Tesla Stock Tumbles as Analysts React to Earnings Miss and Downgrade Predictions

Tesla Stock Dives After Earnings Miss

Tesla's Second-Quarter Earnings Report

Tesla's recent earnings report revealed a significant decline in profits. The electric vehicle giant announced that its second-quarter earnings fell by more than 40%, which was worse than analysts had expected. Despite this, Tesla's revenue topped estimates, primarily due to surging regulatory credits. The company's stock took a hit, plunging 12% to 216.72 during market trading on Wednesday following the earnings announcement and the company's conference call.

Analyst Reactions and Downgrades

Several analysts responded to Tesla's earnings miss with downgrades and target price cuts. Notably, Adam Jonas from Morgan Stanley, a prominent Tesla bull, noted there was "no big change in outlook" and described Tesla as "muddling through the EV recession." Cantor Fitzgerald downgraded Tesla to neutral from overweight while raising its price target slightly. Both Goldman Sachs and Citigroup also cut their price targets, reflecting a more cautious near-term valuation.

Earnings and Revenue Highlights

Tesla reported a 43% drop in earnings per share to 52 cents, while quarterly revenue rose 2% to $25.5 billion. The company achieved record quarterly revenues despite a challenging operating environment. However, Tesla's gross margins fell slightly, with auto gross margins, excluding regulatory credits and leases, coming in below analyst expectations.

Regulatory Credits and Future Growth

Tesla's revenue from regulatory credits hit a record $890 million in Q2, a significant increase from the previous year. The company mentioned that vehicle volume growth in 2024 might be lower than the previous year, but growth in its energy storage business is expected to outpace its automotive segment.

Conference Call Insights

During the earnings call, CEO Elon Musk continued to express optimism about Tesla's future, particularly in self-driving technology, the Optimus robot, and the upcoming robotaxi. Musk confirmed that the robotaxi reveal event will now be held on October 10, instead of the previously planned date in August.

Market Reactions and Predictions

Wells Fargo commented that Tesla's stock is not a "Trump trade," suggesting that weak fundamentals were evident in Q2. They noted that a potential Trump win in 2024 could impact Tesla's profits if EV tax credits are rolled back. UBS analyst Joseph Spak highlighted stress on Tesla's automotive business, maintaining a sell rating and a lower price target, while suggesting the robotaxi event could be a "sell-the-news" event.

Positive Outlook from Tesla Bulls

Despite the earnings miss, some analysts remain bullish on Tesla. Dan Ives from Wedbush Securities emphasized the potential of Tesla's AI and robotics ventures, valuing the AI story at $1 trillion over the next few years. Ives noted that Tesla's broader strategy includes significant investments in AI and robotics, which could drive future growth.

Tesla's Stock Performance and Market Position

Tesla's stock recently saw a surge, gaining over 25% in July following a surprise beat in vehicle deliveries for the second quarter. Shareholders voted to approve Musk's $56 billion pay package and to reincorporate the company in Texas. Tesla ranks third in the IBD Auto Manufacturers industry group, with a strong Composite Rating, Relative Strength Rating, and EPS Rating.

Tesla's second-quarter earnings report has led to a mixed response from analysts, with some downgrades and target price cuts reflecting caution. However, the company's long-term prospects in AI and robotics continue to fuel optimism among some analysts. As Tesla navigates the challenges of the EV market, its future growth and stock performance remain closely watched by investors and industry experts.

Tesla Shares Plummet Following Earnings Report: Competition and Sales Slump in Focus

Sluggish Sales and Heightened Competition Impact Tesla’s Earnings

Tesla shares experienced a significant drop, falling 12% in early trading on Wednesday, following an earnings report that revealed declining profits due to increased competition and sluggish sales. The report failed to meet Wall Street's profit expectations, triggering a sell-off that brought Tesla’s stock price to its lowest level in over three weeks.

Elon Musk Acknowledges Challenges in the EV Market

In a call with analysts, Tesla CEO Elon Musk highlighted the impact of competing electric vehicles on the market. "There have been quite a few competing electric vehicles that have entered the market and mostly, they have not done well, but they have discounted their EVs quite substantially, which has made it a bit more difficult for Tesla," Musk said.

Financial Performance and Revenue from Government Credits

Tesla's earnings report indicated a second consecutive quarter of declining profits. Notably, revenue from government credits surged to $890 million in the most recent quarter, accounting for a substantial portion of the company's profits. Gordon Johnson, CEO and founder of GLJ Research, pointed out that this boost from government credits provided a financial cushion amidst struggles in Tesla’s core business of vehicle sales.

Market Reaction and Stock Performance

Tesla shares had plummeted more than 25% at the start of 2024 but had recovered following a positive vehicle delivery report earlier this month. However, the latest earnings release caused another sharp decline, raising concerns about the company's ability to maintain its previous growth trajectory.

Analysts Weigh In: Mixed Reactions and Future Prospects

Critics argue that Tesla’s demand has slowed due to the lack of a new, affordable model and a general softening in the EV market. Conversely, proponents emphasize Tesla’s history of innovation and potential future gains from autonomous vehicle development. Dan Ives of Wedbush highlighted the long-term prospects of Tesla's advancements in autonomous driving, despite the underwhelming quarterly earnings.

Future Outlook: Autonomous Vehicles and Robotaxis

Musk expressed optimism about the progress in Tesla’s full self-driving software, expecting significant improvements in customer experience. However, recent recalls related to safety issues with Tesla’s autopilot and self-driving systems have posed challenges. The launch of Tesla's Robotaxi service has been postponed until October, adding to the uncertainties surrounding its rollout.

Skepticism and Caution

While some analysts remain hopeful about Tesla’s future innovations, others, like Johnson of GLJ Research, remain skeptical, particularly regarding the Robotaxi initiative. The absence of operational Robotaxis continues to be a point of contention.

Tesla’s latest earnings report has underscored the competitive and operational challenges the company faces. As it navigates through a period of heightened competition and market dynamics, the coming months will be crucial in determining Tesla's ability to maintain its leadership in the EV industry and capitalize on its technological advancements.