The 10X Opportunity for Tesla (TSLA) Stock

  • Tesla (TSLA) stock has had difficult month and it isn’t over yet.
  • However, Cathie Wood remains ever bullish on TSLA stock.
  • Wood sees a potential path toward extreme profitability for the electric vehicle (EV) leader.
Tesla (TSLA) badge on back end of red Tesla car
Source: Hadrian /

After a month marked by disappointing earnings, Tesla (NASDAQ:TSLA) stock is back in the green today. It’s a generally positive day for markets so far, with the Nasdaq Composite, Dow Jones Industrial Average and S&P 500 all trending upward. While Tesla doesn’t have any company-specific news pushing it upward today, Cathie Wood did recently give investors cause for optimism.

The founder of Ark Invest, Wood increased her TSLA stock holdings last week, adding 66,190 shares. Evidently, Wood sees a path forward that could push the electric vehicle (EV) leader into a new sphere of profitability. In an email update to investors, Wood explained that “Tesla could expand its addressable market ten-fold by cutting the cost of an electric vehicle in half.”

Cathie Wood isn’t the first to raise this point. As Tesla’s EVs have soared in popularity, experts have raised questions about what more affordable EV models could mean for the company’s future. Let’s take a closer look.

What This Means for TSLA Stock

On the same day that Wood made her 10x prediction, Tesla reduced its EV prices in China due to concerns over falling demand. The company cut the prices of the Model 3 Sedan and Model Y SUV by 5% and 9%, respectively.

Even in China, the world’s largest EV market, demand for Tesla’s vehicles may be declining amid increasing competition from domestic automakers like Nio (NYSE:NIO). However, with TSLA stock rising today, markets don’t seem to be reacting too badly to the price reduction news. This supports the idea that Tesla may be best served by offering less expensive vehicles.

While Tesla is one of the trendiest names in global EV markets, there’s no denying that its vehicles are costly. As InvestorPlace has reported, the company was unable to meet the moderate expectations set by Wall Street when reporting third-quarter deliveries. That strongly implies that demand for highly priced EVs may be waning as consumers face financial pressure. Per Barron’s:

“Many Model 3 and Model Y vehicles sell for roughly $60,000. And EVs account for only about 5% of total U.S. car sales today. Cars priced at about $30,000 account for roughly half of the U.S. market.”

In a market where demand fears are increasing, companies selling more affordable products are likely to benefit the most. Compared to Tesla, legacy automakers like General Motors (NYSE:GM), Ford (NYSE:F) and Toyota (NYSE:TM) offer much less expensive EVs. However, none of these companies have Tesla’s cache when it comes to electric vehicles. Therefore, Wood’s prediction — that Tesla will see a much larger addressable market once it perfects a less expensive model — is certainly plausible. And there has perhaps never been a better time for an affordable Tesla model than now.

Tesla’s Model-T

Everyone knows the story of the Ford Model-T — and how mass-producing the everyday car took Ford to new heights. There’s no reason that Tesla can’t accomplish such a feat, too. CEO Elon Musk has hinted at a Tesla model with a $25,000 price tag before. Although that project is on pause right now, Wood’s prediction may compel the company to shift gears.

This market is ideal for Tesla’s own affordable EV. If Musk gets behind the idea, TSLA stock could soar.

On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

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