Are Tesla investors losing confidence in Elon Musk’s vision of the future? Or are they still inflating the company’s value based on their faith in the cofounder?
For the past several quarters after Tesla has unveiled earnings, I’ve been calculating a metric that I’ve dubbed The Musk Magic Premium. The figure estimates both the portion of the EV-maker’s valuation that’s justified by its current, baseline earnings, and the extra part based on CEO Musk’s promises for sensational products that have yet to be fully or even partially commercialized. That categories ranges from autonomous robotaxis, to full-self driving kits for retrofitting Teslas now on the road, to the manufacturer’s forthcoming humanoid “Optimus” robots.
Tesla’s Q2 report, issued after the market close on July 23, continues a series of highly disappointing quarters for the company’s EV sales, reflecting continuing weakness in China and Europe, even after a series of sharp discounts. Auto revenues dropped 16% versus Q2 of last year, and a rise in energy storage, services and other businesses failed to fill the gap, so that overall revenue declined by low-double-digit percentages. The sales headwind sent GAAP net profits down 17% to $1.17 billion—about a third what Tesla was netting per quarter in 2022.
