Following a period characterized by the recovery of electric vehicle (EV) shares, that successfully wiped out all losses incurred so far this year by soaring over 30%, Tesla’s (NASDAQ: TSLA) stock faced a setback in the most recent trading session.
Specifically, on July 23, Tesla’s stock concluded trading at a value of $246.38 after a decline of 2.04%, with these losses of 8.15% continuing into the pre-market on July 24.
These declines follow a mixed Q2 release where Tesla surpassed some analysts’ expectations but fell short on others.
What did Tesla’s Q2 report unveil exactly?
In Q2, the firm disclosed adjusted earnings per share (EPS) of $0.52 on revenue of $25.5 billion, below Wall Street’s projections of $0.61 per share and $24.33 billion in revenue.
The profitability was affected by a drop in automobile sales, which decreased to $18.53 billion from $20.42 billion a year ago, in combination with margins lower than anticipated due to price reductions on EVs, restructuring expenses, and costs linked to AI investments.
Gross margins, excluding credits—a closely-observed metric—slid to 14.7% in Q2 from 18.1% the prior year, falling short of analysts’ expected 16.3%. Tesla supplied 443,956 EVs during the quarter, showing a 5% decline from the corresponding period in the previous year.
Nevertheless, the company’s energy storage sector represented a positive aspect, releasing 9.4 gigawatts in Q2, signifying a 158% rise from the previous year. If excluding $622 million in restructuring and other expenses, the adjusted EBITDA would have reached $4.296 billion with a 16.8% margin, which surpassed the consensus estimate by 10.8%.
Wall Street turns cautious post Tesla’s Q2 earnings
Responding to the Q2 results, various analysts from major financial institutions on Wall Street opted for a cautious stance on TSLA shares as they revised their price targets and ratings.
Cantor Fitzgerald analysts downgraded Tesla stock from “overweight” to “neutral” due to near-term valuation concerns, citing the recent surge in share price.
Despite the downgrade, they raised their price target to $245 from $230 and boosted their revenue forecast for fiscal year 2024 to $101.2 billion from $100.6 billion, driven by higher estimates for energy storage and deployment.
Conversely, UBS analysts reiterated their “sell” recommendation on Tesla, pointing out significant downside risk stemming from overvaluation and ongoing challenges in the automotive sector. They highlighted that Tesla’s stock, trading at over 100 times its run-rate EPS of around $2.25, embodies a substantial amount of AI opportunity, leading to an inflated valuation.
On July 23, Jefferies upheld its “hold” rating on Tesla with a price target of $165.00. This underscored the significance of Tesla’s performance in the second quarter, specifically the increasing influence of its storage division, which accounted for 16% of the firm’s gross profit.
The current sentiment on Wall Street signifies a sudden shift in sentiment from prior less recent price targets that reflected heightened optimism regarding Tesla shares.
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