Goldman Sachs likes Tesla despite vehicle price cuts

Goldman Sachs has lowered its Tesla price target following price cuts on Model 3 and Model Y vehicles but still thinks there is a big upside in the stock.

Tesla recently cut the price of its vehicles in the United States and Europe, which followed two rounds of reductions in 10 weeks in China.

These price cuts spooked many investors, but Goldman Sachs remains bullish on the electric vehicle maker’s prospects.

Goldman Sachs lowered its earnings expectations for Tesla as the price cuts were larger than anticipated and implied lower vehicle orders than were seen historically.

However, the lower price point for Tesla’s cars would also increase vehicle demand and boost volumes in the long run.

Considering these factors, Goldman Sachs reduced its price target for Tesla from $295 to $200. It still represents a 55% upside potential on Tesla’s share price at the time of writing.

Tesla’s 2022 Q3 results reported a 56% increase in revenue at $21.45 billion and a 75% increase in earnings with a net income of $2.09 billion.

Despite the strong growth, it was lower than analyst expectations, sending the share price plummeting by 7% in a single day.

Good prospects

Tesla made impressive progress in ramping up vehicle production. It expanded its footprint in recent years with gigafactories in China, Texas, and Berlin.

Demand has also been promising as vehicle supply increases have constantly been matched by vehicle orders.

During its latest earnings call, Tesla CEO Elon Musk said that the Q4 demand for Tesla EVs looked very strong, and the company is expecting a record-breaking year.

The vehicle manufacturer is expected to release its Q4 results after market close on 25 January, and investors are eager to see if Musk’s comments will bear fruit.