Tesla’s (NASDAQ: TSLA) stock was down in morning trading on Monday after JP Morgan analyst Ryan Brinkman reiterated a Sell rating on the stock with a price target of $120 implying a 30.1% downside at current levels.
Brinkman commented, “Tesla’s softer trend and below-consensus adjusted automotive gross margin comes before the impact of large price reductions that will primarily be felt beginning in the first quarter. As such, we view margin trajectory negatively and expect that consensus margin expectations are likely to decline.”
The analyst is apprehensive about TSLA’s recent price cuts even as volumes could expand and thinks that this move “seems fraught with greater risk relative to demand, execution, and competition.”
This Sell rating from Brinkman halted TSLA’s more than 40% rally this month.
Interestingly, Berenberg analyst Adrian Yanoshik had a different take on TSLA’s recent price cuts. The analyst was of the opinion that the EV major’s recent price cuts indicated its cost leadership strategy as it looks to gain market share.
Yanoshik expects that TSLA’s margins will recover as it shifts its production away from its Fremont, California factory improving the company’s capital efficiency and labor costs. This is because, according to the analyst, the Fremont factory has higher labor costs and old equipment.
The analyst also perceives an opportunity for TSLA when it comes to battery cell production.
As a result, Yanoshik has upgraded the stock to a Buy from a Hold with a price target of $200, implying an upside potential of 16.4% at current levels.
Analysts remain cautiously optimistic about TSLA stock with a Moderate Buy consensus rating based on 21 Buys, seven Holds and three Sells.