Tesla could ‘easily’ sell more cars after price cuts, analyst says

Tesla Inc.’s price cuts herald market-share gains that most investors do not yet fully appreciate, analysts at Piper Sandler said in a note Thursday, keeping their ratings on the electric-vehicle maker at the equivalent of buy.

That’s true especially in the U.S., the analysts, led by Alexander Potter, said in the note. Lower prices in the U.S. for some models lead to $7,500 tax credits, and those could “unlock at least 300k units of incremental demand (if not twice that),” the analysts said.

Tesla
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is slated to report fourth-quarter earnings on Wednesday after the bell. Analysts are looking to hear more about the effects of the price cuts, enacted last week for the U.S. and Europe, and Tesla guidance.

Piper Sandler analysts acknowledged that the cuts, of 6% to 20% depending on model and region, have an obvious downside as they imply lower margins. So they cut their estimates to automotive gross margins to 24.7%.

“But we are hopeful that such drastic declines may not materialize, due to deflating raw material costs and better margins in Tesla Energy,” the analysts said. “Even more importantly, we suspect that the margin profile of new capacity in Shanghai, Austin, and Berlin is higher than many expect.”

See also: ‘Poker move’ or wake-up call? Wall Street weighs in on Tesla’s price cuts

They also cut their price target on Tesla shares to $300, from $340, with implied upside of 140% on Thursday prices.

Tesla stock is down 62% in the past 12 months, compared with losses of about 14% for the S&P 500 index.
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