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When Elon Musk announced that his company Tesla would be making semi-trucks and pickup trucks in the future, it was bound to have widespread repercussions. In line with that is the downgrades that some companies are getting with regards to their stocks. These companies either have a direct connection to the conventional semi-truck market or the auto industry as a whole.
One analyst who seems ahead of the game is Alex Potter of Piper Jaffray, who recently released a note announcing that he will be downgrading the stocks of both Cummins and Paccar. Both companies are heavily involved in the truck and engine business, which are set to see significant disruptions from the renegade Tesla, CNBC reports.
In the note, Potter explains that he had to devalue the two companies because "their valuations already reflect cyclical optimism, but also because we think TSLA's impending arrival could pressure valuations." The analyst is also highlighting the risk to Allison Transmission Holdings, which he considers is vulnerable to the rise of electric vehicles. Potter also wrote separate notes discussing Cummins and Paccar individually, citing how Cummins was in a deeper hole than Paccar.
“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,” the note reads. “But when/if electric drivetrains are proven viable in the first commercial vehicle segments, we think incumbents' valuations could fall rapidly thereafter.”
This development isn’t exactly surprising since analysts regularly issue warnings to investors when it comes to rising trends that might disrupt existing markets. As Potter also acknowledged in his notes, Tesla is not the first to try to break through the semi-truck sector with an electric model, Futurism reports.
On that note, Musk has proven himself a resilient innovator and Tesla has survived the predictions of analysts pegging the tech company as a dead brand for years. The simple point that Potter seems to be making is that disregarding Tesla’s semi-truck ambitions could be bad for investors.
