Tesla, the industry leader in the electric vehicle (EV) space, is poised to benefit from the recent United Auto Workers (UAW) strike which is likely to increase labor costs for its internal combustion engine (ICE) competitors like General Motors, Ford, and Stellantis. This will give Tesla more room to lower prices and capture a larger market share.
Ford recently stated that if the UAW’s proposals were implemented, their labor costs would more than double. Ford’s labor costs are already higher than those of Tesla and other automakers with non-union-represented labor. This places Ford, GM, and Stellantis at a disadvantage in the EV market, as they are still in the early stages of transitioning from ICE to EV vehicles.
Wedbush analyst, Daniel Ives, shares the same sentiment, stating that Tesla will be one of the top beneficiaries of the UAW strike. The disruption in production and higher labor costs will make it difficult for the ICE competitors to challenge Tesla’s leadership in the EV space. Ives has a bullish outlook on Tesla and has set a price target of $350.
According to TipRanks, Ives is the most accurate analyst for TSLA stock. Their data shows that copying his trades and holding each position for one year could result in profitable transactions, with an average return of 14.76% per trade.
Analysts’ consensus rating for Tesla stock is a Hold, with uncertainty surrounding the company’s margins. Needham analyst, Chris Pierce, noted that Tesla’s strategic differentiation compared to mass-market OEMs has compressed, with Tesla embracing discounting as a lever. Pierce has a Hold recommendation on Tesla stock.
Tesla has received 12 Hold ratings, 11 Buy recommendations, and five analysts recommend a Sell. The average price target of $270.80 is about 1.3% lower than the current levels.
Tesla’s focus on driving volumes through price cuts puts pressure on its peers to do the same, potentially affecting their profitability. Additionally, Tesla’s ICE competitors are already grappling with higher costs, making it challenging for them to chip away at Tesla’s market share. Tesla is also committed to reducing manufacturing costs and expects its hardware-related profits to be supported by software-related gains, solidifying its leadership in the EV space.
However, investors should exercise caution as near-term margin pressures and year-to-date price gains may contribute to volatility in Tesla stock.
Source: This article is based on the source article, “Tesla Can Take a Re-priced Victory Lap While UAW Wreaks Havoc on Detroit Rivals” by Aditya Raghunath.
Definitions:
– EV (Electric Vehicle): A vehicle that runs primarily on electricity powered by rechargeable batteries, rather than internal combustion engines.
– UAW (United Auto Workers): A labor union representing workers in the United States automotive industry.
– ICE (Internal Combustion Engine): An engine that combusts fuel within the engine, such as gasoline or diesel, to produce power.
– OEMs (Original Equipment Manufacturers): Companies that manufacture products that are then used as components in the products of another company.
– Hold: A recommendation by analysts to neither buy nor sell a stock at a given time, often due to uncertainties or other factors affecting the stock’s performance.