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Tesla, Inc. (TSLA), once the shining star of the “Magnificent Seven,” has more recently been hit with calls to be removed from the elite group of tech stocks. The electric vehicle (EV) leader is grappling with a series of setbacks, including sweeping global price cuts, layoffs, top executive exits, and intense competition in the EV space. The stock’s once-unstoppable ascent is now facing multiple macro-level challenges.
In fact, for the first time ever, Tesla's dominance in the US electric vehicle market slipped below 50% in the second quarter of this year, capturing just 49.7% of sales, according to Cox Automotive. This dip marks a historic shift, signaling a new era in the EV landscape where Tesla's once-ironclad grip is now under pressure, with legacy auto giants like General Motors (GM), Ford (F), and Volkswagen (VWAGY) racing to catch up.
Despite grappling with various challenges, TSLA stock has rebounded sharply from its year-to-date lows, boosted by investor optimism around the company’s highly anticipated Robotaxi launch - now slated for Oct. 10 at Warner Brothers Studios. This eagerly anticipated event has the potential to dramatically alter Tesla's trajectory.
Originally scheduled for August, the postponement of the Robotaxi launch could signal that Tesla is carefully fine-tuning its innovation, with CEO Elon Musk dropping hints about additional exciting surprises. While anticipation is running high, Tesla's history of missed deadlines in the Robotaxi and autonomous vehicle space, paired with regulatory hurdles and stiff competition from Alphabet’s (GOOGL) Waymo and GM-owned Cruise, also throws a layer of skepticism on the project's near-term success.
About Tesla Stock
Austin-based Tesla, Inc. (TSLA) has emerged as a leader in the EV market, driven by the success of its flagship Model 3. Since its 2010 initial public offering (IPO), the company has evolved into an industry giant, and reached a $1 trillion market cap in 2021, surpassing the combined value of major legacy automakers. More than just an automaker, Tesla also has segments focused on energy storage, automation, and robotics, which are in various stages of growth and development.
However, after delivering exceptional returns since its IPO, Tesla has hit the brakes, significantly underperforming the broader market over the last three years. Currently valued at a market cap of roughly $724.5 billion, shares of this EV king are down 45% from their 2021 highs.
TSLA is lagging the broader S&P 500 Index ($SPX), with the stock in negative territory over the past year and on a YTD basis. However, the shares have rebounded 72% from their 2024 lows set in April, and are now down just 3.7% since the start of the year.
From a valuation perspective, TSLA stock trades at a lofty 97 times forward adjusted earnings. Even after factoring in above-average earnings growth projected over the next three to five years, this valuation still seems notably expensive.
Tesla Slides After Q2 Earnings
After the company announced its Q2 earnings results, which fell short of Wall Street’s bottom-line expectations, shares of the EV maker took a nosedive, plunging more than 12% on July 24. While Tesla’s revenue of $25.5 billion jumped 2% year over year and managed to exceed forecasts by roughly 3.1%, thanks to impressive growth in its Energy Generation and Storage revenue, it wasn’t enough to offset the impact of lower vehicle deliveries and falling average selling prices.
During the quarter, the company’s automotive revenue dropped 7% annually to $19.9 billion, but still represented a hefty 78% of the company’s top-line figure. Tesla's adjusted earnings came in at $0.52 per share, missing the forecasted $0.62 per share and significantly trailing the year-ago quarter’s $0.91 per share. The company’s adjusted EBITDA margin also took a hit, dropping to 14.4% from 18.7%, sparking concerns about profitability.
On the brighter side, Tesla’s cash reserves swelled to $30.7 billion at the end of Q2, marking a 14.4% jump from the prior quarter. This surge was fueled by a robust $1.3 billion in free cash flow, spurred by a $1.8 billion cut in inventory. However, this gain was slightly tempered by $600 million in capital expenditures for artificial intelligence (AI) infrastructure.
While management didn’t offer formal guidance, Tesla indicated that it aims to ramp up production with new, more affordable models starting in early 2025, leveraging both current and next-gen platforms. This strategy, while leading to slower cost reductions, is designed to maximize production efficiency and capitalize on existing manufacturing capacity.
Additionally, Tesla is highly optimistic that its ambitious Robotaxi will continue to push boundaries. In fact, during the company’s Q2 earnings call, CEO Elon Musk disclosed Tesla’s long-awaited Robotaxi unveiling to occur next month. When asked about the timeline for the first Robotaxi ride, Musk remained cautiously optimistic, suggesting he’d be “shocked” if it didn’t happen next year, even while acknowledging his past over-promises.
Musk also downplayed regulatory hurdles for Tesla’s self-driving technology, contrasting it with what he described as Waymo’s “limited” and “fragile” services. Plus, the tech mogul confidently asserted that Tesla’s Robotaxi should be able to operate globally, not just in restricted areas.
Analysts tracking Tesla project company's profit to drop a notable 32.7% year over year to $1.75 per share in fiscal 2024 before rising 44% annually to $2.52 per share in fiscal 2025.
The Robotaxi Reveal: What Can Tesla Investors Expect?
With TSLA stock recently climbing on the heels of its latest AI milestone roadmap, all eyes are on the company’s much-anticipated Robotaxi event set for Oct. 10 at Warner Brothers Studios. On Sept. 6, Morgan Stanley’s (MS) Adam Jonas laid out his expectations, forecasting a demonstration of Tesla’s latest Full Self-Driving (FSD) technology and a fully autonomous "cyber-cab" displayed on a closed or semi-closed course.
But Jonas hints that the event might have more in store than just the Robotaxi reveal. “Could we see an electric plane? A boat? The latest-gen Optimus robot flipping burgers at a Tesla Diner?” he speculated, suggesting that Tesla could use the occasion to unveil some unexpected innovations.
However, the analyst also cautioned investors that regulatory hurdles could impact the company’s ambitious plans, as Tesla is currently limited to testing “with a driver” in the U.S., unlike Waymo and Cruise, which are already conducting robotaxi tests and rideshares in several cities.
While the analyst urges investors to “keep expectations well managed” for this upcoming event, Jonas still reaffirmed Tesla as the firm's “Top Pick” in the U.S. auto industry, praising its bold diversification strategy.
“The company continues to take steps to mitigate downside risks to the core auto business… while shifting incremental resources to stationary energy, compute infrastructure and robotics and other expressions of embodied AI,” he said. Encouraged by these positive factors, the analyst backed an “Overweight” rating and a Street-high $310 price target for TSLA stock.
What Do Analysts Expect for Tesla Stock?
While Morgan Stanley might be optimistic about the company’s long-term prospects, Wall Street is still cautious about TSLA overall, with a consensus “Hold” rating. Of the 36 analysts covering the stock, 10 recommend a “Strong Buy,” one suggests a “Moderate Buy,” 18 advocate a “Hold,” and the seven analysts back a “Strong Sell.”
TSLA stock is trading at a premium to its average analyst price target of $201.60, while Morgan Stanley’s target of $310 suggests that the stock could rally as much as 27.8% from current price levels.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
