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A Tesla, Inc. TSLA bull took down his price target for the stock following the electric vehicle maker’s first-quarter results.
The Tesla Analyst: Wedbush’s Daniel Ives maintained an Outperform rating and reduced the price target from $225 to $215, citing further near-term margin softness in the next few quarters.
The Tesla Thesis: Tesla’s quarterly results could be characterized as mixed, with solid demand metrics, Ives said in a note. Softer margins will weigh down shares in Thursday’s session, he said.
The decline in the auto gross margin to 19% compared to the consensus of 20.7% was due to price cuts implemented to stimulate demand, the analyst said. “With no rose colored glasses: margins are now a delicate issue that are keeping Tesla investors up at night,” he added.
The near-term margin pain with an eye on volume gain is a strategy in line with Street expectations, but the metric dipping below the magical 20% threshold is a concern, Ives said.
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The full-self driving software suite driving the margin story going forward is a narrative that may not go down well with many, he said. The company, therefore, now walks a tight-rope between margin pressure versus driving strong Model Y/3 volume, he added.
“In a nutshell, we remain very bullish on the Tesla story, However, this margin compression and price cut narrative must be carefully managed over the coming quarters as it now emerges as a clear overhang on the stock,” Ives said.
Tesla Price Action: In premarket trading, Tesla shares were sliding 7.10% to $167.76, according to Benzinga Pro data.
Check out more of Benzinga’s Future Of Mobility coverage by following this link.
Read Next: Why Tesla Stock Is Skidding Toward Mid-March Lows Premarket Today
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