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Tesla (TSLA) Stock Rebounds: Can the Cybertruck Redeem Itself?

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Tesla (TSLA - Free Report) shares edged higher Monday after a botched Friday debut of its new pickup truck that Elon Musk has dubbed Cybertruck. The unveiling went off course when Musk asked his head of design to throw a small metal ball at the vehicle’s side window.

The metal ball ended up cracking the window much to the surprise of the audience and Musk. After the debacle at the premier, TSLA shares slipped Friday as Wall Street was hardly impressed with the design. Despite the eccentric showcase, Musk announced Monday on Twitter (TWTR - Free Report) that orders for the new truck were doing better than most expected.

Tesla’s Pickup Makes the Rounds

Footage of the window of the electric pickup truck shattering made its rounds on social media as the public all shared their opinions on the uniquely shaped automobile.

The unveiling in LA focused on demonstrating the new vehicle and its ability to compete in the pickup space dominated by Ford (F - Free Report) and General Motors (GM - Free Report) . Tesla’s Cybertruck pickup is polarizing, with its angular design that makes it stand out and hard to describe. The price of the new vehicle is set to start at $39,900, which is about $10,000 less than expected. 

However, while the entry-level rear-wheel drive Cybertruck is set to cost less than $40,000, the higher-end, more-capable all-wheel-drive versions will be priced up to $69,900. The priciest version of the electric pickup boasts a zero-to-sixty acceleration time in 2.9 seconds, up to 500 miles of range, and can tow 14,000 pounds.

Tesla didn’t seem to skimp on the performance capabilities that most pickup consumers look for, but some worry that the odd design might not have mass appeal. During the production of the pickup, some inside the company worried that Musk would let his personal preferences overly influence the design. Despite the design backlash, Tesla has already received 200,000 orders for the new Cybertruck according to Musk.

Can the Cybertruck Transcend the Nascent Market?

Putting aside the failure and unconventional design, can Tesla’s new pickup truck appeal to a broad audience? Tesla first defied conventional automotive industry wisdom by betting that consumers would be willing to pay a premium to drive an electric car.

A sleek design was a central part of the formula, as Tesla aimed to inspire consumers to buy an unconventionally modern looking car. It seems Tesla adopted the same strategy with its unique Cybertruck design that it hopes can attract the pickup truck consumer.

The automotive company has time for its Cybertruck to grow on consumers despite the initial backlash as most don't expect a release until the latter half of 2021 and the electric pickup truck market is just entering its infancy. Research firm IHS Markit (INFO - Free Report) projects electric vehicles will account for about 9% of the US automobile market in 2026, up from less than 2% today. Joseph Spak, an analyst with RBC Capital Markets, called the Tesla pickup “a Hummer for the green millennial generation; really the ultimate virtue and vice signaling machine.”

Bottom Line

Apart from the unorthodox design and embarrassing accident at the showcase, the capabilities of the truck seem to be in line with what pickup truck enthusiasts would look for. Additionally, the strong preorder numbers reported by Musk may indicate that consumers have looked past Wall Street’s initial worries.

However, investors should note that Ford and GM have already announced plans to design their own electric pickups, with GM set to release its vehicle in the fall of 2021. This may not bode well for Tesla as pickup consumers are known to be brand loyal, and Ford and GM have long dominated the pickup truck landscape.

On top of all that, TSLA remains a volatile stock that has been on a roller coaster ride year-to-date. However, the automaker’s recent performance has helped make up for some of the losses it endured earlier as it is has gained over 55% in the past 12 weeks. Our Q4 estimates forecast a 35.75% bottom-line decline to $1.24 per share and for sales to slip 1.82% to $7.09 billion.

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