Tesla Drops Prices to Boost Demand

The equity is up over 50% for the quarter

by Fernanda Horner

Published on May 27, 2020 at 11:05 AM
Updated on Jun 24, 2020 at 10:16 AM

The shares of Tesla, Inc. (NASDAQ:TSLA) are down 0.3% to trade at $818.87 at last check, after the electric vehicle maker announced on Wednesday it will cut North American and Chinese prices by as much as 6%, to fight a coronavirus-related decline in demand. Though Tesla was temporarily forced to stop work at its Fremont, California factory due to stay-at-home orders, it is now ramping up production as the state reopens.

In response, Tesla earned a price-target hike from Wedbush to $800 from $600 early this morning. Coming into today, only five of the 22 analysts in coverage considered TSLA a "strong buy," compared to 10 calling it a "hold," and seven calling it a "sell" or worse, leaving plenty of room for upgrades should this bearish attention begin to unwind.

Digging deeper, Tesla stock sports attractively priced premium at the moment, per its Schaeffer's Volatility Index (SVI) of 60% which sits in the 22nd percentile of its annual range. In other words, near-term options traders are pricing in relatively low volatility expectations on the equity -- a boon for premium buyers.

TSLA is staging an impressive rebound off its mid-March lows near the round $350 level, with recently formed support at the 20-day moving average. The stock, which is now sitting at a 93% year-to date surplus, is now looking up at the $850 level, territory not breached on more than a one-time basis since February.


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