After Tesla (TSLA) CEO Elon Musk tweeted cryptically this weekend about a "Tesla Masterplan, Part 2," Wall Street analysts speculated today that the news could simply be elaboration on its planned integration with SolarCity (SCTY), or something as pivotal as a full-featured mobility and ride-sharing service with 5,000 cars on the road by 2018.
DRIVER WARNING MAY BE KEY TO AUTOPILOT: Weighing in on a Wall Street Journal report yesterday the the SEC is investigating Tesla for potential breach of securities laws after choosing not to publicize the fatal May 7 crash of a Model S, UBS analyst Colin Langan calls the news "the latest in a series of negative Tesla headlines." That said, Langan highlights the Journal's interview with Michigan law professor Adam Pritchard, who would be "very skeptical" a court would judge the crash a material event for stockholders given that Tesla shares recovered so quickly after news of the crash finally did break. The analyst says the larger issue surrounding Autopilot is not disclosure but performance, with autonomous driving experts debating whether the system provides adequate notice to drivers that they must remain alert. "Ensuring the driver is ready and able to take back control over the vehicle may ultimately be a key addition," he says. Langan also voices skepticism of Tesla's comparison to fatalities in other car models, as Autopilot is operated in restricted, highway-only conditions. Finally, commenting on CEO Elon Musk's tweet hinting at a "top secret Tesla masterplan, part 2," Langan said he would be surprised if the announcement concerned autonomous vehicles given the recent Tesla crashes, and he instead expects the focus to be on the integration of SolarCity after the carmaker's bid to buy the solar system installer was met with investor skepticism. The analyst reiterates a Sell rating and $160 price target on Tesla shares.
MASTER PLAN POINTS TO WIDER MOBILITY SOLUTION?: Also speculating on Musk's cryptic "masterplan" tweet, Morgan Stanley analyst Adam Jonas believes the "the missing piece" of Tesla Motors' puzzle could be an on-demand mobility service. According to Jonas, a "business model based on selling cars to private owners who achieve a time utilization of 4% and an available seat-mile utilization of 1% may not be sustainable. We believe all auto firms, including Tesla, must confront this strategic shift." With the auto industry in this "early metamorphosis" towards a public utility, Jonas sees Tesla uniquely positioned to capitalize given its headstart in machine learning, data collection, and connected cars. The analyst has modeled the potential for Tesla to launch a mobility service with 5,000 cars by 2018, though he reminds investors to consider several important factors of such an initiative, including fleet ownership, levels of car automation, and any negotiations with municipalities and states, with Jonas arguing that the "most credible" mobility solution would be a public-private partnership with governments. He keeps an Equal Weight rating and $245 price target on the shares.
MUSK WON'T DISABLE AUTOPILOT: Speaking in a Wall Street Journal interview published after the above research notes, Elon Musk said Tesla has no plans to disable Autopilot, and instead plans an explanatory blog post that outlines how Autopilot works and what drivers are expected to do while using it, with Musk remarking that "a lot of people don't understand what it is and how you turn it on."
PRICE ACTION: Shares of Tesla are roughly flat in afternoon trading at $225, slightly underperforming the broader market. Since July 1, which is the first trading day after Reuters broke news of the NHTSA opening an evaluation into the performance of Autopilot during a fatal crash that occurred in a Model S, Tesla shares are up about 6%.
Comments
Log in or sign up to join the conversation.