Electric vehicle (EV) manufacturer Tesla (NASDAQ:TSLA) and its chief executive, Elon Musk, are closely watched and followed by investors and commentators. Yet, not everyone is bullish on TSLA stock. In fact, at least one analyst anticipates a share-price crash — but that’s fine as long as you’re not over-invested in Tesla now.
To give credit where it’s due, Tesla had a generally solid third quarter and Tesla stock has had an epic run this year. This doesn’t mean that the company is problem-free, though. So, be sure to weigh the automaker’s obstacles and opportunities before considering a share position in Tesla.
Tesla’s EV Tax Credits to Drop in 2024
Tesla’s stainless-steel pickup truck, the Cybertruck, looks interesting and will undoubtedly provide a power-packed, feature-rich ride. However, they’ll typically cost six figures, and most people probably won’t be able to afford a Cybertruck in the near future. Furthermore, Musk has acknowledged that the Cybertruck won’t likely be profitable until 2025.
To be completely frank, Tesla’s vehicles — not only the Cybertruck — are sometimes quite expensive, even after the company’s price cuts. Fortunately, tax credits of $7,500 per vehicle have made them somewhat more affordable.
However, recent reports suggest that “certain vehicles,” including two versions of Tesla’s popular Model 3 EV, will only be eligible for a $3,750 U.S. tax credit. Prospective investors might wonder how this will impact the demand for Tesla’s vehicles next year.
It’s no secret that demand for EVs has declined recently. Thus, even the almighty Tesla is vulnerable to a drop-off in vehicle sales in 2023 and 2024. Going forward, investors should keep tabs on Tesla’s quarterly financials. If the reduced tax credit causes real problems for Tesla, the stock could come under pressure.
Could TSLA Stock Actually Crash to $125?
It’s not all bad news for Tesla, though. Indeed, there may be a major event in the works. Tesla recently hinted that a Texas-manufactured $25,000 vehicle, the Model 2, could be available within the next couple of years. This could be a game-changer, but evidently the prospect of an affordable Tesla EV didn’t turn Guggenheim analyst Ronald Jewsikow from a bear to a bull.
Jewsikow believes that Tesla “will wait closer to launch to take orders — 6 to 12 months prior — for” the Model 2 in order to limit its “impact on selling current model lineup.” In other words, don’t expect to see Tesla’s proposed $25,000 EV on the roadways in the near future.
Believe it or not, Jewsikow published a $125 price target on TSLA stock. He also issued a “sell” rating on Tesla shares. This would represent a share-price decline of nearly 50%.
Personally, unless there’s a broad market crash, I can’t imagine Tesla stock falling that far down. Again, the company’s third-quarter results were solid. Tesla shouldn’t lose half of its value to the shareholders even if the Cybertruck isn’t an epic success.
Going forward, the customers and investors should insist that Tesla promptly produce and deliver the $25,000 Model 2 vehicles. This would be a win-win scenario, especially if it persuades reluctant car shoppers to give EVs a try.
Tesla Stock: Hold It, But Wait for Further Developments
Unless something drastic occurs, Tesla stock isn’t likely to crash to $125. Still, there’s no urgency to load the boat with Tesla shares. It’s fine to hold on to a current share position and wait for more data on the Cybertruck and the proposed Model 2.
At the end of the day, there’s no need to panic-sell TSLA stock just because one analyst published a low price target. Tesla will probably continue to grow as a company over the coming years.
Hence, a simple and prudent strategy is to just maintain a small Tesla share position. Moreover, be prepared to buy more Tesla stock if it drops 10%, 20% or more. Over the long run, Tesla’s investors should do well as the company never ceases to expand and innovate.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.