Tesla Will Make More Affordable Cars: What Could This Mean For Stock Prices?

Santander, Spain - 12 January 2024: A white Tesla Model Y in motion on a highway.
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Elon Musk’s Tesla has seen a meteoric rise in its stock price since its initial public offering (IPO) in June 2010. At the time, Tesla stock was valued at a mere $17 per share, according to the company’s website, as opposed to its current valuation of around $245 (as of Nov. 4).

After a fairly promising Q3 earnings call, as LinkedIn News and Ars Technica outlined, it appears that Tesla could be poised for some market movement.

What factors may influence a change in valuation in the future, and how might they influence the stock price?

Tesla To Offer Cheaper Cars, But Only Robotaxis Around the $25,000 Mark in the Near Future

Despite earlier reports of both a $25,000 self-driving “Robotaxi” as well as a $25,000 “Model 2” Tesla offering, the latter has been shelved, Electrek reported. With Elon Musk claiming on X that Reuters was “lying again” in its reportage over the cancelation of the Model 2 project, however, it remains unclear whether it will eventually reach fruition — though Musk’s recent comments during Tesla’s most recent earnings report did not seem encouraging on the subject.

“I think having a regular $25,000 model is pointless,” Musk said during Tesla’s Oct. 26 earnings report. “It would be silly, like it will be completely at odds with what we believe.”

In the meantime, Tesla’s efforts are being focused on more inexpensive vehicles, with no particular price point mentioned, as well as the rollout of a fleet of self-driving taxis costing $25,000 per unit.

“Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025. These vehicles will utilize aspects of the next generation platform as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line-up,” the earnings report promised.

Electrek’s Jameson Dow exhibited skepticism over Musk’s claims that the less-expensive Tesla models would arrive in the first half of 2025 — noting that the earnings report verbiage was “actually exactly the same as what appeared in Tesla’s Q2 earnings, just shifted forward in time three months.”

Strong Fundamentals May Bode Well For Tesla Stock, But ‘Exponential Growth’ Could Be Over

Ars Technica editor Jonathan Gitlin was a bit more neutral in his estimation of Tesla’s fortunes, particularly concerning the relative strength of the automaker’s most recent earnings report.

“After a rocky first half of the year, Tesla enjoyed a much healthier third quarter in 2024. As we learned earlier this month, it arrested a slide in sales, delivering 6 percent more electric vehicles year over year. But the automotive side of the business was essentially flat — Tesla attributes its success to its second-best quarter ever for regulatory credits, as well as making it cheaper to build the cars it sells,” Gitlin wrote.

After highlighting Tesla’s current strengths — a booming battery and solar operations business, service and operations income, and the sale of emissions credits to other automakers to name a few — Gitlin turned his focus more critically to challenges facing Tesla in the future.

“The days of Tesla promising exponential growth in its car sales appear to be at an end, or at least on hiatus until it can deliver a new vehicle platform,” Gitlin detailed. Concerns about a potentially costly hardware recall related to the automaker’s vision-only system were also gestured towards as a potential downside. As for another upside, “spare capacity at its factories in California, Texas, Germany, and China” was mentioned by Gitlin.

Is Tesla Stock a Buy, Sell or Hold?

According to Markets Insider, the stock holds a strong consensus buy rating, with 50 analysts calling for a buy, 27 for a hold, and 15 to sell.

With that being said, Morningstar analysis described Tesla stock as currently overvalued, despite increasing its “fair value estimate to $210 per share from $200 following the strong earnings, due to our improved near-term outlook for Tesla’s automotive business and higher forecast for its energy generation and storage business.”

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