After a month highlighted by the recovery of electric vehicle (EV) stock, which managed to erase all the year-to-date losses by surging more than 30%, Tesla’s (NASDAQ: TSLA) stock was hit by a drawback in the latest trading session.
Namely, on July 23, Tesla stock closed trading at a valuation of $246.38 after a drawback of 2.04%, with the losses of 8.15% extending into the pre-market on July 24.
These losses come after a mixed Q2 report in which Tesla reported a beat on some of the analysts’ expectations while missing the mark on others.
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What exactly did Tesla’s Q2 report reveal?
In Q2, the company reported adjusted earnings per share (EPS) of $0.52 on revenue of $25.5 billion, falling short of Wall Street’s estimates of $0.61 per share and $24.33 billion in revenue.
The bottom line was impacted by a decline in automotive sales, which dropped to $18.53 billion from $20.42 billion a year earlier, alongside weaker-than-expected margins due to EV price cuts, restructuring charges, and costs related to investments in artificial intelligence (AI) projects.
Gross margins, excluding credits—a closely watched metric—fell to 14.7% in Q2 from 18.1% a year earlier, missing analysts’ expectations of 16.3%. Tesla delivered 443,956 EVs during the quarter, representing a 5% decrease from the same period the previous year.
However, the company’s energy storage business provided a positive highlight, deploying 9.4 gigawatts in Q2, marking a 158% increase from a year earlier. Excluding $622 million in restructuring and other charges, the adjusted EBITDA would have been $4.296 billion with a 16.8% margin, which is 10.8% higher than the consensus estimate.
Wall Street is cautious after Tesla’s Q2 earnings
In reaction to the Q2 earnings, several analysts from Wall Street’s largest financial institutions decided to take a cautious approach to TSLA stock as they released their readjusted price targets and ratings.
Analysts at Cantor Fitzgerald downgraded Tesla stock to “neutral” from “overweight” due to near-term valuation concerns, citing the recent surge in the share price.
Despite this downgrade, they raised their price target to $245 from $230 and increased their revenue estimate for fiscal year 2024 to $101.2 billion from $100.6 billion, driven by higher projections for energy storage and deployment.
Meanwhile, UBS analysts reiterated their “sell” rating on Tesla, highlighting significant downside risk due to overvaluation and ongoing challenges in the automotive business. They noted that Tesla’s stock, trading at over 100 times its run-rate EPS of approximately $2.25, includes a lot of AI optionality, leading to an inflated valuation.
On July 23, Jefferies maintained its “hold” rating on Tesla with a price target of $165.00. This emphasized the importance of Tesla’s second-quarter performance, particularly the growing impact of its storage business, which contributed 16% to the company’s gross profit.
The current sentiment on Wall Street reflects a sudden change in tone from the other less recent price targets that showcased increased optimism concerning Tesla shares.
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