Tesla (NASDAQ:TSLA) stock closed over 3% lower on Wednesday and fell another 1.1% during the after-hours trading session. This drop can be attributed to rising potential price war concerns in China, as the electric vehicle (EV) giant reduced the prices of its vehicles for the second time within the same week.
TSLA reduced prices for its Model S sedans and Model X sport utility vehicles, with cuts of up to 8%. This move follows a prior cost reduction for the Long Range and Performance versions of the Model Y SUV by 14,000 yuan. Additionally, Tesla extended the deadline for receiving an insurance subsidy for the base version of the Model 3 sedan until September.
These pricing adjustments suggest the company’s efforts to remain competitive and stimulate demand in the Chinese market. Furthermore, the slow recovery of China’s economy also adds to Tesla’s woes.
Last month, the company’s CEO, Elon Musk, said that Tesla aims to adjust its pricing strategy in response to changes in external factors such as interest rates. It is noteworthy that the company’s discounted approach highlights its willingness to prioritize long-term growth and market presence over short-term profitability.
Is Tesla a Hold or Buy?
Interestingly, analysts’ projections for TSLA stock reflect their apprehension regarding how price reductions could affect the company’s profit margins. Overall, Wall Street is sidelined on Tesla, with a Hold consensus rating based on 10 Buys, 13 Holds, and five Sells. The average price target of $253.77 implies 12.5% upside. Shares have risen 108.7% year-to-date.
However, investors looking for the most successful analyst covering TSLA stock could follow analyst Alexander Potter from Piper Sandler. If one were to replicate Potter’s trades on Tesla and hold each position for one year, about 65% of the transactions would result in a profit with an average return of 113.57%. Potter most recently reiterated a Buy rating on the stock 28 days ago.
