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July has been a good month for Tesla (TSLA), and it gained 27% in the first week alone - despite the holiday-shortened schedule. After the stellar rally, the electric vehicle (EV) giant – which, for some time, was the worst-performing S&P 500 Index ($SPX) stock of 2024 – has now turned positive for the year.
While TSLA is still the worst-performing “Magnificent 7” stock this year, it has rebounded spectacularly from its lows, and added $200 billion to its market cap. Will Tesla stock keep going up in 2024? We’ll discuss in this article, beginning with the recent price action.
Why is Tesla Stock Rising?
Sentiment towards Tesla started to improve last month after shareholders approved Elon Musk’s gigantic compensation package. Despite his mammoth valuation and seemingly unending controversies, Musk still looks like the best person to lead the company. Approval for his compensation cleared up the uncertainty over his future at the company – at least, for now.
More recently, Tesla reported better-than-expected deliveries for Q2. While the deliveries still fell YoY – and marked the first time in a decade that the company’s deliveries fell for two consecutive quarters – they were nonetheless ahead of what analysts expected.
Moreover, a lot of pessimism was baked into Tesla’s stock price, so even a slight beat on deliveries - coupled with the uptrend in broader markets - helped trigger a rally.
Reacting to Tesla’s Q2 delivery numbers, Wedbush Securities analyst Daniel Ives said, “The worst is in the rearview mirror for Tesla.” Ives, who has a bullish view of Tesla, also believes that the company's China business is recovering.
TSLA Stock Forecast
Amid the recent rally, TSLA has run well ahead of its mean target price of $179.03. Wall Street analysts have a consensus rating of “Hold” on Tesla, and of the 33 analysts covering the stock, only 9 rate it as a “Strong Buy” and 2 as a “Moderate Buy.”
Fifteen analysts rate Tesla as a “Hold,” while 7 rate the stock as a “Strong Sell.” Such split ratings are quite common for Tesla, though, and the dispersion in its target prices is invariably the highest among major companies.
Tesla’s Q2 Earnings Are Due on July 23
We have two key events lined up over the next month that could decide the direction of Tesla’s rally. First, the company will release its Q2 earnings on July 23. During the earnings call, markets will especially watch for the progression in Tesla’s operating margins, which plunged to mid-single digits in Q1 due to aggressive price cuts.
Also, after two consecutive quarters of decline in deliveries, markets will look for comments on the demand environment. During the Q1 earnings call, Musk sounded confident that Tesla should be able to report a YoY rise in 2024 deliveries. However, during the Q2 call, markets will want to hear more color on the delivery forecast, and whether Tesla is still confident about growing its deliveries in 2024.
Robotaxi Day Will Be Crucial for TSLA
The more important event, however, could be the robotaxi unveil on Aug. 8. The bulk of Tesla’s valuation comes from the software and artificial intelligence (AI) products that the company is developing.
While bulls like Ives believe that Robotaxi Day will be a key catalyst for Tesla, and help support the momentum in its stock, bears are not sold on the product.
Gordon Johnson, founder of GJC Research, is among the notable Tesla bears, and believes that the company is “nowhere near” a robotaxi. He added, “Effectively with Tesla, what you have is a company that I think that [Elon] Musk is promoting a lot of smoke and mirrors to hide the fact that he owns a car company with declining margins that has basically went ex-growth.”
To be sure, there are genuine concerns over Tesla’s growth in 2024, and analysts expect its revenues to rise a mere 2.3% this year. However, the consensus is modeling an 18.8% rise in revenues next year, due in part to the lower base in 2024. Tesla's per-share earnings are also expected to fall 28% in 2024 before rebounding by 39% in 2025.
Will Tesla Stock Keep Going Up?
Cathie Wood of ARK Invest – who Musk has said has a better understanding of Tesla's business – believes the company is the “biggest AI project” globally. Last month, ARK Invest revised its Tesla target price to $2,600, which it expects to be hit by 2029. The firm’s bear case and bull case target prices are $2,000 and $3,100, respectively.
Ives, who has a $300 target price on Tesla, believes that Tesla is the “most undervalued AI play” and sees its robotaxi unveil as a “historical day” that could “lay the yellow brick road to FSD (full self-driving) and an autonomous future."
Overall, I believe that the robotaxi unveil could help support the rally in Tesla stock. However, if the robotaxi fails to impress markets, Tesla could retreat, as some of its recent gains are also because of optimism over the progress the company is making in its autonomous driving.
On the date of publication, Mohit Oberoi had a position in: TSLA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
