Tesla analyst: 'We don't think that this is the floor' for price cuts

It is a busy week for EV earnings, with Lucid Group (LCID) missing estimates on Monday afternoon. Rivian (RIVN) and Fisker (FSR) post their quarterly results on Tuesday. But when it comes to EVs, there will always be one automaker that dominates the conversation: Tesla (TSLA).

Barclays senior autos analyst Dan Levy told Yahoo Finance on Monday that the EV giant's price hike last week doesn't necessarily mean the previous string of price cuts are over. "We don't think that this is the floor" Levy said. "The most recent price hike may have just been a way to signal to consumers that there is a little bit of stability for now."

Levy, who currently has an overweight rating on Tesla shares, points to Elon Musk's push for sales growth over profits backs up his premise. "There's probably going to have to be more price cuts to unlock that supply," Levy said.

Be sure to listen to Akiko Fujita's entire interview with Levy here.

KEY VIDEO MOMENTS:

0:18 Levy on why he doesn't believe this is the price floor for Tesla

0:49 Levy's view on Tesla stock and what investors should expect

Video transcript

AKIKO FUJITA: Let's talk about the leader in this space. That is, of course, Tesla. You've still got an overweight rating on the stock right now. But this is a company that has gone through multiple price cuts this year. Until most recently, they had a price hike. Does that suggest we've finally seen the floor on pricing?

DAN LEVY: No, we don't think that this is the floor. The most recent price hike may have just been a way to signal to consumers that there is a little bit of stability for now. But our view is that as they continue to ramp on supply, which has been-- you know, Elon made it pretty clear on the last earnings call that they want to ramp on volume. The more supply you have hitting the market, there's probably going to have to be more price cuts to unlock that supply.

Our view on the stock is that, look, the current fundamentals are challenged. We are seeing the question of, what's the floor on margins? What's the elasticity of demand? These are all real questions. And it's making the fundamentals somewhat challenging now. We do think that there's negative EPS revisions ahead for 2024. We're at roughly $4 of earnings next year. Consensus, I see, is closer to $5.

What keeps us positive, though, is that they are still the leader in this transition. We know this transition is happening. We think they're going to soak up a lot of share. And really, the name of the game for them is aggressively reducing costs. So there are some challenges on fundamentals right now, just given what's happening on demand. But we think that eventually they will get past this.