Tesla's "sales first, profits later" strategy reliable? Wall Street is arguing!
One voice is that Tesla is executing the "razor strategy" and sees autonomous driving as the biggest value release point in the industry competition; but some people also see that the profit plummeting is a fact, and Tesla is walking a tightrope between profit margin pressure and driving global demand!
After a sharp drop in profits and a two-year low in gross profit margin in the first quarter, Tesla is still "sales volume over profit margin"!
From the stock price performance, investors are probably anxious. How does Wall Street see it? Mixed feelings!
Some analysts believe that Tesla's strategy has some merit, mainly because the future of autonomous driving is bright; but there are also different voices that say Tesla's statement of "selling cars with zero profit and relying on autonomous driving for future harvest" is simply not reliable, and demand is also a big problem.
Focusing on FSD!
In the view of Citigroup analyst Itay Michaeli, Tesla's price reduction reason is based on the long-term lifetime income of cars, that is, regarding autonomous driving cars as the biggest value release point in this industry competition, which is consistent with the bank's industry view. But in order to consolidate this investment thesis, the market really needs to see more evidence of Tesla's progress in fully autonomous driving.
Canaccord analyst George Gianarikas sees Tesla's current strategy as a razor mode (low-priced handling of a part of the same product, and high-priced sales of another part), aiming to put upgradeable and high-profit potential cars into the market. The analyst also predicts that in order to boost the sales of fully autonomous driving FSD, Tesla may reduce its price by $15,000.
Some analysts are optimistic about Tesla's energy storage business growth and long-term projects such as Dojo supercomputers, Optimus robots, etc.
Worries? Doubts!
However, led by Wedbush's star technology stock analyst Dan Ives, Wall Street also has a relatively pessimistic view.
Dan Ives said frankly that although Tesla's demand indicators are stable, the "elephant in the room" is the softening of profit margins, which will inevitably drag down the stock price. Moreover, the idea of driving profit margins through FSD has not been welcomed by many people. "We believe that Tesla is now walking a tightrope between profit margin pressure and driving global demand."
TD Cowen analyst Jeffrey Osborne's disbelief in the FSD strategy comes from Tesla's many "empty promises": "He has said many times such as 'can be done this year', 'supply cannot meet demand', so we have doubts about this."
On the other hand, the weakness of the macro economy is also one of the reasons why Wall Street's confidence in Tesla has declined.
New Street Research analyst Pierre Ferragu sees that although Tesla's overall demand is still higher than supply, the price reduction itself is already a response to the sharp decline in demand in some regions and the global weakness in multiple points. "The economic recession has begun."