Canaccord Genuity analyst George Gianarikas considers Tesla Inc TSLA shares a solid buy despite the current slump in price. The analyst is optimistic about the electric vehicle giant’s growth potential in three key areas, expecting a rebound in the stock.
What Happened: Gianarikas attributes the stock’s current lag to the company’s dismal earnings revisions over the past 12-plus months.
“I think we’re at a period of time right now where the worries likely exceed the reality,” the analyst stated in an interview with Yahoo Finance.
According to Gianarikas, a reliable measure of Tesla’s performance is its vehicle prices, which have remained relatively stable in the U.S. over recent months.
Gianarikas currently sets a price target of over $230 for Tesla shares, banking on expectations of improved margins and volume over the next two years.
“Look, we’re in a little bit of a pause period right now for the stock. And the near-term wiggles, we think we’ve overcorrected. But for the stock to really get its legs, we have to have three things happen,” he said, listing the below factors:
- Ramp-up of next-generation vehicles
- Margin improvement driven by increased adoption of full self-driving (FSD) technology
- Sustained rapid growth in energy storage
To boost FSD adoption and subsequently improve margins, Gianarikas emphasizes the need for Tesla to reduce the cost of FSD, which currently stands at $12,000 — a steep price compared to the vehicles themselves. He notes that FSD, being a software upgrade, offers high gross margins.
Tesla’s Pricing Strategy: Despite aggressive price cuts initiated by Tesla to stimulate sales since the beginning of 2023 — resulting in margin erosion — the strategy has allowed the company to increase vehicle sales significantly, the analyst points out. Moreover, it has put pressure on rival EV manufacturers, particularly in the United States and Europe.
In China, despite the fiercely competitive landscape, Tesla can operate its Shanghai gigafactory at full capacity and maintain its relevance and competitiveness.
Price Action: Tesla shares closed up 1.4% at $177.77 on Monday, according to data from Benzinga Pro, although the stock remains down 28.4% year-to-date.
Check out more of Benzinga's Future Of Mobility coverage by following this link.
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