Tesla shares bumped higher Friday, but are still on pace for a sharp weekly decline, after a key Wall Street analyst reiterated his bull case for the group with a focus on the value beyond its core carmaking business.
Tesla (TSLA) posted weaker-than-expected second quarter earnings earlier this week, including the narrowest profit margins in five years, as its struggles with a global EV price war and fading consumer demand.
The group also pushed back its long-delayed robotaxi unveiling until October, and possibly beyond, as its scrambles to make late-hour design changes flagged by CEO Elon Musk.
Morgan Stanley analyst Adam Jonas, however, thinks investors put too much emphasis on weakness in the group's carmaking business and are still overlooking the value of its energy, AI and robotics units that could actually be worth far more in terms of shareholder value.
"While negative developments in the global EV market could impact the stock in the near-term, investors should not overlook Tesla’s other plays, including recurring revenue from the Tesla fleet and areas like Energy Storage and Optimus," Jonas said in a client note published Friday.
AI assets 'booming'
The longtime Tesla pull reiterated his $310 price target, and his 'overweight' rating on the stock, while arguing that "Tesla's reported AI infrastructure assets are booming, with changes in the business mix being overlooked."
In energy storage, for example, Tesla said it deployed around 9.4 gigawatt hours of energy-storage products over the three months ending in June, a figure more than double the record tally of 4.1 GWh reported over Q1.
That pushed triggered a doubling in overall revenues in the unit, which rose to around $3 billion and generated a bottom line that was around 16% of Tesla's gross profits.
The value and potential of those divisions, Jonas argued, now far outweighs that of its traditional carmaking unit.
"Our thesis views Tesla as both an auto and an energy/AI/robotics company, with the core auto business valuation at $59/share, just ~19% of our $310 target," Jonas said.
"Despite China revenues falling to their lowest in years (18.2% of sales), Tesla has significant attributes to be valued as an AI beneficiary," he added, although he also conceded that "stabilization in negative earnings revisions in the auto business is needed for Tesla to gain AI credit."
Big capex plans
Musk himself touted the profit potential of AI technologies, particularly with respect to the group's ambition to offer full self-driving software to its near 7 million global EV fleet, and said capital spending would likely rise to around $10 billion this year as a result.
Tesla posted a bottom line of 52 cents per share, a 43% slump from the same period last year that missed Wall Street's forecast of 62 cents. Group revenues, however, managed to rise 3% from last year to $25.5 billion, thanks in part to the stronger-than-expected delivery tally.
That didn't translate into firmer profit margins, however, and Tesla's gross margin tally of 14.6% not only missed Street forecast, but was the lowest overall figure in at least five years.
Tesla reiterated its earlier view that full-year deliveries would be "meaningfully lower" than last year's record tally of around 1.81 million, but CEO Elon Musk leaned into the group's ambition to introduce a new, lower-priced model by the first half of next year.
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Musk also doubled down on the group's new tech future, telling analysts on the post-earnings conference call that "the world is headed for a fully electrified transport" that includes not just cars but aircraft and boats.
"Anyone who doesn't believe that Tesla would solve vehicle autonomy should not hold Tesla stock," Musk said. "They should sell their Tesla stock."
Tesla shares were last marked 2.05% higher in premarket trading to indicate a Friday opening bell price of $224.77 each, a move that would still leave the stock in negative territory for the year.
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