If you want to be notified every time I post a new article, just click 'FOLLOW' above. Also, if you want to learn more about a particular topic or need some advice, please comment below the article and I'll be happy to help.
Is Tesla implementing the wrong strategy?
Despite yesterday's sharp price drop, Tesla doesn't seem to react before the open.
The stock remains at a two-and-a-half-month low with no sign of recovery.
The performance for the year was reflected in an increase of 32%.
To maintain solid growth, the company has decided to lower the prices of its electric vehicles around the world, including in the United States, where it had already fallen due to increasingly fierce competition.
This caused Q1 gross margins to decline 19.3% from 29.1% last year, falling short of the average forecast of 21%.
Since Tesla began cutting prices, the stock has lost a quarter of its value.
The company said that despite price reductions in some areas during the first quarter, it was able to maintain a controllable reduction in operating margins.
The company also announced it was ready to make further cost cuts, including finding more efficient ways to produce in its modernized facilities.
The company stood by its production forecast for the year of 1.80 million vehicles, up against consensus estimates of 1.84 million.
I have already expressed my opinion in previous articles, and I confirm that management has made a wrong choice by sacrificing margins in order to follow a sales strategy.
We are dealing with a company in the automotive sector, which has to cope with the typical ups and downs of the sector.
The Fed expects economic growth to decline at the end of the year, with a return to recovery over the next two years.
This is a topic of great relevance to the entire global economy.
It all started with the sudden rise in interest rates that is creating problems for the banking sector, which is increasingly reluctant to lend.
As for the 'temporary recession', I myself am not too convinced that it will be just a mild recession.
When the recession comes to the end of the year, we know the automotive sector will be badly hit, except probably the luxury sector.
Therefore, we have to be prepared to face the consequences of this crisis.
Savers are in a difficult situation due to the high interest rates.
Getting a loan to buy a car isn't as cheap as it used to be, with interest nearly twice as high as it was in 2015.
This obviously has a negative impact not only on Tesla, but also on the entire automotive industry.
Tesla was forced to lower prices following the huge and rapid growth of inventories, which rocketed within a year, thus highlighting a clear overproduction.
This is an important warning signal, since a potential Tesla buyer would have an incentive to delay his purchase if he learns of the continuing decline in selling prices.
If there's a chance they could save a few thousand dollars in a month or two, why would they buy it at full price now? Getting out of this situation is not easy.
Lowering prices can also have a negative effect on brand reputation, as it could lead to a loss of exclusivity.
In confirmation of the above, I believe that Tesla is currently overvalued.
My valuation is 85 and my model will stay that way in the coming quarters.
If you need technical and psychological support from me, google me.
Author's note:
The information and content provided on this site should not be considered as an invitation to invest in the financial markets. The Content is a personal opinion of Mr Antonio Ferlito.
Is Tesla implementing the wrong strategy?
Despite yesterday's sharp price drop, Tesla doesn't seem to react before the open.
The stock remains at a two-and-a-half-month low with no sign of recovery.
The performance for the year was reflected in an increase of 32%.
To maintain solid growth, the company has decided to lower the prices of its electric vehicles around the world, including in the United States, where it had already fallen due to increasingly fierce competition.
This caused Q1 gross margins to decline 19.3% from 29.1% last year, falling short of the average forecast of 21%.
Since Tesla began cutting prices, the stock has lost a quarter of its value.
The company said that despite price reductions in some areas during the first quarter, it was able to maintain a controllable reduction in operating margins.
The company also announced it was ready to make further cost cuts, including finding more efficient ways to produce in its modernized facilities.
The company stood by its production forecast for the year of 1.80 million vehicles, up against consensus estimates of 1.84 million.
I have already expressed my opinion in previous articles, and I confirm that management has made a wrong choice by sacrificing margins in order to follow a sales strategy.
We are dealing with a company in the automotive sector, which has to cope with the typical ups and downs of the sector.
The Fed expects economic growth to decline at the end of the year, with a return to recovery over the next two years.
This is a topic of great relevance to the entire global economy.
It all started with the sudden rise in interest rates that is creating problems for the banking sector, which is increasingly reluctant to lend.
As for the 'temporary recession', I myself am not too convinced that it will be just a mild recession.
When the recession comes to the end of the year, we know the automotive sector will be badly hit, except probably the luxury sector.
Therefore, we have to be prepared to face the consequences of this crisis.
Savers are in a difficult situation due to the high interest rates.
Getting a loan to buy a car isn't as cheap as it used to be, with interest nearly twice as high as it was in 2015.
This obviously has a negative impact not only on Tesla, but also on the entire automotive industry.
Tesla was forced to lower prices following the huge and rapid growth of inventories, which rocketed within a year, thus highlighting a clear overproduction.
This is an important warning signal, since a potential Tesla buyer would have an incentive to delay his purchase if he learns of the continuing decline in selling prices.
If there's a chance they could save a few thousand dollars in a month or two, why would they buy it at full price now? Getting out of this situation is not easy.
Lowering prices can also have a negative effect on brand reputation, as it could lead to a loss of exclusivity.
In confirmation of the above, I believe that Tesla is currently overvalued.
My valuation is 85 and my model will stay that way in the coming quarters.
If you need technical and psychological support from me, google me.
Author's note:
The information and content provided on this site should not be considered as an invitation to invest in the financial markets. The Content is a personal opinion of Mr Antonio Ferlito.