Tesla shares slumped lower in early Wednesday trading as analysts moved quickly to revisit their ratings and price targets on the carmaker following a disappointing second quarter earnings report.
Tesla (TSLA) , which had rallied nearly 25% since reporting a surprise beat in second quarter deliveries, posted a nearly halving in overall profits thanks in part to an ongoing EV price war and rising operating costs.
The group posted a bottom line of 52 cents per share, a 43% slump from the same period last year that missed Wall Street’s forecast of 62 cents. Group revenues, however, managed to rise 3% from last year to $25.5 billion, thanks in part to the stronger-than-expected delivery tally.
That didn’t translate into firmer profit margins, however, and Tesla’s gross margin tally of 14.6% not only missed Street forecast, but was the lowest overall figure in at least five years.
Tesla CEO Elon Musk told investors that “anyone who doesn’t believe that Tesla would solve vehicle autonomy” should not hold the stock.
Tesla reiterated its earlier view that full-year deliveries would be “meaningfully lower” than last year’s record tally of around 1.81 million, but CEO Elon Musk leaned into the group’s ambition to introduce a new, lower-priced model by the first half of next year.
Robotaxi delay
He also confirmed that the group would unveil its robotaxi prototype on October 10, following reports that the event would be delayed from its August 8 scheduling, owing to what he called “some important changes that I think would improve the vehicle”.
Musk also doubled-down on the group’s new tech future, telling analysts on the post-earnings conference call that “the world is headed for a fully electrified transport” that includes not just cars, but aircraft and boats as well.
“Anyone who doesn’t believe that Tesla would solve vehicle autonomy should not hold Tesla stock,” Musk said. “They should sell their Tesla stock.”
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“If you believe Tesla will solve autonomy, you should buy Tesla stock. And all these other questions are in the noise.”
The results, however, as well as Musk’s always-bullish commentary have drawn a mixed reaction from Wall Street, with the stock poised for a big opening bell decline and analyst looking to tweak their ratings and price targets as a result.
Wall Street revisits price targets
“While Tesla shares have rebounded strongly in recent months, with the Robotaxi Day having been delayed until October, we see little in the way of near-term catalysts for the story,” said CFRA analyst Garrett Nelson, who lowered his Tesla price target by $10, to $240 per share, following last night’s earnings.
“We move to the sidelines on valuation and pending greater clarity on intermediate-term growth drivers, but we continue to believe in the long-term story,” Nelson added.
That thesis was evident in a number of notes and updates, including from Cantor Fitzgerald analyst Andres Sheppard, who held his ‘overweight’ rating and $230 price target in place following last night’s earnings.
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“Although we don’t expect (the robotaxi segement) to launch prior to 2027, we do expect it to be a meaningful business segment for the company over the long term,” said Sheppard.
“We also expect future revenues from (self-driving) and robotaxis to be fundamental to Tesla’s bullish thesis over the long term,” he added.
Jefferies analyst Philippe Houchois, who kept his $165 price target and ‘hold’ rating in place following last night’s update, was more focused on the impact of Tesla’s energy storage business, which saw revenues double from last year to just around $3 billion.
He was also less than impressed with Musk’s performance on the post-earnings call.
Wall Street revisits price targets
“Q2 results mostly confirmed the growing importance of storage (16% of gross profit) and a return to positive free cash flow ($1.3 billion) on modest working capital reversal and reduced capex but also as record (zero emission vehicle income ($890 million),” Houchois said.
“Tesla’s earnings call and Q&A circled around mostly known topics with reiteration of earlier comments on TAMs (Humanoids>Robotaxis>Cars), vague comments on the robotaxi business models and very little incremental information,” he added.
On the bullish side, Baird analyst Ben Kallo held his ‘outperform’ rating and $260 price target in place and suggested the post-earnings pullback could be a buying opportunity into the autumn robotaxi event.
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“Commentary indicates weaker auto margins may persist throughout the year, but strength in the Energy segment and increased regulatory credits could offset these challenges,” Kallo said. “Crucially, timelines for the Robotaxi unveil and next-generation vehicle remain intact, alleviating concerns of delays.”
Two other Wall Street analysts kept their Tesla price targets unchanged after last night’s update, including Dan Levy from Barclays, who left it at $225 per share, and Ronald Jewsikow from Guggenheim, who reiterated his $134 objective.
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Goldman Sachs analyst Mark Delaney, meanwhile, lowered his price target by $25, to $230 per share while keeping a ‘neutral’ rating in place.
Wedbush analyst Dan Ives, meanwhile, simply noted that the “bull/bear debate on Tesla will rage on today”, given the mixed nature of last night’s earnings report and product update, as he held his ‘outperform’ rating and $300 price target in place.
“Bears will focus on the auto gross margin miss and massive EV regulatory credits boosting results, which we ultimately view as table stakes in the broader Tesla story,” Ives said.
“(But) The EV demand story is stabilizing in China for Tesla, price cuts are mostly done, and the mojo is back at Tesla with AI front and center,” he argued.
Tesla shares were marked 8.5% lower in premarket trading to indicate an opening bell price of $225.43 each
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