Tesla was handed a downgrade to a sell rating on Friday, marking the fourth rating downgrade since the EV giant announced late Tuesday that second-quarter earnings sank more than 40%, worse than expected. Revenue for the quarter topped views, fueled by surging regulatory credits. TSLA edged lower Friday.
Phillip Securities analyst Jonathan Woo downgraded Tesla stock to sell from the previous reduce rating on Friday. Woo also cut his Tesla stock price target to 135, down from 145.
The analyst decreased financial estimates on expectations that margins will face more difficulties amid soft pricing and European Union tariffs on China exports. Woo added that Tesla management, mostly Chief Executive Elon Musk, did not do enough on the Q2 earnings call to dispel concerns about its auto business.
The firm also noted that Musk and Tesla are focusing on "lofty plans" around the robotaxi and the Optimus robot. Woo's view is that those products are still at least 3-5 years away from contributing to the company's growth.
TSLA shares dropped 0.2% to 219.80 during market action on Friday, retreating after a 2% advance Thursday to 220.25.
The downgrade Friday was the fourth this week for Tesla. On Thursday, KGI Securities downgraded Tesla to neutral from outperform with a 236 price target. Meanwhile, New Street also downgraded Tesla, giving it a neutral rating, down from buy, with a 225 price target.
Directly 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, the brokerage was "becoming a bit more conservative on valuation in the near-term."
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 much new information, continuing to express optimism about self-driving, the Optimus robot and robotaxi. Musk did confirm the robotaxi reveal event would now be held on Oct. 10 vs. the previous plan for Aug. 8.
Tesla Stock Performance
TSLA stock plunged 12.3% on Wednesday to 215.99, diving below its 21-day moving average. Technically, Tesla stock has a 271 handle buy point on a consolidation going back several months to a year, according to MarketSurge chart analysis. However, it is no longer tight action.
For the week, Tesla stock has plunged around 8%. Going into earnings, investor sentiment had been upbeat, with TSLA 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 a 70 Composite Rating out of a best-possible 99. Shares have a 75 Relative Strength Rating and a 60 EPS Rating.
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