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Tesla's Model S Plaid 'is a major step forward,': Oppenheimer Analyst Colin Rusch

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Colin Rusch, Oppenheimer Sr. Research Analyst, joined Yahoo Finance Live to break down why he believes Tesla's Model S Plaid is a 'major step forward' and how this leap will impact other EVs.

Video Transcript

JARED BLIKRE: I'll tell you what, the Tesla Model S Plaid is here, and it is blazing fast. And for that, I want to bring in our next guest. This is Oppenheimer Senior Research Assistant, Colin Rusch. And Colin, besides the blazing speed, does this car live up to the hype?

Yeah, I mean, I think it does. They're trying to do a couple of things with this. One, update the Model S, but also really innovate on the technology side. We saw a couple of things with the RPMs on the motor running at blazing speed, and in the light weight. And that happened. So in terms of an evolution of the technology, that's been an important element.

At the product level, seeing a little bit more comfort in the vehicle and taking a kind of an incremental step towards a fully autonomous vehicle and how that might look in terms of the steering wheel, as well as the back seats, and having a little bit more space to lounge while you're riding, make a lot of sense to us that they're doing that with their high end vehicles before they start rolling those sorts of design elements into the lower end vehicles.

But I think for us, this was a major step forward with the 0 to 60 under two seconds is an impressive feat in a production vehicle, and I think it more than meets the needs of the company in terms of the product portfolio.

SEANA SMITH: Colin, you said that this is a major step forward for the company. Any concern at all that they canceled the Plaid Plus? Or why, I guess can you give us any insight as to why you think that decision was made?

COLIN RUSCH: I mean, honestly, I don't know why we need to go faster than 0 to 60 in two seconds or go 200 miles an hour.

SEANA SMITH: That's a good point.

COLIN RUSCH: [INAUDIBLE] they offer consumers at this point. It just, it seems like an unnecessary element that they didn't need and so they took it out. And so for us, it's really not a concern at all.

JARED BLIKRE: We saw the Tesla stock take a hit off of those numbers that came out of China, various reports saying that they've lost market share there. Of course, they can export to the rest of the world, but is that a concern for you? And how does that fit into your valuation model?

COLIN RUSCH: Yeah, for us short term, the company really is meeting demand that's well in excess of supply. And so if they have a little bit of a PR issue in China right now, I'm expecting them to shift a number of vehicles outside of China from those facilities. I'm not sure that it's actually impacting domestic demand all in. I do think that the company has had very sporadic month to month shipments in different geographies, and so we know that they have starved certain geographies and then fed them in various lumpy ways as they're able to get containerships to give them locations. And I think that's probably what we're seeing.

Historically, we've seen the company deliver almost half of its vehicles in the last month of the quarter. And so we're really watching what the June numbers will ultimately be, and we'll see where those shake out here in a few weeks, just after the 1st of July with the delivery report.

SEANA SMITH: Colin, we have shares trading just around $607 today. You have a price target of $1,000.80 bucks on this stock, about $400 from where we are. What's going to get us there?

COLIN RUSCH: Our thesis from here is really about Tesla delivering on the autonomous opportunity. They've got by the end of the quarter, they'll have nearly a million and a half vehicles on the road collecting data and forming their AI and improving the system. We think that's a critical advantage versus all of their peers that are working still thousands of vehicles, and single digit thousands of vehicles.

So we think the learning cycles are dramatically faster. And our expectation is that they're going to be rolling out incremental functionality around urban driving, left-hand turns, things like that in larger and larger set of geographies. And that's what we think ultimately drives the valuation here over the next 12 to 24 months is the delivery on that autonomous technology and to really be first to market with a fully autonomous vehicle.

JARED BLIKRE: And when you look at Tesla's competition, and they have quite a bit of competition now, but especially from the legacy automakers, GM had a big push for EV earlier in the year, Ford had one within the last month, and Volkswagen, you look at all those stocks and they've been outperforming most of the EV plays over the last month or two. Is this a threat for Tesla? Because they are better capitalized and they have bigger factories and more resources right now.

COLIN RUSCH: Well, I mean, Tesla is awfully well capitalized right now, north of $10 billion cash in hand, they're growing their factory base, so we're not worried about their capitalization. In terms of some of the startups and the newer companies in the EV space versus some of the legacy platforms, it actually is quite difficult to make EVs. We saw that with Tesla's teething pains early on in its development, and we've seen it with folks like VW in specific with their operating system over the last couple of years.

So we're expecting that the larger OEMs that are established are going to figure this out and will make vehicles. They still, I think, are disadvantaged from a performance perspective versus Tesla, as well as from a brand perspective, given the evolution of the technology. And again, that's why we think this Plaid was important for us to get out into the public realm, because they are demonstrating a clear technology lead versus their peers, whether it's the established OEMs or some of the startups.

JARED BLIKRE: And you have to appreciate the showmanship of Elon Musk himself, love it or hate it. Colin Rusch, thank you so much for joining us. Oppenheimer Senior Research Analyst.