Tesla's Share Price Will Be Hit By Price Cuts

According to tech investor Mark Hawtin, Tesla shares are unlikely to recover over the medium term in part because of the price reductions the electric manufacturer announced late last year.

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Hawtin, investment director at Zurich-based GAM Investments, declared, "I'm pretty pessimistic on Tesla."

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He went on to say that shares would "certainly" not return to their $300 level, citing obstacles including the significant decline in the resale value of Tesla vehicles that had increased lease expenses.

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Since September, when the company's shares were trading at around $300, they have decreased by 30%. On Monday, shares were trading at about $205.

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Hawtin's opinion is supported by recent data from the credit broker Electrifying. Tesla's reduction in price for the Model 3 and Model Y has resulted in a 57% increase in monthly payments for the lenders financing the vehicles.

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This is as a result of the decrease in the final worth of the vehicles for the lenders, who then increased their prices to make up the difference.

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It makes it unavailable to many, many people, according to Hawtin, who spoke on Trade Algo.

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According to Hawtin, this might then result in less demand for Tesla's products, which would have an effect on margins and profitability.

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At a time when factories are expanding all around the world, he continued, "I believe we will see lesser demand."

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At GAM, where it is estimated that there are about $80 billion in assets under administration, Hawtin is in charge of many international long-only and long/short funds. He makes investments in technology and disruptive growth companies.

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If Hawtin's hypothesis is confirmed, it will be awful timing for the company with its headquarters in Texas.

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To reach its 50% multi-year annual growth rate, Tesla has been increasing production on a global scale. It currently runs an assembly facility for American vehicles in Fremont, California, a more recent one in Austin, Texas, its first production outside of the United States in Shanghai, and another one in Gruenheide, Germany.

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Concerns regarding a potential "demand cliff" for Tesla have also been raised by analysts at Bernstein.

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In a note to clients, they stated, "We believe that many investors misunderstand the depth of the demand issues Tesla is facing."

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As of February 22, the investment bank's price target for Tesla's shares was $150, which would be a 26% decline from the stock's current price.

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Some upbeat analysts, including Adam Jonas of Morgan Stanley, forecast a 20% increase in the stock price to $220.

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In the automaker's Feb. 1 earnings report, Jonas claims that any fresh plans for the "wide adoption of EVs at substantially lower price points" could cause the stock to surge. Day of investors.

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"Doubling down with a re-vamped Model 3 can offer new enthusiasm and cost reductions as the competition in EVs intensifies and we see the first symptoms of a deflationary EV market," Jonas wrote in a letter to investors on February 22.

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