Tesla TSLA shares fell hard after the company posted weaker-than-expected third-quarter results in mid-October, missing Street expectations both in earnings and deliveries. The stock has since settled somewhat, though it remains far below its pre-earnings level.
The most significant factor behind recent Tesla investor sentiment revolves around the price cuts that the company has been so fiercely engaged in; the average Tesla is selling for around 25% less than last year's sale price.
The result of this ongoing price war has been steadily falling gross margins, something many investors were extremely frustrated about in the wake of the company's third-quarter earnings. CEO Elon Musk did little to assuage these frustrations during the earnings call, leaving the door wide open for more price cuts with no clear end in sight.
Related: Cathie Wood has a blunt warning about Tesla's stock over the coming months
Affordability, he said, is the most important thing right now. And with inflation as high as it is, the only thing Tesla can do, according to Musk, is to continue cutting prices.
But at least in some geographies, the dreaded price war might be nearing its conclusion.
Weeks after Tesla China boosted the price of its Model Y Performance by roughly $2,000, the company, according to Bloomberg, is planning to similarly hike the prices of its other Model Y variants as well.
Both the details and timing of such an announcement remain unclear.
"This would increase conviction that Tesla auto gross margins have bottomed — a necessary condition for Tesla stock to rise from here," Gary Black, managing partner of the Future Fund, said in response to the news.
Related: Why Tesla stock is crumbling — and where it could go next
Black added that such a move could also serve to boost Tesla volumes into November.
Black said that, following the news, Tesla's stock should start to tick back up.
The company's stock, however, remains in the red, down by less than one percent by mid-morning Tuesday.
Cathie Wood of Ark Invest, one of Tesla's most prominent uber-bulls, recently noted a point of near-term volatility for the stock. Last week, Wood said that the stock tends to react violently to new moves made by the company.
With the much-anticipated Cybertruck set to begin making deliveries at the end of November, and with the Cybertruck not expected to be profitable for up to 18 months, Wood said another period of volatility is coming.
"We are going to have to navigate through a volatile period," Wood said, adding that she still expects consumer excitement around the Cybertruck to grow following its delivery event Nov. 30.
Wood projected in April that Tesla will be trading at $2,000 per share by 2027.
Contact Ian through email, ian.krietzberg@thearenagroup.net, or Signal, 732-804-1223.
Related: Cathie Wood's super bullish Tesla stance tested after latest earnings
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