Tesla (NASDAQ: TeslaThe journey into 2024 has been anything but smooth. We’ve had factory closures, charging issues, and some serious competition killing Tesla, especially in China. However, Elon Musk’s unwavering commitment to expanding Tesla’s electric vehicle lineup has kept the company on track. The recent release of Tesla’s second-quarter production and delivery report has everyone talking. While the numbers are down from a year ago, they still managed to beat analyst expectations, giving the stock a much-needed boost.
Personally, I am bullish on Tesla stock. While the company faces significant challenges, its ability to exceed delivery expectations in a challenging environment, coupled with its strong brand and leadership in electric vehicle technology, points to continued growth potential.
Highlights of delivery and production in the second quarter
Tesla managed to produce about 411,000 vehicles in the second quarter, which is impressive considering the challenges the company has faced recently. Tesla delivered more cars than it produced, with about 444,000 vehicles heading into customer driveways. This represents a 4.8% year-over-year decline in deliveries and a 14% decline in production compared to the same period in 2023.
As expected, the Model 3 and Model Y were the stars of the show, accounting for the lion’s share of production with 386,576 units produced and 422,405 delivered. The much-publicized Model S, Model X and Cybertruck made up the rest, with 24,255 units produced and 21,551 delivered.
Analysts had expected Tesla to deliver about 439,302 vehicles, so the company’s performance was a pleasant surprise. The news sent Tesla’s stock up 10% to $231.26 despite being down about 7% for the year.
In just three trading days, from July 1 to July 3, Tesla stock rose A staggering 23%. That’s right, nearly a quarter of the company’s value was added in just 72 hours, and the stock has risen a bit more in the past few days.
Even more impressive is that the surge has erased Tesla’s year-to-date losses, with the stock now up 1.8% for the year, a far cry from where it was just two weeks ago.
However, it is important to note that even with this recent decline, Tesla is still trading at a significant premium to other automakers. Its price-to-earnings ratio of 64.3x is miles higher than the likes of General Motors (NYSE: General Motors) (5.7x) Ford (New York Stock Exchange: F) (13.3x), indicating that much of the growth has already been built into the stock price. The coming quarters will be crucial in determining whether Tesla can maintain this momentum and justify its lofty valuation.
Tesla Challenges and Strategic Responses
Tesla is feeling the heat, especially in China. BYD (Off-exchange: BYDDF), their biggest competitor, sold about 426,000 pure electric vehicles in the second quarter, just shy of Tesla’s 443,956 sales — a difference of just 17,956 units. And it’s not just BYD; other Chinese automakers like Geely (Over the counter: GELYF) It is also upping its game, with Geely’s sales jumping 41% in the first half of 2024.
In response, Tesla has been aggressively cutting prices since early 2023, which has helped maintain sales volume but has also squeezed profit margins. Automotive gross profit margin fell to 18.5% in the first quarter of 2024 from 21.1% in the first quarter of 2023. Tesla also faced significant challenges earlier this year, including an arson attack at its German factory and shipping disruptions due to riots in the Red Sea, which contributed to a 14% year-over-year decline in second-quarter production.
Despite these hurdles, Tesla isn’t just playing defense. Elon Musk plans to accelerate mass production of affordable electric cars, likely to launch in the first half of 2025. That could be a game-changer for access to a broader market. Additionally, Tesla’s energy storage business is booming, with first-quarter revenue hitting a record $1.64 billion and power deployments reaching 4.1 gigawatt hours.
Tesla is also investing heavily in AI and robotics, nearly doubling its AI training capacity. Musk is so confident in their humanoid Optimus robots that he believes they could boost Tesla’s market cap to $25 trillion (it’s currently around $800 billion).
What’s next for Tesla and its investors?
There are some major events coming up that could have a major impact on Tesla’s future. First, the company’s second-quarter earnings report on July 23 will give us a detailed look at its financial performance. Analysts are expecting revenue of $23.83 billion. They also Expected earnings per share (EPS) of $0.60, with a range of $0.41 to $0.87. This represents a significant improvement from the previous quarter’s EPS of $0.45. If Tesla’s revenue growth turns positive in the third quarter, it would mark a major milestone in the recovery.
Then there’s Robotaxi Day on August 8, which could be a big deal for Tesla’s self-driving ambitions. Analysts are mixed on Tesla stock, though. Wedbush’s Dan Ives is bullish, raising his price target to $300, believing the worst is behind Tesla and that upcoming innovations like Robotaxi could drive growth.
On the other hand, Colin Langan of Wells Fargo is cautious, recommending a sell on Tesla shares due to concerns about declining delivery growth and the impact of price cuts on margins. His target price is a conservative $120. Guggenheim analysts also raised their target price to $134. Keep your sale rating uppointing to Tesla’s impressive energy storage deployments as a key factor.
Is Tesla Stock a Buy, According to Analysts?
According to the latest analyst ratings, Tesla stock has a consensus rating of Hold. Out of 35 analysts covering the stock, 13 rate it as a Buy, 14 as a Hold, and eight as a Sell. TSLA Average Target Price The price of $184.41 indicates a potential downside of about 27.1% from the current price.
bottom line
In conclusion, Tesla’s Q2 delivery report was mixed. While the company beat estimates, deliveries were still down year-over-year. The market reaction was positive, but analysts are divided on the stock’s future. Some believe the worst is over for the company, while others remain cautious about potential competitive pressures and margin squeezes.
Despite these challenges, I am bullish on Tesla stock. The company’s resilience, commitment to expanding its electric vehicle lineup, and exciting potential in AI and energy storage make it a compelling investment. The upcoming Q2 earnings report on July 23 and Robotaxi Day on August 8 could provide further clarity and potentially drive the stock higher. As always, do your homework and invest wisely.
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