Tesla completes first Cybertruck: What it means for the stock

Tesla has finished building its first Cybertruck at its Giga Texas facility. Colin Rusch, Oppenheimer Managing Director and Senior Research Analyst, tells Yahoo Finance Live the completion of Tesla's Cybertruck "shows incremental progress from the platform," but "the real driver for the stock here is a little bit of anticipation on Wednesday that they're going to post better than feared gross margins."

Video transcript

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DIANE KING HALL: Tesla has officially completed its first Cybertruck. The EV Maker unveiled the completed model on Twitter, showing a group of workers at its gigafactory in Texas. Now Tesla first revealed the prototype for the Cybertruck back in 2019 but pushed back the original release date for the vehicle due to supply chain shortages.

For more on what this means for Tesla, we're joined by Colin Rusch, Oppenheimer Managing Director and Senior Research Analyst. Colin, thanks so much for joining us this morning. So this, obviously, has been accretive at an earlier check to Tesla's share price. To you, is this a bullish signal for you that they finally completed this?

COLIN RUSCH: They're just delivering on one of the promises. Albeit, substantially late compared to what they originally guided. But it just shows the incremental progress from the platform. And we think the real driver for the stock here is a little bit of anticipation on Wednesday that they're going to post better than feared gross margins. And we think that's the real number that investors are looking at as they look at the results Wednesday after the close.

JULIE HYMAN: What is going to fuel-- hey, Collins, Julie here. What's going to fuel those better than expected gross margins do you think, especially, considering that they've been in this sort of price cutting mode?

COLIN RUSCH: Yeah, it's really around the supply chain and utilization on the factories. So what we're seeing is supply chain bottlenecks easing, product becoming available, you know, utilization going up on the factory, and this is across the broader OEM complex. And so for Tesla. What that means is they've been passing on some of those cost savings.

And I think some of the fear around the stock has been that margins would be lower for longer. And I think that's still persists. But if they show a little bit of progress here off the 17.8%, you know, margins ex credits from last quarter, I think there's going to be some relief from the Bulls and some fear from the Bears that things are actually getting better and that they can hit some of the higher end margins that folks are looking at and '25, '26.

DIANE KING HALL: So Colin, Ford saying, they're cutting the price of their F-150 Lightning by about 10,000 bucks. What do you think that means for Tesla and what it may have to do with regard to pricing?

COLIN RUSCH: You know, I think all of these OEMs are working through what the right price is for the vehicles. And as fuel prices change from geography-to-geography, we're seeing oil prices up and down a little bit. We're seeing electricity prices go higher.

And with the credits that we have in the US. It's still about a $10,000 to $11,000 total cost of ownership advantage towards EVs. But when you look at of some of the base vehicles in the trucking market or the pickup market, the prices need to come down if you're moving away from a luxury sale into a real duty driven sale for folks.

And so I think the prices on a lot of those trucks are a little bit too high once you get out of the realm of fashion and luxury. And so, Ford, you know, although we don't cover them, I suspect is probably looking at that dynamic. And saying, you know, what do we need to do from a price perspective to drive volume? And we're seeing some of that today.

JULIE HYMAN: If I'm not mistaken, Colin, you are still at a market perform when it comes to Tesla. What would change your thesis at this point? Is there anything in their numbers for example that would change your mind?

COLIN RUSCH: This is an interesting question with the stock. So there's a couple of dynamics that we're looking at pretty closely. First, is the gross margin issue that we talked about earlier and their ability to ramp up to gross margins in the high 20s percentages on the automotive side and the vehicles. The second thing is what the real commentary is around AI.

Obviously, the stock ran is a lot of the market got enthusiastic around AI for broader applications. And under a number of applications within the Tesla platform, you've got some AI IP. The first one really being self-driving vehicles. You've got this robot that they're talking about building. And then, the Dojo Platform that's going to drive a number of learning cycles and faster learning cycles for the company.

And so, as we look at the stock, the first consideration is really what they're doing on the manufacturing side with the vehicles. And we think they're really having to compete on a performance basis and a cost basis with a much broader volume of vehicles as they get to higher volumes themselves as a manufacturer. And we're seeing that in the pricing dynamic. But the big question for the stock here.

I think it's really what's the realization and the reality of AI within this platform? And I think there's a lot of hope built into the stock right now but not a lot of meat on the bone. And so, that's what we're looking for on Wednesday is some commentary around that AI, that opportunity, and how they're going to go about monetizing it.

JULIE HYMAN: Yeah, that should be very interesting. As always though, when it comes to Tesla, and in particular, when it comes to Elon Musk, there tends to be noise, right? The latest of that noise coming in the form of Senator Elizabeth Warren, whose CNBC is now reporting has sent a letter to the Securities and Exchange Commission.

Telling them to investigate Tesla and its Board. Over what she is saying, and I'm quoting here,

DIANE KING HALL: Possible conflicts of interest, misappropriation of corporate assets, and other negative impacts to Tesla shareholders. All of this having to do with Musk's Twitter takeover." so his takeover of Twitter. His interest there. And then, sort of the feedback to Tesla. What do you make of that call? And what do you make of that issue?

COLIN RUSCH: Well, certainly, there's a lot of interest around shareholder protection. Broadly speaking with consumers. And certainly, when you see stocks as volatile as Tesla, there's a lot of consideration around how those management teams and boards look after shareholders.

You've also seen a lot of money made both on the long and short side with the stock. And there's been-- like you said, a lot of noise around Elon's behavior and how the stock gets managed or how the company gets managed. And so, I think at this point, having not looked at any of those documents or those filings, you know, I can't really comment on the specifics.

But I think there's going to be an ongoing consideration for the SEC, for consumer advocates, and with Tesla. Especially, as its influence grows increasingly going forward. Now that said, what we've seen historically is that Tesla has been very aggressive around defending its position. And Elon's been very aggressive about defending his position. And so I don't think they'll back down on any of these issues.

DIANE KING HALL: Colin, there's a lot of talk about, like, range anxiety with regard to people who have EVs or are considering getting an EV. Is the charging network enough for deeper penetration when it comes for-- or just more market growth when it comes to Tesla and the amount of Chargers there are?

COLIN RUSCH: I think it's a great question. And certainly, there's the use patterns for vehicles writ large. And there's a couple things to note here. One, the electrical network is widely available across almost the entire country, and most developed countries. And so, there is potential access for vehicles to be charging at any number of points all along that network.

Two, the build out of chargers is still very much in its nascency. And there's two elements to this. One, actually installing those Chargers. But then, two, managing the chargers and the impact on the grid. And we think the controls are really important here and the potential supplementing of batteries.

We cover a company called ChargePoint Tiger CHPT, which we're actually quite bullish on given their leadership from a controls perspective and public charging, particularly, in the US. And so we think there's still a lot of room to run on this infrastructure build out here through the balance of the decade and into post 2030.

And so at this point, from a range anxiety perspective, I think folks that actually have vehicles have found ways to manage that. And there's-- one, a fair amount of infrastructure available now so you can solve that problem the real issue is when you're doing long road trips.

And so there is I think still a fair amount of build out left to happen around those issues. And Tesla certainly is a leader in that regard with its supercharger network. And we're seeing a lot of OEMs look at what they need to do to enable sales. And signing up for access to that supercharging network has been a capital efficient way for them to pass on some of those costs to their consumers, without actually having to spend the cash for that infrastructure themselves.

DIANE KING HALL: All right, Colin Rusch, thank you so much. Oppenheimer Managing Director and Senior Research Analyst, we appreciate you.