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Buy Tesla shares ahead of big semi truck unveil, 'major' autopilot update: Analyst

  • Nomura defends its Tesla buy rating and high price target, citing key developments in Elon Musk's car company, including "major" software updates and its new semi truck.
  • Tesla unveils its hotly anticipated futuristic semi truck on Thursday.
  • The analyst's $500 12-month price target remains the highest on Wall Street and is 61 percent higher than the current stock price.
Tesla Semi to be unveiled next month.
Source: Tesla Motors
Tesla Semi to be unveiled next month.

Wall Street is eager to see Tesla's new semi truck and hear updates on its autonomous driving technology ahead of the company's event Thursday.

Tesla's leadership in autopilot technology and the semi truck's performance is critical for one analyst at Nomura Instinet, who reiterated his buy rating on CEO Elon Musk's electric car maker.

The Tesla event "will be about unveiling an electric semi-truck that does more than just out torque Class 8 heavy diesel trucks," wrote Nomura analyst Romit Shah. "Demonstrating a substantially lower cost of operation, among other things, will also be important."

Tesla has been struggling with profitability as it deals with "production bottlenecks" and low output. Manufacturing complications have crippled production of the mass market electric Model 3, a car widely considered essential to Tesla's future.

Following the announcement of the most recent production holdup, shares of Tesla fell 5 percent. The company reported third-quarter earnings that missed Wall Street's already-low expectations, stoking concerns that Tesla is lagging in self-driving innovation. Shares closed up 0.4 percent Thursday.

Musk, who has said the new truck will "blow your mind clear out of your skull," had previously scheduled the semitractor announcement for October but was forced to delay after the Model 3 production bottlenecks. Though information on the truck is scarce, many expect the prototype to be futuristic, visually stimulating and environmentally friendly.

"We believe that Tesla must demonstrate a lower cost of operation for the new truck," Shah said. "And given that the cost of the driver is the largest component ($0.30-0.40 per mile), the company's self-driving technology is an important part of the cost equation."

The analyst's $500 12-month price target remains the highest on Wall Street and is 61 percent higher than the current stock price.

While Tesla's shiny new truck may make headlines across the automotive world, investors are also looking for more general updates on the company's autonomous innovation. The company has been working closely with up-and-coming chipmaker Nvidia in its quest for smart cars.

Nvidia recently introduced its latest computing platform Pegasus. Thought to be the state-of-the-art technology that will make driving fully autonomous, the new hardware is capable of 320 trillion operations per second, 16 times faster than Tesla's current Drive PX2.

"Autopilot is an option that increases revenue per vehicle sold; however, its real significance goes beyond a spreadsheet," said Shah. "Tesla is recognized for incorporating next-generation technologies such as an electric powertrain, responsive infotainment, and autonomous driving capabilities that provide a great user experience."

Tesla recently said its neural network for vision processing has been "figured out," leading many to anticipate a "major" autopilot software update in the near future.

In its recent investor letter, Tesla management wrote:

"Now that the foundation of the Tesla vision neural net is right, which was an exceptionally difficult problem, as it must fit into far less computing power than is typically used, we expect a rapid rollout of additional functionality over the next several months and are progressing rapidly towards our goal of a coast-to-coast drive with no one touching the controls."