Tesla attracts downgrade from Truist on theory that margins may be sacrificed now for long-term AI benefits
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Truist Securities downgraded Tesla (NASDAQ:TSLA) on Friday to a Hold rating from Buy based largely on concerns over margins with the electric vehicle maker stating a willingness to reduce prices further.
Analyst William Stein and team made the point that Tesla's approach to price cut make the firm's AI-oriented thesis look even more correct. That line of thinking is that Tesla would in theory be willing to break-even in automotive in order to expand the installed base and then sell AI software like FSD.
Elon Musk on the earnings conference call (transcript) was not far off from that notion: "We're the only ones making cars that technically, we could sell for zero profit for now and then yield actually tremendous economics in the future through autonomy, no one else can do that. I'm not sure how many people will appreciate the profundity of what I've just said, but it is extremely significant."
While Tesla (TSLA) did increase some model prices earlier on Friday, on a year-to-date basis the prices across models are still roughly 15% to 20% lower.
Shares of Tesla (TSLA) rose 0.40% in premarket trading on Friday after a 9.75% decline on Thursday.
Read the latest breakdowns on Tesla from Seeking Alpha analysts.