After the electric vehicle company revealed that its second-quarter profitability fell more than 40% short of projections, the stock of Tesla (TSLA) was downgraded and many target price reductions were made overnight. My regulatory credits surged as a result of surpassing revenue.
Following the release of Tesla's Q2 earnings and the company's conference call, TSLA shares fell 12% to 216.72 on Wednesday.
No Amount Change; Tesla Downgrade
High-profile cars analyst and Tesla bull Adam Jonas of Morgan Stanley tweeted late on Tuesday that there is "no big change in outlook" and that Tesla is "muddling through the EV recession."
According to Jonas, the prognosis for 2024 "reiterates language from the previous quarter's outlook largely unchanged," which "should keep consensus little changed."
Cantor Fitzgerald raised the price objective for Tesla from 230 to 245 after downgrading it from overweight to neutral in light of the earnings. The company stated that it is "becoming a bit more conservative on valuation in light of TSLA's more than 70% increase in the last three months."
Citigroup and Goldman Sachs also lowered their price expectations for Tesla shares in the interim. Goldman maintained a neutral rating on Tesla shares and dropped its price target from 248 to 230. Itay Michaeli, a Citi analyst, lowered his target price from 274 to 258.
Tesla's Quick Results
The market leader in electric vehicles said on Tuesday that its earnings per share dropped 43% to 52 cents. In the meantime, revenue for the quarter was $25.5 billion, 2% more than the same period last year. Tesla stated that it "achieved record quarterly revenues despite a difficult operating environment."
Tesla's gross margins decreased to 18%, a drop of 23 basis points. After accounting for regulatory credits and leasing, auto gross margins were 14.6%. FactSet reports that analyst forecasts were for 15.1%.
The EV behemoth also reported a decline in regulatory credit revenue a record $890 million in the second quarter, up 216% from the $282 million in the same period in 2023.
"May be notably lower than the growth rate" in 2024, according to Tesla's addition about car volume growth. The largest EV company stated that the growth of its energy storage division should surpass that of its automobile division.
Elon Musk, the CEO of Tesla, continued to voice excitement about self-driving cars, the Optimus robot, and robotaxi during the results call, but he didn't offer any new information. Musk did clarify that the robotaxi announcement event will now take place on October 10 instead of August 8, as originally planned.
Stock in Tesla: Not a "Trump Trade"
According to Wells Fargo, there doesn't seem to be a "Trump trade" involving Tesla stock. Analysts observed that Tesla's shares are trading dropped as Q2's dismal fundamentals came to light.
The company went on to say that Tesla's short-term earnings would suffer if former President Donald Trump wins the 2024 election and eliminates the EV tax credits under the Inflation Reduction Act.
Investors were informed by UBS analyst Joseph Spak that the automobile industry is under stress. Although the number of units may rise, Spak said that Tesla's current lineup is "limited" and that more discounts could be necessary.
With a price target of 197, UBS kept its sell rating and predicted that the robotaxi day on October 10 would be a "sell-the-news" occasion.
Robotaxi Excitations
In the meanwhile, the robotaxi event will "unleash the beginning of the AI story at Tesla which we value at $1 trillion alone," according to a Wednesday post by veteran Tesla bull and Wedbush Securities analyst Dan Ives throughout the next years."
Ives continued, "Tesla bears will concentrate on auto gross margins and the total revenue from regulatory credits." These products, according to the analyst, represent "table stakes in the broader Tesla story."
Ives wrote, "Tesla is a robotics and AI play." "Potential investments into the xAI company under Musk could also be in the future and a smart move along with this broader AI/Robotaxi strategy."
Musk asked X users to vote in a poll he had posted after the earnings call about whether Tesla should spend $5 billion in his artificial intelligence startup, xAI. The CEO of Tesla went on to say that an investment of this kind would need board and shareholder approval.
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