Model X Pricing Could Hurt Tesla Motors Inc (NASDAQ:TSLA)

Tesla Motors Inc (TSLA) Model X Founders Edition Presentation

Tesla Motors Inc delivered the first units of Model X a week ago, and several analysts covering the firm have expressed their thoughts on the car. Price is one factor that is sticking out to Morgan Stanley analyst Adam Jonas, who lowered his price target on Tesla saying that the car is too expensive.

Model X is nice, but over-priced

No doubt, the Tesla Model X is a nice car, the only problem with it is the price, said Jonas. Priced at $132,000, it is the most expensive car from Tesla, making it too much for the early adopters, believes Jonas, who slashed the price target on the stock to $450 from $465, but maintained an ‘Overweight’ rating on Tesla Motors.

The average transaction price of the Model X is very high, said Jonas, he reckons the average price will be around $25,000 higher than for the Model S. It is also higher by $10,000 to $15,000 than what they had been expecting based on early spec and list pricing.

Since the start, expectations attached to the Model X features has been very high, and the firm has been able to meet those, Jonas said. For several years Tesla had a backlog of orders for the Model X, and now it remains to be seen whether or not the high price of the vehicle compels people, who have pre-ordered the car, to withdraw their $5000 deposit and cancel their order.

Tesla has promised that the price of the Model X will come down as production ramps up, but with essentially no units of the car shipped just yet, it’s not clear when that might happen. Jonas seems worried that the sticker price won’t allow too many new orders, and that will hit demand thisnyear and into 2016.

Will Tesla meet 4Q target?

Whether or not people cancel their orders for Model X, it will be hard for Tesla Motors Inc to meet its full-year target. Last week, Tesla said it delivered 11,580 units in September. Though the number is in-line with its guidance, it could fall short of analysts’ expectations, said Chuck Jones from Forbes.

Tesla is expected to sell 50,000 to 55,000 cars this year, but it seems hard for the firm to meet this as in the first three quarters it could deliver just 33,157 cars or 11,052 vehicles per quarter on average. So now, Tesla will be required to deliver 17,000 units in Q4 to meet the low-end of its guidance. It will be interesting to see how many of those will be Model X.

At around 10 am EDT, Tesla Motors Inc shares were down 3.36% at $233.11. Year to date, the stock is up over 5% while in the last one-year, they are down almost 10%.

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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.


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