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Tesla’s lower-priced variant ‘will expand’ the addressable market, says Baird

Wedbush Securities analyst Daniel Ives also said the price cut was a “potential game changer” for Tesla’s growth
A Tesla car
There was bullish commentary from several analysts who advised clients to to be aggressive buyers of Tesla stock on any weakness

Baird analysts who had designated Tesla Inc (NASDAQ:TSLA) as a ‘Fresh Pick’ ahead of its big announcement were naturally durably bullish Friday about the electric vehicle maker closing stores as it finally cut the Model 3 starting price to US$35,000.

Shutting physical stores, except for a handful of ‘galleries’, will allow the firm to cut its costs by around 6%, savings it will pass on to customers through lower prices across its range of vehicles.

READ: Tesla to close stores as it finally cuts Model 3 starting price to US$35k

The Baird analysts said there would be “aggressive buyers on weakness.”

“The long-awaited $35k Model 3 is available for sale, despite significant skepticism over Tesla’s ability to ever manufacture a mass-market vehicle,” wrote Ben Kallo and David Katter in a note to clients on Friday. 

“We think the update should mitigate demand concerns; the lower-priced variant expands the addressable market and Tesla would not shutter stores if it were struggling to sell cars, in our view. Musk reportedly indicated he does not expect Tesla to be profitable in Q1, likely due to one-time charges. We would be aggressive buyers on weakness.”

Meanwhile, Wedbush Securities analyst Daniel Ives said the price cut was a “potential game changer” for Tesla’s growth.

“While there are still questions that need to be answered around logistics and delivery ... we believe this strategic shift was the right move at the right time for Tesla,” he said in a note to clients.

Despite the positive analyst commentary, Tesla stock fell 3.15% to $309.79 in premarket trade Friday.

The Model 3 moment

Over the past year, Tesla has shrunk the Model 3 battery, tweaked the manufacturing process and axed thousands of jobs in a bid to deliver the promised US$35,000 price tag.

Tesla said earlier that it expects to deliver 360,000 to 400,000 vehicles in 2019, a growth of approximately 45% to 65% compared with 2018.

Musk did warn during the final quarter of 2018, though, that deliveries may slow in the coming months as it starts to ship its Model 3 cars overseas, a process which takes time.

Contact Uttara Choudhury at [email protected]

Follow her on Twitter@UttaraProactive 

 

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