This week Tesla Motors Inc (NASDAQ:TSLA) shares surged by over 10% post the electric carmaker’s announcement of an upgrade to its Model S line. However, one analyst predicted that the automaker’s move would ultimately harm its sales.
Last Tuesday, the firm introduced an upgraded version of its Model S line named the 70D. The new car boasts of a bigger battery pack, 240-mile range as well as auto-pilot capability. At a price of $75,000 the car costs $5,000 more than the earlier version.
The cannibalization theory
This week, CLSA America’s Tesla analyst Andrew Fung opined that the introduction of the new model reduces the incentive to upgrade to the 85D model and had the potential to cannibalize sales of the relatively more expensive model.
On March 25, 2015 Fung downgraded the stock to an underperform rating from an earlier outperform rating. The reason being legitimate worries that there would be the near term earnings risk from Model X margin.
Since Fung’s statement, the stock has risen by 5%. However, he maintains that the down gradation was the right decision.
The counter view
Fast Money Trader Guy Adami differs in opinion from Fung. Recently he said that the stock is well placed for a run-up. Contrary to Fung, Adami is gung-ho about the stock’s prospects.
The news of the firm’s first-quarter delivery numbers played its part in boosting the stock. According to Tesla, 10,030 vehicles were sold in the first quarter making it a 55% jump from a year back.
Events in the near future to affect the stock
Tesla Motors Inc (NASDAQ:TSLA) is aiming at an ambitious sales figure of 55,000 vehicles the current year. Also on sale will be the firm’s first ever sports utility vehicle, the Model X.
Within the coming two weeks, Tesla has a few impactful events, which could either cause a rise of the stock or send it plummeting. A new product line will be introduced on April 30, and the firm is set to report earnings in early May 2015.
