A number of analysts cut price targets on Tesla Friday, coinciding with the EV giant's decision to reduce its vehicle prices in the U.S. and Europe. The cuts aimed to make more of the company's models eligible for U.S. tax credits. Tesla stock, along with other auto plays, edged lower Friday.
On Friday, Guggenheim analyst Ronald Jewsikow downgraded Tesla to sell from neutral with an 89 price target. Wells Fargo analyst Colin Langan also on Friday lowered the firm's price target on Tesla stock to 130, down from 230. However, Langan maintained an equal weight rating on TSLA shares.
Jewsikow forecasts a "sizable" gross margin miss in Q4, which will be driven mainly by price reductions and incentive actions. Based on the latest price cuts in the U.S. along with lowered prices in Europe and China, Jewsikow's view is 650 basis points below the consensus gross margin estimate.
Jewsikow also told investors that 2023 estimates "need a reset," and that there continue to be signs that Tesla has "near-term oversupply."
Citigroup's Itay Michaeli was another analyst to lower the price target on Tesla stock. Michaeli revised the target to 140, down from 176 on Friday. Michaeli maintained a neutral rating on TSLA shares and was a little more bullish on Tesla than Guggenheim's Jewsikow.
"We are constructive on Tesla's strong global premium EV position and particularly the company's improved execution in recent years," Michaeli told investors.
Tesla Stock
Tesla stock pared early losses to 0.94%, trading around 122.40 early during Friday's market trading. On Thursday, TSLA shares angled up 0.3% to 123.56, still below its long-falling 21-day line. Shares dipped 0.8% on Tuesday after bouncing 5.9% on Monday.
The Tesla stock drop Friday came as Elon Musk's EV giant cut U.S. Model 3 prices by 6%-14%, depending on the trim. A standard trim Model 3 RWD has been cut by $3,000 to $43,990. With the Inflation Reduction Act tax credit applied to the vehicle, consumers that meet income limits would be paying $36,240.
The Performance Model 3 trim was cut $9,000 to $53,990, getting under the $55,000 limit for tax credits. Meanwhile, Tesla's base Model Y has been slashed $13,000, or nearly 20%, to $52,990, also below the tax-credit limit. The Performance variant for that vehicle has been cut to $56,990, also down $13,000.
Tesla also cut prices significantly in Europe, with reductions in at least Austria, France, Germany, the Netherlands, Norway, Switzerland and the U.K. That comes amid signs of declining backlogs in Europe, with reduced or eliminated subsidies in key markets such as Germany.
Evercore ISI analyst Chris McNally also weighed in on Tesla stock Friday. McNally estimated that with these price cuts "there will be a significant impact" to Tesla's gross margins. McNally has an in-line rating and 140 price target on TSLA shares.
Tesla's price cuts also weighed on General Motors, Ford Motor, Rivian and Lucid, among others. GM stock fell 4.8%. Ford sank 5.3%, Lucid dropped 1.9% and RIVN stock also declined 6.4%
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