‘Obsession’ over Tesla automotive gross margin unwarranted, says Piper

Piper Sandler attributes the post-earnings selloff in shares of Tesla to the quarter-over-quarter decline in gross margins, owing largely to the company’s aggressive pricing strategy. While skeptics may focus on the under 20% automotive gross margin, "an obsession with this metric is unwarranted," the analyst tells investors in a research note. Instead of stressing over the 20% threshold, investors should focus on the spirit of Tesla’s message around operating margin, cash flow, and capex self-sufficiency, says Piper. "The stock may bleed in the coming months, but eventually, this narrative should gain traction," the firm writes. It keeps an Overweight rating on the shares with a $300 price target.