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Investors Business Daily

Tesla Stock Retreats; Analyst Explains Strength Of 'Non-Unveil' Strategy

Tesla stock steered sharply lower Thursday as analysts pointed to a lack of detail regarding short-term challenges, and no "Tesla-like surprise" coming out of the EV giant's investor day on Wednesday.

Headlines heading into the Tesla investor day stirred some expectations for major announcements. Despite speculation of a new EV being unveiled,  Tesla executives said Wednesday a next-generation platform or vehicle will come at a "later date."

CEO Elon Musk presented an ambitious "Master Plan 3" focused on making a huge push for clean energy.

Executives also stressed cost reduction efforts. The company's goal is to cut assembly costs by 50% in its next-generation vehicle platform. Tesla also plans to reduce its factory footprint by 40%.

Wells Fargo analyst Colin Langan wrote Thursday however the timeline and cost details were limited. Langan added that with high expectations ahead of the event, the affair lacked a "Tesla-like surprise." The Wells Fargo analyst wrote he expects Tesla stock to trade down, but he maintained an "Equal Weight" rating and a Tesla stock price target of 190 — about 6% below where shares closed on Wednesday.

CFRA analyst Garrett Nelson told investors Thursday he is also maintaining a "Buy" rating and a Tesla stock price target of 250.

The Logic Of A 'Non-Unveil' Event

TSLA shares were poised to follow "past trends in the aftermath of its investor day, namely a big run-up leading up to the event followed by a sell-the-news reaction," Nelson wrote.

"The company's presentation largely focused on its long-term vision, but we think investors were looking for answers to questions more near-term in focus," he added.

Meanwhile, Morgan Stanley analyst Adam Jonas was more bullish on Tesla Thursday. Jonas wrote Thursday the "non-unveil" of a new cheaper Tesla model shouldn't have disappointed people.

"Imagine you just placed an order for a $50k Model Y and Tesla tells you there will be a slightly smaller version for half the price with enhanced capabilities available soon," Jonas wrote. "From a commercial standpoint, maybe not the best strategy."

The analyst added he leaves the event asking himself "which legacy automakers could compete with TSLA in terms of EV profitability?"

Futures Rise, Yields Slide Ahead Of Key Econ Data; AI Stock Soars Into Buy Zone

Tesla Stock

TSLA shares sank 6% to 190.70 Thursday. On Wednesday, Tesla stock closed 1.4% lower at 202.77 amid lower-than-average traffic. Shares opened sharply below their 21-day moving average on Thursday, pointing the stock toward a second straight weekly drop following a steep six-week climb.

Ahead of the Tesla event, TSLA shares had doubled from bear-market lows 0f 101.81 on Jan. 6. Much of that run-up reflected Tesla investor day buzz. This followed a historical pattern of TSLA shares rallying ahead of similar events. In 2016, Tesla stock went on a monthlong 22% run ahead of Musk's second "Master Plan" announcement on July 20, 2016.

TSLA stock rank fourth in IBD's Auto Manufacturers industry group. Tesla stock has a 73 Composite Rating out of 99. The stock also has a 27 Relative Strength Rating. The EPS Rating is 99.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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