Truist downgrades Tesla and slashes target due to price reductions and lower margins
Truist Securities downgraded its investment opinion on Tesla because of the electric vehicle maker's willingness to cut prices and accept lower profit margins. The firm now views Tesla as a hold, down from a buy rating, and slashed its per share price target 37% — to $154 rom $245. That's almost 6% lower than Thursday's close of $162.99. Tesla reported disappointing earnings on Wednesday, noting a 24% decline in net income compared to the year ago period. Shares of the Austin, Texas-based company lost nearly 10% on the report, but are up about 0.2% pre-market trading Friday. TSLA YTD mountain Tesla stock is slightly higher so far Friday after a disappointing earnings report on Wednesday. "This willingness to accept lower margins highlights the degree to which TSLA's value is more tied to its AI initiatives; however, it also diminishes the value of the core automotive business," Truist analyst William Stein wrote on Friday. "This influences a sensitivity analysis around automotive EBIT margins...stimulating our downgrade to Hold." Chief executive Elon Musk told investors on the company's earnings call that Tesla is focusing instead on building a bigger fleet of vehicles as opposed to higher margins. "We've taken a view that pushing for higher volumes and a larger fleet is the right choice here, versus a lower volume and higher margin," he said. Early Friday morning, Tesla raised the prices of both the Model S and Model X , the company's premium tier vehicles, just days after cutting prices for the sixth time this year on Model 3 and Model Y cars. Stein noted some positive takeaways from Tesla's latest quarterly results, noting that the company is sticking with a target of producing 1.8 million vehicles this year as well as the forthcoming launch of the Cybertruck. — CNBC's Michael Bloom contributed to this report.