It's another week, and some analysts are focusing on an EV government contractor, while others have their eyes on Tesla (TSLA) and its Full-Self-Driving technology.
Full-Self Driving, more like Fail-Safe Driving
These words from Tesla CEO Elon Musk are still haunting to one particular analyst.
"I would encourage anyone to understand the system better to simply try [Full-Self Driving] out, let the car drive you around. Once people use it, they tend to continue using it. So it’s vastly compelling."
Truist Securities Analyst William Stein is probably the bravest person on Wall Street, as he is truly committing himself to put Tesla CEO Elon Musk at his word.
In a note published on July 29, the analyst wrote that he tried a special "Demo" mode of FSD, where it made a number of illegal and dangerous moves that "would have surely caused an accident" while he and his teenage son were in the car.
He noted that the Model Y he and his son took for a spin "accelerated through an intersection as the car in front of us had only partly completed a right-turn. My quick intervention was absolutely required to avoid an otherwise certain accident."
Related: TheStreet Auto Week: Analysts evaluate Tesla FSD, mull over Stellantis
Tesla began rolling out a new update of FSD, version 12.5, for Tesla vehicles, and Stein was among the first to try it out.
In a note published on August 13, he wrote that he tested the new update under optimal driving conditions. While he observed that it exhibited more human-like driving behaviors, he was not impressed.
He called the software a 'fast fail,' observing it committed egregious driving infractions such as making a left turn from a non-turning lane while the traffic light was red and veering into the middle of two lanes on a twisty road. Despite demonstrating improvements in acceleration, braking, and lane changes, Stein ultimately found that FSD at its current state is far from what Musk calls "solving autonomy" or having something capable of being used in a robotaxi.
"My 16-year-old son came away terrified," he added. "I wasn't so sure. FSD did not cause an accident or necessarily require an intervention. I could envision TSLA describing these moves as more human-like and less robotic than earlier systems, and therefore better suited to real-world driving conditions."
“It seems especially true if FSD were trained by NYC taxi drivers. We remain befuddled as to what TSLA might introduce in its planned RoboTaxi event in October.”
In an appearance on Bloomberg Technology on August 15, Stein oddly stated that as an equity research analyst and not "a video vlogger or whatever," he did not film his experience. He said that he was driving in "suburban New York" using a "test vehicle from Tesla with the latest software that they had available."
However, he expanded on the fact that much of Tesla's valuation and its stock price is really dependent on the viability of FSD and the upcoming robotaxi.
"Well, I think the idea that FSD needs to work is critical to the stock, in my opinion. Only about a third of the stock's value is wrapped up in the automotive production and energy capture and storage businesses. About two-thirds of the stock are wrapped up in these AI projects," Stein told Bloomberg Technology.
"So he's got to show something at this Robotaxi day. He's already pushed out that day from August to October. But if we have the supposition that Robotaxi will depend on FSD, then it's not ready."
Stein's "Hold" rating for Tesla stock remains unchanged.
More Business of EVs:
- Waymo finds new way to bring chaos to quiet city streets
- Gavin Newsom's 'EV mandate' is under U.S. Supreme Court threat
- BMW's clever, new EV app is a privacy nightmare
Lost in the EV sauce
Analyst Toni Sacconaghi at Bernstein also warned that the October 10 robotaxi event could be a "sell the news event," noting that Elon Musk and his company “has a history of unveiling concepts that are years away from being ready for release.”
However, the crux of their concerns revolve around their position in the greater EV market in general.
Though Tesla is one of the most recognizable electric vehicle manufacturers, its market share has dwindled amidst the expansion of EV offerings from trusted establishment automakers like Ford, Hyundai, Kia, General Motors, and BMW.
Although salespeople in dealerships all over the country have very mixed sentiments about electric vehicles, Tesla's market share has suffered. In 2019, Musk and Co. held onto 77% of the market; today, that number is down to just 48%.
Bernstein analysts believe that Tesla stock's growth will lag behind if the car company doesn't focus on cars, especially as manufacturers begin to sell cars in the down market.
“We don’t believe that Tesla will be able to regain share or grow materially until it launches all-new, lower-priced offerings – likely only in 2026 and 2027 – and believe the company’s valuation is increasingly disconnected from prevailing fundamentals,” Bernstein analysts said.
Bernstein maintains its sell rating for Tesla.
Canoo
Taking the oars of the Canoo
Torrance, California-based startup Canoo (GOEV) has had a very weird 2024.
Despite earning major contracts from the U.S. Postal Service, NASA, and Walmart, the fledgling EV startup has been found to be wildly prioritizing frivolous expenses to the point of causing losses.
According to its 2023 full-year earnings report filed on April 1, the startup made only $886,000 in revenue during the year, a huge win compared to a recorded revenue of zero dollars in 2022. During the same year, however, Canoo spent twice the amount it made on private jet flights for its CEO Tony Aquila, reimbursing an entity owned by the CEO for its use of the jet.
On August 14, Canoo announced its second-quarter 2024 results, which were its largest revenue quarter at $605,000. The company did not disclose the number of vehicles delivered between April and June, but its CEO stated that the results represent “good progress,” noting that its customers “drove more than 34,000 recent real-world, industrial use miles."
In a research note published on August 15, Roth MKM analyst Craig Irwin kept its Neutral rating on Canoo stock, citing tight cost controls and significant supplier engagement, but reduced its price target from $3 to $1.50 because of an anticipated delay in production commencement.
Related: Gavin Newsom's 'EV mandate' is under U.S. Supreme Court threat
On the flip side, H.C. Wainwright analyst Amit Dayal wrote in an August 15 note that though it previously expected Canoo to begin production in the second half of 2024, "commentary from the 2Q24 earnings call leads us to believe that the production start may now be pushed to early 2025."
Dayal believes that more Canoo EVs in customers' hands will be the “key catalyst for the stock," noting that the startup's latest engagements may be the driver behind the growth of its customer list.
“Canoo has also received Foreign Trade Zone approval for the Oklahoma City facility. We believe the company is continuing to engage with existing and prospective to grow the order-book," Dayal said. "This includes vehicle deliveries to the U.S. Postal Service (USPS), entry into Saudi Arabia, completing Phase 3 milestone with Defense Innovation Unit, and concluding the Red Sea Global pilot."
However, Wedbush analyst Dan Ives remains confident that the company is on its way to growth as long as it manages its expenses and cash flow properly.
"We believe this quarter was a testament to GOEV laying the foundation for future growth and production ramps while focusing on the bottom-line expansion and cash flow improvements by reducing operating expenses over the coming year and remaining strict with capital deployment," Ives said.
H.C. Wainwright reiterates its Buy rating, and Wedbush maintains its Outperform rating for Canoo stock.
Related: Veteran fund manager picks favorite stocks for 2024
