EV maker Tesla (NASDAQ: TSLA) had a tumultuous 2022, falling nearly 65%, however the stock has recovered as of late. The worth cuts on its top-selling models in the beginning of the month have boosted sales, driving investors’ interest back into the stock. Given its revenue growth prospects and comparatively low share price, I’m bullish on the stock at current levels.
Interestingly, TSLA stock has a really positive signal from hedge fund managers, who added 1.1 million shares through the last quarter. In actual fact, well-known investor Catherine Wood, CEO of Ark Investment Management, recently bought TSLA stock. On January 13, Wood’s Ark Innovation ETF reported a purchase order of 168,989 shares of Tesla price $20.7 million.
Tesla’s Price Cuts Boost Sales
On January 6, Tesla announced price cuts within the range of 6% to 13.5% for all variants of its Model 3 and Model Y cars in China. On top of that, last week, the EV maker took its daring steps further by slashing its prices in major markets just like the U.S. — by around 20% — and Europe.
As intended by the corporate, the value cuts massively boosted the sales of Tesla vehicles. In keeping with a China Merchants Bank International (CMBI) study, average day by day sales for Tesla in China through the period between Jan 9-15 soared 76% year-over-year to 12,654 vehicles. Compared on a weekly basis, Tesla China EV registrations rose 500% to 12,654 through the same week, in comparison with merely 2,110 reported within the prior week.
The worth cuts raised concerns in investors’ minds about demand trends amid toughening competition and macroeconomic headwinds. Further, they could result in the compression of Tesla’s profit margins, but let’s understand the underlying reason for such an aggressive move made by Tesla.
First, there was a visual slowdown in EV demand over the previous couple of months. On the availability side, things look higher now with input prices coming down. On top of that, government incentives — just like the $7,500 EV tax credit announced within the Inflation Reduction Act — gave another reason for Tesla to chop prices (with the intention to meet the eligibility criteria for tax advantages.)
the pricing metrics, the common selling price for Tesla cars was high, at over $50,000 in December, higher than a lot of its peers. Subsequently, the value cut was inevitable. Even after the value cuts, the cars proceed to stay expensive in comparison with competitors.
It looks like a price cutting war has just begun within the EV industry. After TSLA cut its prices in early January, Xpeng Inc. (NASDAQ:XPEV) followed in its footsteps, slashing the value of its best-seller P7 sedan by 12.5% to $31,015. Subsequently, I consider it is probably going that other industry players like NIO (NYSE:NIO) and Li Auto (NASDAQ:LI) will even announce price cuts in the approaching months.
TSLA Had a Difficult 2022 but Still Reported Upbeat Results
Prolonged lockdowns in China in 2022 led to an enormous drop in production, affecting firms like Tesla. Demand suffered, too, on account of difficult macroeconomic conditions while competition from Chinese EV makers intensified. Resulting from the above aspects, for December, Tesla reported a 44% slump in Chinese EV deliveries to 55,796 compared to November deliveries of 100,291. Further, on a year-over-year basis, December deliveries fell 21%.
Importantly, Tesla lost a few of its market share to competitors through the fourth quarter. Tesla’s vehicles represented 65% of recent EV sales in 2022 versus 72% in 2021. Within the U.S., its market share dropped to 58% during Q4, in comparison with 78% within the prior-year quarter, despite the 50% growth reported in overall volumes.
Further, CEO Elon Musk’s prolonged tussle with lawmakers over the acquisition of Twitter didn’t go well with many investors. Investors could also be apprehensive about Elon Musk selling more TSLA shares like he did in recent months. Addressing those issues, he stated recently that he wouldn’t sell any more TSLA shares.
Despite all of the bears pulling the stock down in 2022, it’s price praising that Tesla has consistently reported estimate-beating results previously seven quarters, and, importantly, the corporate is on account of release its Q4 results on January 25.
Is Tesla Stock a Buy, In keeping with Analysts?
As per TipRanks, analysts are cautiously optimistic about TSLA stock and have a Moderate Buy consensus rating based on 17 Buys, eight Holds, and three Sells. Tesla’s average price forecast of $187.32 implies 30.4% upside potential.
Conclusion: Consider Buying Tesla Stock
EV penetration the world over has continued to grow, with newer models being introduced by leading EV makers. Within the U.S., EV penetration of recent automotive sales reached 6% in 2022 in comparison with 3% in 2021.
Tesla’s price cuts have put its competitors in a tricky situation, as they could must follow suit. The corporate has a powerful cost advantage (a high gross profit margin of 26.6% relative to competitors), and its price cuts could immediately boost sales significantly, making up for the lower prices.
Net-net, Tesla’s growth prospects amid its price cuts, I’m bullish on the stock.
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