Tesla margin headwinds still building with continued price cuts, says Roth MKM

Roth MKM analyst Craig Irwin keeps a Neutral rating and $85 price target on Tesla after its Q1 results. The company’s strategy of cutting prices to stimulate demand helped lift deliveries in Q1, but at the expense of gross margins and profitability, and headwinds are still building with continued price cuts, the analyst tells investors in a research note, adding that the Model Y – Tesla’s top-selling vehicle in North America – is now 29% cheaper than the beginning of the year. Roth’s Neutral rating appropriately balances how Tesla is positioned to continue executing, though Tesla shares are still valued at an oversize premium to all peers in the automotive sector, the firm added. In pre-market trading, Tesla shares were down over 7% at $167.50.