The countdown to the unveiling of Tesla’s (TSLA) Model Y keeps ticking, with the electric auto maker’s shares rising Wednesday. The car is expected to give would-be buyers who are interested in smaller SUVs a much-awaited option.
Tesla stock, down 13% in 2019, closed Wednesday up about 2% to $288.96 ahead of Thursday night’s announcement. The Y, when available, will give the company both sedans and SUVs in multiple sizes, with a high-end roadster and, eventually, a pickup on the way.
The Y will debut as the company is trying to both manage expenses and spur demand. Tesla recently announced the availability of its most-affordable car, the $35,000 Model 3 sedan, as well as price cuts across its lines though it then rolled some of those back. The Y gives an option in a high-demand market segment.
“We’ll probably see a higher sales volume of Y than 3,” Elon Musk said on a late January conference call with investors.
But might that be a mixed blessing? That is what Goldman Sachs analyst David Tamberrino wondered in a Wednesday note. (He has a Sell rating and a $210 price target on Tesla shares, well below FactSet’s current average near $337.)
“While the unveil of the Model Y could drive incremental reservations given a much larger global market for crossovers than sedans and help cash balances given likely deposit collection, this new product could further weigh on Model 3 demand as consumers decide to wait a little longer to purchase a Tesla,” Tamberrino wrote.
Wedbush analyst Daniel Ives, who has an Outperform rating and a $390 price target on Tesla stock, believes the Y “could be a potential game changer” for the company.
“We believe price points will likely be in the high $30,000 to $50,000 range (depending on features) for this product and with this could see massive demand as we head into 2020,” Ives wrote Wednesday.
Tamberrino joins a few analysts who, Barron’s wrote Tuesday, have expressed varying degrees of concern about Tesla’s profit outlook. While competitors are showing increased commitment to electric cars read my colleague Al Root’s recent story, for an example questions about their long-term profitability abound.
In Tesla’s case, Elon Musk recently told investors not to expect a first-quarter profit after two straight quarters in the black.
Looking further ahead, Macquarie Research analyst Maynard Um, a Tesla bull, suggested Wednesday that Tesla could have potential as an “ecosystem platform” provider for cars.
“While Tesla’s software capabilities are standard on all models, we are unaware of another competitor that offers the same level of functionality (at least today),” Um wrote. “The integration of hardware and software is also paramount, which we think sets Tesla apart.”
But more pressing questions about demand notably, with federal tax credits phasing out for Tesla this year and the effect lower prices could have on margins this year seem more pertinent to investors at present.
“We continue to expect the introduction of the $35,000 price variant to weigh on overall automotive gross margins,” Tamberrino wrote.