Tesla stock received a downgrade and several target price cuts overnight after the EV giant announcing that second-quarter earnings sank more than 40%, worse than expected. Revenue topped, fueled by surging regulatory credits.
TSLA shares plunged 12% to 216.72 during market action on Wednesday, following Tesla Q2 earnings and the company's conference call.
No Change In Outlook; Tesla Downgrade
Adam Jonas, Morgan Stanley's high-profile autos analyst and a Tesla bull, wrote late Tuesday there is "no big change in outlook" and that Tesla is "muddling through the EV recession."
Jonas added that the 2024 outlook is "largely identical reiteration of language from the previous quarter's outlook" and that this "should keep consensus little changed."
Following earnings, Cantor Fitzgerald downgraded Tesla to neutral from overweight while lifting the price target to 245 from 230. The firm wrote that with TSLA up more than 70% in the last three months, it is "becoming a bit more conservative on valuation in the near-term."
Meanwhile, both Goldman Sachs and Citigroup cut Tesla stock price targets. Goldman lowered its price target on Tesla to 230 from 248 and kept a neutral rating on the shares. Citi analyst Itay Michaeli reduced his target price to 258 from 274.
Tesla Earnings At A Glance
The electric-vehicle giant reported Tuesday that earnings fell 43% to 52 cents per share. Meanwhile, quarterly revenue totaled $25.5 billion, up 2% vs. the year-earlier quarter. Tesla reported it "achieved record quarterly revenues despite a difficult operating environment."
Meanwhile, Tesla's gross margins fell 23 basis points to 18%. Auto gross margins, excluding regulatory credits and leases, came in at 14.6%. Analyst expectations were for 15.1%, according to FactSet.
The EV giant also saw revenue from regulatory credits hit a record of $890 million in Q2, surging 216% compared to the $282 million from Q2 2023.
Tesla added vehicle volume growth rate in 2024 "may be notably lower than the growth rate" last year. The EV giant added that growth in its energy storage business should outpace its automotive segment.
On the earnings call, Tesla Chief Executive Elon Musk didn't provide a lot new, continuing to express optimism about self-driving, the Optimus robot and robotaxi. Musk did confirm the robotaxi reveal event will now be held on Oct. 10 vs. the previous plan for Aug. 8.
Tesla Stock: Not A 'Trump Trade'
Wells Fargo wrote that Tesla stock does not appear to be a 'Trump trade." The analysts noted that Tesla stock is trading down as weak fundamentals proved out in Q2.
The firm added that if former President Donald Trump wins the 2024 election and does away with Inflation Reduction Act EV tax credits, it could hurt Tesla's near-term profits.
UBS analyst Joseph Spak told investors there is stress on the automotive business. Spak wrote Tesla's current vehicle lineup is "limited" and while units could increase, it may require continued promotions.
UBS maintained its sell rating with a 197 price target, and that the Oct. 10 robotaxi day could be a "sell-the-news" event.
Robotaxi Thrills
Meanwhile, Wedbush Securities analyst Dan Ives, a longtime Tesla bull, wrote Wednesday that the robotaxi event will "unleash the beginning of the AI story at Tesla which we value at $1 trillion alone over the next few years."
Ives added that Tesla bears will focus on auto gross margins and the regulatory credit revenue total. The analyst said those items are "table stakes in the broader Tesla story."
"Tesla is a robotics and AI play," Ives wrote. "Potential investments into the xAI company under Musk could also be in the future and a smart move along with this broader AI/Robotaxi strategy."
Following the earnings call, Musk posted a poll to X asking if Tesla should invest $5 billion into xAI, Musk's artificial intelligence company. The Tesla head added that the board and shareholders would have to approve such an investment.
Tesla Stock
Tesla stock has a 271 handle buy point on a consolidation going back several months to a year, according to MarketSurge chart analysis.
Shares on Wednesday plunged undercut their fast-rising 21-day moving average and the low of the handle.
Going into earnings, investor sentiment had been upbeat, with Tesla stock surging more than 25% in July after the EV maker announced a surprise second-quarter beat in vehicle deliveries earlier this month.
Shareholders recently voted in favor of giving Musk his 2018 $56 billion pay package and reincorporating the company in Texas, moving it from Delaware.
Tesla stock ranks third in the 35-member IBD Auto Manufacturers industry group. The stock has an 85 Composite Rating out of a best-possible 99. Shares have an 89 Relative Strength Rating and a 61 EPS Rating.
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