Tesla (TSLA:NSD) Cuts Prices Again as Earnings Loom

Wedbush Boosts price target for Tesla from $310 to $350

Tesla Price Cuts/Earnings on Deck

Tesla Inc.  has once again cut prices for its Model 3 and Model Y electric vehicles (EVs), ahead of the company’s highly anticipated earnings report. This marks the sixth time that Tesla has lowered prices this year in the United States. The move saw a $3,000 reduction in the price of every version of the Model Y SUV and a $2,000 price cut for the Model 3 RWD, bringing its starting price to $39,990. The base Model Y, known as the AWD or all-wheel-drive version, now starts at $46,990.

Tesla has been aggressively lowering prices to remain competitive, with the base Model 3’s price having been reduced by 11% this year alone.  Tesla’s base Model Y prices have dropped by 20% during the same period of time. This latest round of price cuts follows the federal government’s recent decision to limit the number of vehicles eligible for the electric vehicle tax credit, with Tesla’s base Model 3 RWD seeing its tax credit halved to $3,500.

The Q1 earnings report was expected to reflect a dip in revenue to $23.37 billion, down from the $24.32 billion in Q4, but still up by 24.6% from a year ago. Tesla’s adjusted net income for Q1 was anticipated to be $3.03 billion, a billion less than last quarter and $700 million less than a year ago. Although the revenue was expected to remain flat and profit to dip, it is likely that the effects of margin compression would come into play.

Investors are closely watching Tesla’s gross margin figures to see how the price cuts are affecting profitability. Tesla’s gross margin figures for automotive sales were 25.9% in the last quarter, slightly lower than the previous quarter.

Analysts have been cautious about the profit impact of Tesla’s price cuts, with JPMorgan stating that the lower prices are negative for Tesla and other pure-play battery electric automakers competing with Tesla. In contrast, traditional automakers such as GM and Ford are likely to lose more money on EVs, although they have other profit centers to offset such losses. Tesla’s most recent U.S. price cuts were perceived as an indication of slowing demand for the EV maker by Guggenheim analyst Ronald Jewsikow.

Tesla’s Q1 earnings report is likely to provide more information on production and backlog demand, including any indication of how Q2 deliveries are tracking and whether the order backlog is growing. Investors and analysts are also waiting for progress on Cybertruck production, updates on the gen 3 platform discussed at Tesla’s investor day, and more information on the timeline for construction of Tesla’s latest gigafactory in Mexico.

Tesla’s continued price cuts could impact the company’s profitability, especially in the face of slowing demand for its EVs. However, the company’s Q1 earnings report may shed more light on the matter and provide some insight into its future direction.

TSLA Ratings by Stock Target Advisor

TSLA Stock Forecast & Analysis

The average analyst target price for Tesla Inc over the next 12 months is USD 215.41, with an average analyst rating of Buy. Tesla’s stock price was USD 184.31 at the last closing, having changed by -1.33% over the past week, +2.32% over the past month, and -44.94% over the last year. Stock Target Advisor’s own analysis is Slightly Bullish, based on 10 positive signals and 5 negative signals.

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