Tesla TSLA is recalling the vast majority of its Cybertrucks in the United States to fix an issue wherein an exterior panel could detach while the vehicle is driving. Shares were down a little more than 1% at the time of writing on the news.
Why it matters: The Cybertruck is a luxury truck. Tesla aims for the vehicle to reinforce its brand of luxury vehicles that come with the latest technology, and a recall risks damaging the carmaker’s brand.
The bottom line: We maintain our $250 fair value estimate for Tesla. We view the stock as fairly valued, with shares trading less than 10% below our fair value estimate and in 3-star territory. We recommend investors wait for a larger margin of safety before considering an entry point.
We view product recalls as fairly common in the automotive industry, especially for smaller issues that do not affect vehicle safety, such as an exterior panel detachment. We see little impact on Tesla’s brand or vehicle deliveries from the recall.We think this kind of issue is more likely for newer vehicles like the Cybertruck. We expect Tesla will fix the problem in its manufacturing process. The recall does not change our view that the Cybertruck will eventually see around 50,000 deliveries per year.
Coming up: We expect Tesla will see a decline in first-quarter deliveries. This is due to lower delivery numbers in the US and China in the first two months of the year and a January decline in Europe. We forecast 2025 deliveries will be slightly lower than 2024, owing to a down first quarter.
As the new Model Y will be available in the three key regions during the entire second quarter and Tesla plans to launch its more affordable SUV by midyear, we expect deliveries will grow in the second half of the year.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
