An analyst feels more cautious about Tesla's stock after hearing the company's latest margin philosophy.
Tesla Inc. has calculated that it’s worthwhile to charge less for cars now so that it has a bigger base of customers willing to pay for software in the future, and one analyst is feeling more cautious about the stock after hearing that stance.
Truist Securities analyst William Stein downgraded Tesla’s stock TSLA to hold from buy Friday, shortly after the company’s first-quarter earnings call revealed Chief Executive Elon Musk’s latest thinking on margins, which Stein described as a “brazen willingness” to put up with lower margins in pursuit of the company’s broader goals around autonomous driving.
“The most surprising aspect of the qtr was Musk’s commentary suggesting the company would be willing to accept significantly lower automotive GPM [gross product margins], and even willing to break-even in automotive in order to expand TSLA’s installed base, into which the company can sell AI software like FSD,” he wrote, referring to what Tesla calls its Full Self-Driving capability.
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