Tesla (NASDAQ: TSLA) continued its losing streak in the latest trading session, as the EV maker shredded an additional 12.33% to close at $215.99. Losses of 0.59% are set to extend in the pre-market on July 25.
The losses come after a mixed Q2 report, which saw the Texas-based car giant report adjusted earnings per share (EPS) of $0.52 on revenue of $25.5 billion, missing Wall Street’s estimates of $0.61 per share and $24.33 billion in revenue.
The company’s bottom line suffered due to a decline in automotive sales, which fell to $18.53 billion from $20.42 billion a year earlier, and weaker-than-expected margins impacted by EV price cuts, restructuring charges, and costs related to investments in artificial intelligence (AI) projects.
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Gross margins, excluding credits, fell to 14.7% in Q2 from 18.1% a year earlier, missing analysts’ expectations of 16.3%. Additionally, Tesla delivered 443,956 EVs during the quarter, a 5% decrease from the previous year’s period.
Wall Street is not satisfied by the latest Tesla Q2 report
With a mixed Q2 report from Tesla, Wall Street analysts prefer to play it safe and wait out to see what the future developments hold for TSLA stock, as right now, the performance might quickly change direction, as witnessed by the previous month.
On July 24, Cantor Fitzgerald maintained a “hold” rating with a price target of $240, citing limited near-term catalysts due to the Robotaxi launch delay to October.
In a streak of analysts’ renewed price targets on the same date, Jefferies also sustained a “hold” rating with a price target of $165, noting Q2 results highlighting the growing importance of storage and a return to positive free cash flow.
Analysts observed that auto average selling prices continued to drift while unit costs of goods sold stabilized, but the earnings call reiterated known topics without introducing much new information.
Furthermore, UBS holds a “sell” rating with a price target of $197, viewing Tesla as priced on future optionality, particularly in autonomy and AI, but finds the payoff uncertain, making the stock risky with potential downside if confidence in these initiatives wavers.
Additionally, Citi holds a “neutral” rating with a price target of $258, expecting modest pressure on shares as the Q2 auto margin and outlook offset the delivery beat, leading to a lowering of estimates and the price target.
Bernstein analysts rate Tesla stock as an “underperform” with a price target of $120, doubting that new low-cost models will drive substantial demand amid increasing competition.
Wells Fargo maintains an “underweight” rating with a price target of $120, anticipating the stock to trade down due to low-quality earnings, noting that auto gross margins missed expectations even with higher sales, and the press release revealed little new information.
There is still optimism for Tesla stock
In what seems like a widely unpopular opinion on Wall Street, some financial institutions still see the light at the end of the tunnel for Tesla.
A day after the earnings release, Piper Sandler analyst Alexander Potter maintained a positive outlook on Tesla, reaffirming an “overweight” rating with a price target increase from $205 to $300. This stance comes after Tesla’s earlier-than-expected release of its 10Q report, which allowed for a detailed analysis of the company’s automotive gross margin, a key point from their recent earnings call.
The report highlighted that Tesla’s warranty expenses rose to 4.1% of revenue in Q2 2024, up from 3.1% in Q1. This increase caused a 100 basis point deviation from the expected gross margin, possibly due to accruals for the Cybertruck or a rise in warranty claims. Piper Sandler is seeking further clarification from Tesla’s management on this matter.
On July 23, Stifel rated TSLA stock with a “buy” rating and a price target of $265. The Q2 release was mixed, as auto margins and free cash flow slightly missed expectations, while energy and storage revenues exceeded them. Stifel is encouraged by progress on full self-driving and new models and sees Tesla well-positioned for the long term.
Similarly, Baird bestows an “outperform” rating on the EV maker with a price target of $260, acknowledging short-term auto margin weakness and a bottom-line miss, but recommends buying the dip ahead of the Robotaxi event, with timelines for Robotaxi and next-gen vehicles remaining intact.
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