Tesla shares gain as Wall Street heaps praise on electric truck, new Roadster

Some concerned new vehicles could take Tesla's eyes from 'all-important Model 3.'

  • By Claudia Assis,
  • MarketWatch
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Tesla Inc. shares (TSLA) and bonds rose Friday, a day after the Silicon Valley car maker unveiled its promised electric commercial truck and surprised observers by showing off a new version of the Roadster, the costly sports car that kicked off its electric-vehicle production nearly a decade ago.

Wall Street heaped praise upon Tesla for its one-two punch, which opens up two markets, commercial trucking and ultra-luxury passenger cars, and as the specs for the truck, especially its range, surpassed analyst expectations.

The star of the late Thursday show was revealed to be a big-rig with a 500-mile range with some autonomous driving capabilities and a relatively short recharging time. Most analysts were expecting a truck able to drive about 200 miles between charges, with highest estimates around 450 miles.

The truck is on tap for production in 2019, with trucking and transportation company J.B. Hunt Transport Services Inc. (JBHT) saying earlier Friday it had placed orders to buy several Tesla Semis and Wal-Mart Stores Inc. (WMT) confirming it had pre-ordered 15 trucks, five units for its U.S. fleet and 10 units for Walmart Canada. Meanwhile, shares of diesel-engine maker Cummins Inc. (CMI) ended more than 4% lower on fears that its business will be undermined by the new technology.

"The Tesla truck appears to best current diesel truck performance in almost every measurable way," analysts at Morgan Stanley said in a note, praising the launch as the beginning of a "new age of trucking."

The unveiling of the Tesla Semi "exceeded expectations on virtually all fronts," analysts at Bernstein said in a note.

The truck and Roadster unveiling fueled bear and bull arguments for Tesla, analysts at Evercore ISI said. For fans, the event supports the view that Tesla remains cutting edge, and that particularly in the ultra-luxury sports-car category it could become a market leader, the analysts said.

Bears will zero in on the capital expenditures needed to bring both to market, and also the risk that they would distract Tesla from "the all-important Model 3." Tesla's ability to bring the truck to market in 2019 and the new Roadster in 2020 will also be questioned given the Model 3 production delays, the analysts said.

Overall, the event "will be positive for sentiment as investors continue to buy into the "promise" and see downside risks as surmountable," the Evercore ISI analysts said.

Goldman Sachs took a similar tack, calling to attention the production delays with the Model 3 and their expectations that the mass-market sedan's production will be lower than what the company has planned.

Tesla stock gains moderated as the Friday session progressed, but the advance took off some of the sting from losses earlier this month following poor third-quarter results and the postponement of some of the company's goals toward the Model 3 production.

Tesla has gained 47% in 2017, compared with 15% gains for the S&P 500 index (.SPX). Tesla stock has fallen nearly 11% over the past three months, contrasting with gains around 6% for the benchmark.

The Dow Jones Industrial Average (.DJI) has gained 7.5% in the last three months.

The company's most active bonds also rallied. The 5.300% notes that mature in August of 2025, were last trading up about 2 points at 96.13 cents on the dollar to yield 5.899%. On a spread basis, the bonds were trading at 353 basis points over comparable Treasurys, 35 basis points wider on the day.

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