Should you invest in Tesla stock as it raises Model S and Model X prices in the US?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 9, 2021
  • On Friday, Tesla increased the base price of its redesigned Model S and Model X EVs by $5,000.
  • The price hike came a day after it launched a cheaper version of its Model Y vehicle in China.
  • The rising EV prices are contrary to CEO Musk’s promise to lower the cost of EVs. Is TSLA stock a buy now?

Tesla Inc. (NASDAQ:TSLA) hiked its redesigned Model S and Model X prices by $5,000 on Friday, Fox Business reported. The Model S now has a base price of $84,990, while Model X starts at $94,990. The announcement comes after the world’s leading electric vehicles manufacturer launched a cheaper version of its Model Y in China. 

Customers think the company is going against Co-founder and CEO Elon Musk’s promise to lower the cost of EVs. However, analysts are optimistic about Tesla’s decision citing a popular business strategy where a company raises its products’ prices to the highest level that the market can take.

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Others think that the new price hike could be linked directly to the launch of a cheaper version of Model Y in China, with the company looking to optimize its average selling price (ASP).

In the end, Tesla will realize higher revenue from the US market driven by higher ASP, while in China, the topline will benefit from increased sales volume.

Should you buy TSLA stock in July 2021?

From a fundamental perspective, Tesla shares trade at a steep P/E ratio of 659.97. The current forward P/E ratio of 105.79 reflects the high expectations of earnings growth in the coming quarters. 

Analysts predict Tesla EPS to grow by 165% this year, and at an average of 44.67% annually, in the next five years. The exciting earnings growth prospects make the company an attractive investment in July 2021. 

Source – TradingView

Technical overview: my TSLA stock price prediction for Q3 2021

Technically, Tesla stock faces strong resistance from the 100-day moving average. However, the stock price also enjoys solid trendline support, setting it well for a significant rebound.

Investors can target short-term rebounds at approximately $710.85 or higher at $780.42 for extended gains. The key support levels are $591.38 and $538.68.

Bottom line: the argument for buying Tesla shares now

Tesla’s Model S and Model X price hikes will boost US sales margin, while low-priced Model Y will witness higher sales volume in China. Therefore, the company’s latest pricing decisions will help to drive revenues higher and boost profits.

The stock price seems poised for a rebound off the trendline support after a recent pullback. So now could be the time to invest in Tesla shares.

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