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Tesla (TSLA) stock took a hit overnight, dropping 12% to $216.72 after the company reported a 43% drop in second-quarter earnings, worse than expected. Despite the earnings drop, Tesla’s revenue rose slightly, driven by a surge in regulatory credits.
Morgan Stanley analyst Adam Jonas, a noted Tesla supporter, commented that there is “no big change in outlook” and that Tesla is “muddling through the EV recession.” He noted that the 2024 outlook is similar to the previous quarter’s and likely won’t change the consensus.
Following the earnings report, Cantor Fitzgerald downgraded Tesla to neutral from overweight but raised the price target to $245 from $230. Goldman Sachs and Citigroup also reduced their price targets to $230 and $258, respectively.
Tesla’s quarterly revenue reached $25.5 billion, up 2% from the previous year, but its gross margins fell to 18%. Revenue from regulatory credits hit a record $890 million, up 216% from $282 million in Q2 2023. Tesla indicated that vehicle volume growth in 2024 might be lower than last year, but growth in its energy storage business should exceed the automotive segment.
During the earnings call, CEO Elon Musk reiterated optimism about self-driving technology and the upcoming robotaxi, confirming the robotaxi event is now scheduled for October 10 instead of August 8.
Wells Fargo analysts noted that Tesla’s stock drop is due to weak fundamentals shown in Q2. They mentioned that if former President Donald Trump wins the 2024 election and eliminates EV tax credits, it could impact Tesla’s short-term profits. UBS analyst Joseph Spak expressed concerns about stress on Tesla’s automotive business and maintained a sell rating with a $197 price target.
Wedbush Securities analyst Dan Ives highlighted the upcoming robotaxi event, valuing Tesla’s AI potential at $1 trillion over the next few years. Ives noted that while some focus on auto gross margins and regulatory credit revenue, Tesla’s broader story is about robotics and AI.
Elon Musk posted a poll on social media asking if Tesla should invest $5 billion into his AI company, xAI, with any investment requiring board and shareholder approval.
Tesla stock has been performing well, with a 271 handle buy point on a consolidation pattern over the past several months. Despite the recent dip, investor sentiment had been positive, boosted by strong vehicle delivery numbers earlier in the month. Shareholders also approved Musk’s $56 billion pay package and the company’s move to Texas.
Tesla ranks third in the IBD Auto Manufacturers industry group with an 85 Composite Rating out of 99, an 89 Relative Strength Rating, and a 61 EPS Rating.
