After experiencing a phase marked by the revival of electric vehicle (EV) stocks, which managed to erase all losses accrued thus far this year by surging more than 30%, Tesla’s (NASDAQ: TSLA) stock encountered a setback in the latest trading session.
Specifically, on July 23, Tesla’s stock ended trading at a price of $246.38 after a drop of 2.04%, with these losses of 8.15% extending into the pre-market on July 24.
These declines ensued a mixed Q2 release where Tesla exceeded certain analysts’ expectations but fell short on others.
What precisely did Tesla’s Q2 report unveil?
During Q2, the company disclosed adjusted earnings per share (EPS) of $0.52 on revenue of $25.5 billion, below Wall Street’s forecasts of $0.61 per share and $24.33 billion in revenue.
The profitability was impacted by a decline in car sales, which dropped to $18.53 billion from $20.42 billion a year ago, coupled with margins lower than predicted due to price cuts on EVs, restructuring outlays, and expenses associated with AI investments.
Gross margins, excluding credits—a closely-monitored metric—fell to 14.7% in Q2 from 18.1% the previous year, missing analysts’ anticipated 16.3%. Tesla delivered 443,956 EVs during the quarter, marking a 5% decrease from the same period in the prior year.
Nevertheless, the energy storage division of the company was a bright spot, releasing 9.4 gigawatts in Q2, translating to a 158% surge from the previous year. Excluding $622 million in restructuring and other costs, the adjusted EBITDA could have reached $4.296 billion with a 16.8% margin, beating the consensus estimate by 10.8%.
Wall Street adopts a cautious stance following Tesla’s Q2 earnings
In response to the Q2 results, several analysts from major financial institutions on Wall Street chose to be cautious about TSLA shares as they adjusted their price targets and assessments.
Cantor Fitzgerald analysts downgraded Tesla stock from “overweight” to “neutral” due to near-term valuation concerns, citing the recent upsurge in share price.
Despite the downgrade, they raised their price target to $245 from $230 and increased their revenue projection for fiscal year 2024 to $101.2 billion from $100.6 billion, driven by higher estimates for energy storage and deployment.
Conversely, UBS analysts reiterated their “sell” recommendation on Tesla, highlighting substantial downside risk arising from overvaluation and ongoing obstacles in the automotive industry. They pointed out that Tesla’s stock, trading at over 100 times its run-rate EPS of approximately $2.25, encapsulates a significant amount of AI potential, resulting in 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 performance in the second quarter, particularly the growing impact of its storage division, which contributed to 16% of the firm’s gross profit.
The prevailing sentiment on Wall Street indicates a sudden shift in attitude from earlier, more positive price targets that reflected increased optimism toward Tesla shares.
