Tesla CEO Elon Musk recently revealed through Twitter that the company would be revealing its new semi truck at an event in September (as we reported at the time). That tweet seemed pretty optimistic as regards the quality of the semi truck being developed by Tesla, with Musk stating: “Team has done an amazing job. Seriously next level.”
Following the tweet, an analyst at Piper Jaffray by the name of Alex Potter released a note revealing that he was downgrading the engine and truck manufacturers Cummins and Paccar — partly as a response to Tesla’s impending semi truck reveal. Though, the downgrade was also partly as a result of the stock already being overvalued, according to Potter.
The note from Potter read: “their valuations already reflect cyclical optimism, but also because we think TSLA’s impending arrival could pressure valuations.”
The note also singled out Allison Transmission Holdings as a stock at great risk from potential disruption caused by Tesla’s semi truck.
A second note regarding Cummins was particularly blunt (as quoted by CNBC): “Cummins makes diesel engines, but companies like Tesla (among others) are aiming to supplant CMI’s products. These Silicon Valley disrupters are not confining their ambitions to sedans; instead, they have announced plans for electric semis, electric pickups, electric buses, and various other products that defy the preeminence of diesel engines. CMI enthusiasts will note that EVs won’t replace diesel trucks in the coming 2 years (not in a material way, at least) and we agree. But when/if electric drivetrains are proven viable in the first commercial vehicle segments, we think incumbents’ valuations could fall rapidly thereafter.”
A separate note concerning Paccar made some interesting points as well: “Tesla’s presence looms large; laugh all you want, but this trend cannot be ignored. In the automotive segment, Tesla and others have wrought substantial disruption, forcing incumbents to change their hiring practices, increase R&D spending, and ultimately, suffer lower multiples. PCAR may be less at risk than others — and it’s probably too early to start ringing alarm bells — but with the stock trading near the high-end of its historical valuation range, we wouldn’t be adding to positions.”
Of course, the nature of Tesla’s actual potential to disrupt the semi truck sector is still largely an unknown, as the company has yet to reveal much of anything … but already the threat of disruption is leading to some analysts changing their forecasts, which is interesting.
It should also be realized here that Tesla isn’t the only company pursuing the electric semi truck sector. Daimler/Mercedes-Benz is also planning to begin full production of its Urban eTruck by 2020. …
With regard to the notes from the analyst Alex Potter, he also recently upgraded his price forecast for Tesla’s stock to $368. Apparently, that’s the highest price forecast yet received by Tesla from a major firm, according to CNBC.
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