Tesla shares: Investors should “buy proactively” at this point, says Piper Sandler


The recent decline in Tesla (TSLA) stock has reached attractive levels and it is time for investors to position themselves for an uptick, Piper Sandler argued in a new note.

“Tesla took longer than expected to lower prices, but with price adjustments made and with valuation reset, we believe investors should proactively buy TSLA,” research analyst Alexander E. Potter wrote in a note to clients on Wednesday. .

Tesla shares are down more than 40% in the past three months since CEO Elon Musk bought Twitter. Many Wall Street analysts likened the share’s drop to a “Twitter overhang,” though the company also had other fundamental issues, including a missed fourth-quarter vehicle delivery.

The electric vehicle maker has since responded with price cuts in key markets such as China, Europe and the US. The most recent cut on Jan. 13 also slashed prices by as much as 20%.

See also  Good News: Your Required Minimum Distributions (RMDs) have officially been postponed

The price cuts in the US pushed the price of Tesla’s base Model Y down from $65,990 to $52,990, according to Reuters calculations. However, as the note pointed out, the rebates could be closer to 30% if we factor in the $7,500 federal tax credit for the purchase of a US-manufactured electric vehicle.

The more affordable prices could boost demand, according to Piper Sandler, who currently has an Overweight rating and a $300 price target for the stock. The company noted that Tesla can now “easily” deliver supply growth of at least 50% by 2023.

“We don’t think most investors realize the extent to which lower prices could support Tesla’s market share,” Potter wrote. “This is especially true in the United States, where lower prices, combined with a $7,500 tax credit, could unlock at least 300,000 units of increasing demand (if not double that).”

See also  Foreigners return to China Bluechips as stocks near bull market

In addition, he added, the price cuts could help Tesla coax demand from competitors like GM (GM), Ford (F) and RAM, all of which have lost Tesla’s electric vehicle market share in recent years. reduced.

“The U.S. auto market has a lot of real estate for Tesla to exploit,” the note said.

Indonesian President Joko Widodo talks with Tesla CEO Elon Musk at the SpaceX launch site in Boca Chica, Texas, May 14, 2022. (Laily Rachev/Indonesian Presidential Palace/handout via REUTERS)

Tesla’s price cuts have continued to raise concerns about the company’s margins. Wall Street analysts, including Potter, have cut gross margin expectations to account for Tesla making less per sale of its vehicles. Still, Potter argued, lower margins may not be as bad as feared for the automaker.

See also  Biotech stocks are all the rage - here are today's top 5

“We are hopeful that such drastic declines will not occur due to falling raw material costs and better margins at Tesla Energy,” he wrote. “More importantly, we believe the margin profile of new capacity in Shanghai, Austin and Berlin is higher than many expect.”

Tesla is expected to report fourth quarter 2022 results after the closing bell on January 25.

Josh is a reporter and producer for Yahoo Finance.

Click here for the latest trending stock tickers from the Yahoo Finance platform

Click here for the latest stock market news and in-depth analysis, including stock-moving events

Read the latest financial and business news from Yahoo Finance

Download the Yahoo Finance app for Apple or Android

Follow up Yahoo Finance Twitter, Facebook, Instagram, Flip board, LinkedInand YouTube


Please enter your comment!
Please enter your name here