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Tesla’s artificial intelligence opportunities are underappreciated by the marketplace, says Canaccord analyst George Gianarikas.
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Not all price cuts are created equal.
Some create anxiety among investors about falling demand, increasing competition, and lower profit margins. But others have the ability to excite investors.
Canaccord analyst George Gianarikas sees a way for
Tesla
(ticker: TSLA) to cut prices that would probably fall into the excitement category.
The idea that a price cut could generate a positive buzz might feel like a stretch. Tesla stock fell some 10% when the company disclosed first-quarter results showing that profit margins fell more than expected year over year as a result of price reductions the electric-vehicle company had rolled out around the globe to boost demand.
The Canaccord analyst isn’t talking about car prices, though. “We strongly advocate for a price adjustment to increase FSD adoption and incentivize more Tesla owners to experience the current FSD Beta,” wrote Gianarikas in a Sunday report. He wants a cut to the price of Tesla’s so-called full self-driving software, the company’s top-level driver-assistance system.
The reason a cut could help is obvious: FSD is pricey, costing buyers $15,000. It’s also available for a subscription price $199 a month, or $99 if buyers pay $6,000 up front for a driver-assistance upgrade. A lower price would get more people to buy in early.
“Once the masses truly appreciate what FSD specifically and autonomy generally are truly capable of, Tesla may see its ChatGPT moment,” Gianarikas wrote, referring to the wildly popular artificial-intelligence-powered chatbot rolled out by OpenAI in November.
Every business wants a ChatGPT moment, in which investors recognize how they could gain from the rise of AI.
Nvidia
(NVDA) stock rose some 25% in a day after forecasting second-quarter sales numbers about 50% higher than Wall Street expected on the strength of its artificial intelligence business.
Everyone knows Nvidia stands to gain from AI, but Gianarikas says the AI opportunity at Tesla is underappreciated. The car maker uses internally developed AI to develop, improve, and run its FSD software.
Tesla CEO Elon Musk believes the FSD product will eventually achieve so-called level 4 autonomous driving capability, which means cars equipped with the technology will do most of the driving most of the time without the need for human drivers to pay attention. FSD hasn’t reached level 4, but it would be a game changer for Tesla and the industry if it does.
Even if Tesla doesn’t cut the price for FSD, potential Tesla buyers have gotten another discount thanks to the government. All Tesla Model 3 vehicles now qualify for $7,500 in federal tax credits, up from $3,750, a shift that likely reflects changes in where Tesla gets its batteries and where the materials used to make them are obtained. Tesla didn’t immediately respond to a request for comment about the change.
Gianarikas rates Tesla shares at Buy, with a target of $257 for the price. Overall, about half of the analysts covering the stock rate shares at Buy, while the average Buy-rating ratio for stocks in the
S&P 500
is about 53%. The average analyst price target is about $190 a share.
Tesla stock was up 1.6% in early trading Monday, while futures on the
S&P 500
were flat.
Nasdaq Composite
futures were down 0.2%. Tesla might be benefiting from higher oil prices after OPEC committed to an output restriction over the weekend. Tesla vehicles don’t use gasoline, so higher oil prices make them more appealing.
Write to Al Root at [email protected]
Source: https://www.barrons.com/articles/tesla-stock-chatgpt-price-cut-fsd-3d736b53?siteid=yhoof2&yptr=yahoo