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Tesla Stock’s winning streak in jeopardy after Fed interest rate break




It comes down to the wire.

Tesla shares are reeling as investors wonder whether higher prices for electric vehicles will propel it to a 14th straight day of gains.

Tesla (ticker: TSLA) raised prices for its Model Y crossover again, ending further reductions this year for the company’s electric cars. It’s another signal to car buyers that Tesla will keep prices stable, and it should help ease concerns about demand, margins and competition.

Investors initially liked the move. Tesla shares were up in pre-market trading and opened higher, putting the stock on course for its 14th straight gain. But shares are down 0.3% in late trading after the Fed announced it would not raise short-term interest rates in June but may do so again in the future. The


S&P 500

and


Nasdaq Composite

are up 0.2% and 0.4%, respectively, rebounding from an initial drop following the Fed̵[ads1]7;s announcement.

In trading on Wednesday, the S&P 500 was up about 6% in the past month, boosted in part by the belief that the Fed will not raise interest rates this time around. It didn’t. Still, investors may “sell the news” in the coming days, meaning a pause in increases is already reflected in share prices.

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The Fed has raised short-term interest rates 10 times in a row since March 2022, to a target range of 5%-5.25%, in an effort to curb the worst inflation in decades.

Tesla’s latest price changes compete for investor attention with the Fed. The price of a Tesla Model Y in long-range trim is $50,490, before the application of a $7,500 federal tax credit, according to the automaker’s website Wednesday. That represents a bump of $250 this week; The Model Y was previously priced at $50,240, based on a Tesla website filing from Monday.

The price of a long-range Model Y is down $16,000, or about 25%, from the peaks it reached in 2022. Prices for the rest of Tesla’s vehicle lineup have also fallen this year, weighing on investor sentiment.

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While investors and Wall Street have scrutinized the prices, CEO Elon Musk pointed out in April that other car companies adjust prices frequently, but because they sell their cars through traditional dealer networks, the moves are not as transparent to car buyers. Meanwhile, Tesla sells directly to consumers.

“Our finger on the pulse is real-time and doesn’t have latency … other car companies have a lot of latency in their data,” Musk said on Tesla’s first-quarter conference call, adding that Tesla adjusts its price quickly in response to order patterns. .

This week’s price action follows shocks of the same size as a few models last month. As well as being a signal to buyers not to wait, it is also an indication to investors that demand may improve.

Investors will get more tangible information about demand in a couple of weeks when the electric car manufacturer publishes the delivery figures for the second quarter. Wall Street expects about 445,000 units — a record, and up from about 423,000 delivered in the first quarter. Estimates have dropped by a few thousand units in the last couple of months.

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It will be important to beat estimates for the stock, which has risen more than 25% so far in June and is up around 110% so far this year.

The rise has been significant and surprising. Morgan Stanley analyst Adam Jonas wrote of the gains in a Tuesday report: “We think the market wants to believe that Tesla is a [artificial intelligence] name first, a car company after that.”

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Tesla stock appears to be getting some benefit from Nvidia’s ( NVID ) disclosure that its AI business was much better than expected. Nvidia stock is up about 40% since its second-quarter sales guidance beat expectations by about 50%.

Tesla uses artificial intelligence to train and build its driver assistance features.

Jonas rates Tesla stock a Buy, but the recent run has seen the stock trade well above its target price of $200. His most bullish estimate for Tesla stock is $390 per share. It’s not his official course target, but where he thinks it could go if all goes well.

Write to Al Root at allen.root@dowjones.com and Jack Denton at jack.denton@barrons.com



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