“Bitcoin is the smart move at the right time for Tesla in our opinion, but on the downside its playing with firecrackers and risks and volatility are added to the Tesla story,” said Daniel Ives, tech analyst for Wedbush Securities, who remains bullish on Tesla shares.
Model Y pricing
Last Thursday, Tesla cut the price of the cheapest version of its Model Y and its best-selling Model 3 cars by $2,000 each. That brought the price for the “standard range” Model Y, one that can travel 244 miles on a charge, to $38,490 — and the standard range Model 3 to $34,590.
But over the weekend, the cheapest “standard range” version of the Model Y disappeared from Tesla’s sales site, leaving only the more expensive long-range and performance versions of the SUV. Tesla did not explain its decision.
“We see the plausible reasons as either: the mix was skewed too much to the cheaper variant, and thus it was going to kill their margins, or more likely there just wasn’t much demand for the lower variant,” said Gordon Johnson of GLJ Research, one of the more bearish critics on Tesla shares. He said the recent price cuts and other price cuts show that Tesla vehicles do not have the demand that its fans claim.
“Tesla can’t keep its current factories running at capacity without … price cuts,” said Johnson in note on Monday.
Established automakers have recently set ambitious targets for their own EV sales.
Those efforts are making some Tesla investors nervous, said Ives, although he believes there will be enough of a shift to EVs for multiple winners among global automakers.
Investors got ahead of themselves
During the earnings conference call on January 27, Musk also spoke about a shortage of batteries needed to power electric vehicles. He said that even with Tesla’s own in-house supply of batteries and its planned expansion of battery production, the company is scrambling to find the batteries it wants to build more vehicles.
“The fundamental limit on electric vehicles right now, in general, is total availability of [battery] cells,” he said. For example, Musk said Tesla would have already started producing a semi-tractor if it had the batteries available to do so.
Shares are still way up
Tesla shares rose a market-leading 743% in 2020, as investors embraced the idea that the future of the auto industry would be electric. Tesla remains by far the most valuable automaker in the world, with a market value well above that of the eight largest automakers combined.
Some investors believe Tesla’s stock flew too high. Yet many analysts believe Tesla will bounce back. Ives has a 12-month target price of $950.
Even so, he has a warning: “It’s ‘buckle up the seat belt time’ again for Tesla’s stock with more volatility on the horizon,” Ives said.