehicles on the road, they account for 25% of the greenhouse gases emitted by the transportation sector. The U.S. Environmental Protection Agency is now finalizing its Phase 3 rules that aim to reduce greenhouse gas emissions from diesel trucks by as much as 60% by 2032. These rules could also help Tesla’s Semi see wider adoption.

Now amid the current backdrop, TSLA stock has faced a notable decline of 20% from levels of $235 in early January 2021 to around $185 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. However, the decrease in TSLA stock has been far from consistent. Returns for the stock were 50% in 2021, -65% in 2022, and 102% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that TSLA underperformed the S&P in 2022. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Consumer Discretionary sector including AMZN, TM, and HD, and even for the megacap stars GOOG, MSFT, and AAPL.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could TSLA face a similar situation as it did in 2022 and underperform the S&P over the next 12 months – or will it see a recovery?

Although Tesla will remain a big beneficiary of the long-term transition to cleaner transportation and energy generation, given its well-oiled supply chain, superior battery and drive-train tech, and its lead with software and self-driving technology, there are some concerns for the stock. The company is likely to see its deliveries and earnings face pressure this year, falling well below the company’s multi-year target of 50% annual growth in revenues, amid high interest rates and cooling EV demand. Moreover, it faces mounting competition from Chinese EV players, who have been offering very compelling vehicles and affordable prices. This could pose a threat to Tesla’s growth particularly in international markets.  We value Tesla stock at about $177 per share, which is about 5% below the current market price. See our analysis on Tesla Valuation: Is TSLA Stock Expensive Or Cheap? for more details on Tesla’s valuation and how it compares with peers. For more information on Tesla’s business model and revenue trends, check out our dashboard on Tesla Revenue: How Does TSLA Make Money?

[1] Returns as of 5/22/2024
[2] Cumulative total returns since the end of 2016

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