Tesla (TSLA) Set to Announce Model Y — How Will Stock Move?

After years of anticipation, Tesla (TSLA) is finally set to announce the launch of its new Model Y SUV in Los Angeles Thursday night. While the Model 3 was Tesla’s answer to an affordable sedan, the Model Y is that for the SUV market — which represents nearly half of all new-car sales in the US. Also very important is that the Model Y and Model 3 share about 75% of all parts, making the manufacturing process a little less daunting for Tesla, which has had its share of manufacturing struggles.

On the impending announcement of the new car, Wedbush analyst Daniel Ives maintains his Outperform rating on the stock with $390 price target. (To watch Ives’s track record, click here)

Ives believes “rolling out the red carpet for the next generation EV SUV crossover model could be a potential game changer [for Tesla] when this product goes into full production in 2020. We believe price points will likely be in the high $30k to $50k range (depending on features) for this product and with this could see massive demand,” as more than half of all new cars sold in 2018 were in this price range.

Looking ahead to 2020, Ives says by going after the SUV market, Tesla “could capture incremental demand especially in the US which is key to hitting longer term unit demand and profitability metrics.” But while the analyst expects “Model Y units could approach 15%-20% of overall units” over the next three years, he expects “the Model 3 [to continue] to be the hearts and lungs of the Tesla growth story over the coming years globally.”

Tesla’s new product launch will help the company in other ways — distracting investors. The company has had a whirlwind 2019, with its CFO leaving, Consumer Reports downgrading its rating on the Model 3 and a warning from CEO Elon Musk that the company would lose money 1Q19. This comes after an extremely volatile 2018, where the stock rose or fell 10% more than a dozen times. Perhaps a new vehicle launch can shift investors’ minds away from outside distractions and rumors, and back to the product itself.   

All in all, Wall Street is split on Tesla. While the company has proved it can make a strong product, distractions and challenges are rampant. TipRanks analysis of 25 analyst ratings shows a consensus Hold rating, with nine analysts issuing a Buy, seven analysts recommending Hold and nine maintaining Sell. The average price target among these analysts stand at $316.04, representing an 8% rise from its current trading price. (See TSLA’s price targets and analyst ratings on TipRanks)


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