It was close, but
Tesla
stock finished lower, snapping its record 13-day winning streak. Higher prices for its electric vehicles lost out to the Fed.
Tesla (ticker: TSLA) raised prices for its Model Y crossover again, further unwinding this year’s reductions for the company’s EVs. It is another signal to car buyers that Tesla will keep prices stable, and it should help assuage concerns about demand, margins, and competition.
Investors, initially, liked the Model Y price move. Tesla stock was up in premarket trading and opened higher, putting the stock on course for its 14th consecutive rise. But shares ended 0.7% lower at $256.70, dropping about $5 after the Fed announced it wouldn’t raise short-term interest rates in June. It bounced back a little late in the day but couldn’t make it all the way back. The
S&P 500
and
Nasdaq Composite
ended up 0.1% and 0.4%, respectively.
Coming into Wednesday trading, the S&P 500 was up about 6% over the past month, boosted partly by the belief that the Fed won’t raise rates this time. It didn’t. Still, investors baked the pause into stock prices ahead of time.
The Fed has raised short-term rates 10 consecutive times since March 2022, to a targeted range of 5%-5.25%, in an effort to tamp down the worst inflation in decades.
Competing for investor attention with the Fed on Wednesday were the pricing changes. The price of a Tesla Model Y with a long-range trim is $50,490, before the application of a $7,500 federal tax credit, according to the car maker’s website on Wednesday. That represents a bump of $250 this week; the Model Y was previously priced at $50,240, based on an archive of the Tesla site as of Monday.
The price of a long-range Model Y is down $16,000, or roughly 25%, from the highs it reached in 2022. Prices across the rest of Tesla’s vehicle lineup have fallen as well this year, weighing on investor sentiment.
While investors and Wall Street have scrutinized pricing, CEO Elon Musk pointed out in April that other car companies adjust prices frequently, though because they sell their cars through traditional dealer networks, the moves aren’t as transparent to car buyers. Meanwhile, Tesla sells directly to consumers.
“Our finger on the pulse is real-time and does not have latency…other car companies have a lot of latency in their data,” said Musk on Tesla’s first-quarter conference call, adding that Tesla adjusts price rapidly in response to order patterns.
This week’s move on prices follows similarly sized bumps to a few models last month. In addition to being a signal to buyers not to wait, it is also an indication to investors that demand might be improving.
Investors will get more tangible information about demand in a couple of weeks when the EV maker releases its second-quarter delivery numbers. Wall Street expects about 445,000 units—a record, and up from about 423,000 delivered in the first quarter. Estimates have come down by a few thousand units over the past couple of months.
Beating estimates will be important for Tesla stock, which has gained about 25% so far in June, and is up about 110% so far this year.
The rise has been substantial and surprising. Morgan Stanley analyst Adam Jonas wrote about the gains in a Tuesday report: “We think the market wants to believe Tesla is an [artificial intelligence] name first, an auto company second.”
Tesla stock appears to be getting some benefit from Nvidia’s (NVID) revelation that AI business was much better than expected. Nvidia shares are up about 40% since its second-quarter sales guidance exceeded expectations by about 50%.
Tesla uses AI to train and build its driver-assistance features.
Jonas rates Tesla stock at Buy, but the recent run has left shares trading well above his $200 target price. His most bullish estimate for Tesla stock is $390 a share. That isn’t his official price target, but what he believes it can reach if everything goes well.
Write to Al Root at [email protected] and Jack Denton at [email protected]
Read the full article here
