Tesla’s Price Slash To Boost Volume Growth By 53% This 2023
Tesla’s Price Slash To Boost Volume Growth By 53% This 2023
According to Bank of America, Tesla’s recent price reductions for its automobiles will result in more rise in sales volume in 2023.
The Model 3 sedan and Model Y SUV will have their prices reduced in January by between 6% and 20%, and while this would reduce margins, BofA strategists said in a note on Tuesday that this may lead to a 53% rise in volume this year.
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That would take the business past CEO Elon Musk’s target of 50% and is more than treble the Wall Street firm’s previous estimate of 17% growth.
Tesla’s Price Slash To Boost Volume Growth By 53% This 2023
“This pushes revenue to $100bn in 2023, up 18% from our prior model,” strategists wrote. “Based on the adverse impact of price cuts offset by an average incremental margin on the increase in sales that we estimate at 30%, our earnings estimates move moderately lower in 2023 and our price objective is now $130 (was $135).”
Tesla looks poised to make 10% to 20% less per car sale, and the bank forecasted that additional incremental cuts could follow over the next two years. Analysts trimmed earnings-per-share estimates for 2023 and 2024.
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BofA noted that Tesla remains fairly valued and maintained its neutral rating on the stock, which climbed 5.9% to $129.65 on Tuesday.
Strategists pointed out that the company’s self-funding status is unique among EV competitors, but less notable among legacy automakers. Tesla faces near-term obstacles including a downbeat macro environment of higher interest rates and a looming recession, as well as potential risks to the broader EV market.
Tesla’s Price Slash To Boost Volume Growth By 53% This 2023
Altogether, along with Musk’s distractions associated with his acquisition of Twitter, BofA said a neutral stock rating is “appropriate.”
Also on Tuesday, longtime bull Jefferies lowered its price target for Tesla by 49% to $180 from $350, but kept a Buy rating on the stock, arguing that the company’s recent price reductions will assist a broader objective of making electric vehicles more accessible.
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