Tesla Dives As Analysts Weigh In After Earnings Miss
The EV giant has been rewarded with a variety of price targets lowered and the company was downgraded.
By Investor’s Business Daily
Tesla ( TSLA ) stock received a downgrade and several target price cuts overnight after the EV giant announcing that second-quarter earnings sank more than 40%, worse than expected. Revenue topped, fueled my surging regulatory credits.
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TSLA shares fell 12percent to 216.72 in market activity this Wednesday in the wake of Tesla Q2 results as well as the company’s conference call.
No Change In Outlook; Tesla Downgrade
Adam Jonas, Morgan Stanley’s prominent autos analyst and an avid Tesla fan said late on Tuesday that there was “no big change in outlook” and that Tesla is “muddling through the EV recession.”
Jonas stated that the outlook for 2024 has been fashioned as a “largely identical reiteration of language from the previous quarter’s outlook” and added that it “should keep consensus little changed.”
Following the results, Cantor Fitzgerald downgraded Tesla to neutral from overweight, while increasing the price target 245 from the previous 230. The company wrote that, with TSLA rising by 70% over the past three months, it’s “becoming a bit more conservative on valuation in the near-term.”
Then they both Goldman Sachs and Citigroup cut Tesla price goals. Goldman reduced its price goal of Tesla to 230, down from 248 and maintained an unfavorable rating on the stock. Citi Analyst Itay Michaeli cut his price target down to 258 instead of 274.
Tesla Earnings At A Glance
The maker of electric vehicles reported that its earnings dropped 43 percent to 52 cents a share. In the quarter, revenue was $25.5 billion, which was up by 2 percent compared to. the previous year’s quarter. Tesla said its “achieved record quarterly revenues despite a difficult operating environment.”
In the meantime, Tesla’s gross margins dropped 23 basis points, to a total of 18 percent. Gross margins of autos, including leases and credits for regulatory purposes are 14.6 percent. Analysts had expected 15.1 percent, according to FactSet.
The EV company also saw revenue from regulatory credits reach the record amount of $890 million in the second quarter increasing 216% in comparison to $282 million in the second quarter of 2023.
Tesla said that the growth for 2024 “may be notably lower than the growth rate” in the previous year. Tesla also said that the growth of the energy storage segment will surpass that of its automotive segment.
The earnings call Tesla CEO Elon Musk didn’t offer an update, but continued to reassure investors about the possibility of self-driving vehicles, the Optimus robot, and robotaxi. Musk confirmed that the unveiling event for robotaxi will be held on October. 10, vs. the earlier plan of the month of August. 8.
Tesla Stock: Not A ‘Trump Trade’
Wells Fargo wrote that Tesla stock is not likely to be a ” “Trump trade.” The analysts also noted the fact that Tesla stocks are trading lower because of weak fundamentals that were exposed during Q2.
The firm also said that the former president Donald Trump wins the 2024 election and removes Inflation Reduction Act tax credits for electric vehicles, it could affect Tesla’s near-term earnings.
UBS Analyst Joseph Spak told investors there is pressure on the auto business. Spak said Tesla’s current range will be “limited” and while units could rise, it will require ongoing advertising.
UBS kept its sell rating, with the price target of 197 and also that the October. 10, robotaxi-related day may be an “sell-the-news” event.
Robotaxi Thrills
Additionally, Wedbush Securities analyst Dan Ives an avid Tesla investor, tweeted this week that Tesla’s robotaxi launch is expected to “unleash the beginning of the AI story at Tesla which we value at $1 trillion alone over the next few years.”
Ives stated Ives added that Tesla bears will be focusing on the auto gross margins as well as the revenue of regulatory credit. The analyst noted that those two things represent “table stakes in the broader Tesla story.”
“Tesla is a robotics and AI play,” Ives wrote. “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.”
After the earnings conference, Musk posted a poll on X asking whether Tesla should put $5 billion into xAI Musk’s artificial intelligence company. Musk said that Tesla chief stated that the board of directors and shareholders will have to be in agreement with the decision.
Tesla Stock
Tesla shares have a handle of 271 purchase point in a consolidation that goes from several months back to one year, according to MarketSurge’s charts analysis.
Shares fell on Wednesday, undercutting their 21-day moving mean that is rapidly increasing and also the lowest on the handle.
In the lead-up to earnings, investors’ mood was positive and Tesla stock rising by more than 25 percent in the month of July following Tesla announced an surprising second-quarter increase in deliveries of vehicles in June.
Shareholders have recently voted in favor of the decision to give Musk his annual $56 billion pay packet and re-incorporating the company into Texas and transferring it to Delaware.
Tesla stock is ranked third among the 35 members of the IBD Auto Manufacturers industry group. The stock is rated 85 Composite Rating from a maximum of 99. The shares are rated rating of 89 RSR and an 60 EPS Rating..
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